There are times when public insurance adjusters or lawyers representing policyholders get claims where the policyholder did not discover damage until some time after the actual date of loss. For example, property owners sometimes don’t discover their hail damage until they experience leaks and ask a public insurance adjuster or roofing contractor to inspect their roof. This may be a year after the actual hailstorm that caused the damage. Setting aside issues of prompt notice, which I have discussed in several previous blogs, what are the rules in Texas as to when the claim is dead and it is too late to file suit?

A recent fire case out of the Galveston Division of the Southern District of Texas is a good primer on the state of the law on these issues.1 The relevant dates in Grayson are as follows:

  • 09/22/2009 – Date of loss
  • 06/04/2010 – Letter from Lexington saying it made “final determinations” and paying ACV funds and holding back RCV funds
  • 11/08/2010 – Lexington paid another $5,000 after re-inspection
  • 01/19/2011 – Lexington closed its file
  • 05/2011 – Policyholder’s attorney sent letter of representation
  • 05/2013 – Lexington paid RCV holdback
  • 04/23/2015 – Grayson filed suit

Apparently, the suit was only filed as a breach of contract action. In Texas the general statute of limitations for breach of contract is four years.2 Below are important holdings of law set out by the court:

  1. Once a claim is denied the limitations period begins to run;3
  2. A timely claim for additional payments may begin the statute of limitations running anew, if the insurer investigates the claim and makes a payment on it;
  3. However, the final denial of a claim is controlling;
  4. The limitations period does not restart unless the insurer expressly or impliedly withdraws or changes its decision by, for example, making an additional payment or taking action inconsistent with that decision;
  5. A willingness to review additional information, alone, is not inconsistent with a final decision denying a claim.

The policyholder took the position that the statute of limitations did not accrue until May 2013, when Lexington paid the RCV holdback, which would have made the deadline to file suit May 2016. Granting Lexington’s motion for summary judgment, the court held that Lexington made its final decision (and said as much in its letter to the policyholder) on June 4, 2010, which would mean the deadline to file suit was June 4, 2014. The court was of the opinion that the decision to pay an additional $5,000 on November 8, 2010, was merely to increase an insufficient allowance for demolition, but was not a change of “position” by Lexington. However, the court said that the last possible date that the deadline began to accrue was November 8, 2010, when the extra $5,000 was paid. Even using that date, the deadline to file suit was August 11, 2014, which was five months before the policyholder filed her suit.4

Based on this case (and the rules on limitations in Texas), it is important that public insurance adjusters and attorneys representing policyholders, upon being retained, immediately study all correspondence between the policyholder and the insurer and find the letter from the insurer that shows that a final determination has been made by the insurer setting out what will be paid. Obviously, a total denial of the claim is easy to spot. That is when the statute of limitations begins to accrue. Don’t be fooled by later payments by the insurer, which are simple increases for certain items already agreed to. And don’t think that simply because you have sent a letter of representation and notice to the insurer and the insurer re-inspects the loss that this act by the insurer somehow restarts the statute of limitations.

1 Grayson v. Lexington Ins. Co., No. G-15-120, 2016 WL 4733447 (S.D. Tex. September 12, 2016).
2 Despite the general four-year statute of limitations for breach of contract, most insurance policies contain a two-year deadline to file suit on all claims. The record is not clear as to whether the Lexington policy at issue did not have this clause or whether the clause did not comply with the Spicewood case, which requires any shortening of the breach of contract limitations period to state that the deadline is two years from “date of accrual.”
3 This obviously includes partial denial. In this case the carrier’s final determination was to agree to about $190,000 in damages. Therefore, it “denied” the damages in excess of $190,000 claimed by the policyholder.
4 I am not sure how the court came up with this date. If the November 8, 2010 payment restarted the statute of limitations then the deadline should have been November 8, 2014. Because the suit was filed in April 2015, five months after November 8, 2014, and because the court said the policyholder was five months late, it appears that the “August 11, 2014” date is a typo.