Appraisals are a common alternative method to litigation for resolving property insurance disputes. Still, the time to file suit varies from state to state, even when an appraisal is invoked. Policyholders should be wary that even though an appraisal is invoked, some states still allow the time to bring suit to run despite the ongoing appraisal. Statutes of limitation when an appraisal is involved can be a complex and often overlooked aspect of a claim with disastrous results if the issue is not legally analyzed.

A recent Texas court decision1 involved a policyholder who was unsatisfied with an appraisal and filed a lawsuit. The insurer claimed that the two-year time to file suit started to run on the date the insurer paid the appraisal award. The Texas federal court agreed, stating:

Generally, in first-party insurance cases such as this one, the limitations period begins to run on the date coverage is denied….Although the denial-accrual date is usually a question of law, the Texas Supreme Court has acknowledged that it may present questions of fact to be determined on a case-by-case basis….

…First, Dailey’s insistence that only an outright denial of a claim can conclusively establish the accrual date in a first-party insurance case brought under Texas law is simply incorrect; the date on which a carrier tendered its last payment on an insurance claim can also—and often does— conclusively establish the accrual date. See Castillo v. State Farm Lloyds, 210 Fed. App’x 390…(5th Cir. 2006) (‘Castillo argues that because State Farm made partial payments without any indication of finality, the statute of limitations did not begin to run until, at the earliest, July 28, 2003, when State Farm sent a letter [in response to a settlement offer from Castillo’s attorney] stating that ‘the claims remained closed.’ However, State Farm communicated a final determination on all of Castillo’s claims by March 31, 2003, when State Farm sent the payments on the kitchen and bathroom claims, along with decision letters on both claims. This was the last payment made to Castillo.’)…’ For a first party insurance breach of contract claim, the action accrues when the insurance company sends a letter to the insured detailing its decision to deny the claim or its decision to pay the claim with payment included which the insured disagrees with, as long as the insurance company never changes its position on the claim.’….

Second, Enstar’s February 18, 2019 letter enclosing post-appraisal payment unequivocally stated: (1) that Enstar considered the total amount of loss to be definitively set by the appraisal award; and (2) that the only additional payment that Enstar would consider issuing to Dailey would be the withheld recoverable depreciation as calculated in the appraisal award. There is absolutely no evidence in the record indicating that Enstar ever changed its position on Dailey’s claim that Enstar set forth in the February 18, 2019 payment letter. Accordingly, Dailey’s causes of action accrued on February 18, 2019.

The lesson from this case is that when an insurer pays an appraisal award in Texas, a policyholder should be safe and mark that date as the one where the time starts to run to file a suit.

Thought For The Day

Better three hours too soon than a minute too late.
—William Shakespeare
1 Carroll v. Certain Underwriters at Lloyd’s London, No. 4:21-cv-1957 (S.D. Tex. July 19, 2022).