Limitations Periods In Texas Insurance Cases

An opinion issued by the Texas Court of Appeals in Houston on October 15, 2009 is noteworthy. Atleast one part of this decision addresses a law in Texas that most attorneys do not know.

The case is Anthony Sheppard v. Travelers Lloyds of Texas Insurance Company. This case discusses limitations periods. Limitiations periods are the timelines within which a lawsuit must be filed or otherwise it is barred. These limitations periods are in Chapter 16 of the Texas Civil Practice & Remedies Code. There are 44 sections in Chapter 16 addressing different causes of actions and the limitations applicable to them. Plus there is a ten page chart that breaks down these sections and tries to make them easier to understand.

A carefull reading of Sheppard goes a long way in making these limitations periods as they relate to insurance contracts understandable. And it is important to understand that breaches of an insurance contract usually go hand in hand with other violations of the Texas Insurance Code. Most Insurance Code violations, which are also violations under the Texas Deceptive Trade Practices Act have a 2 year statute of limitations. Texas Insurance Code, Section 541.162 sets out the limitations period for insurance code violations at two years with some variations to the two year period.

The breach or breaking of an insurance policy is a Breach of Contract claim and that is governed by a four year statute of limitations in the Texas Civil Practice & Remedies Code, Section 16.004. However, and this is something a lot of attorneys are unaware of, Section 16.070 allows the contract itself to shorten this four year statute of limitations to a period less than four years but not less than two years.

Once the applicable period for the statute of limitations has been established, the next issue is, when does that period begin. As a general rule, a cause of action accrues and the statute of limitations begins to run when facts come into existence that authorize a party to seek a judicial remedy. In most cases, a cause of action accrues when a wrongful act causes a legal injury, regardless of when the injured party learns of that injury.

Sometimes the wrong is committed or the injury is incurred but the party who is harmed does not know about the harm yet. The actual time frame for starting the running of the statute of limitations may be deferred if the cause of action is, 1) not discovered as a result of fraud or fraudulent concealment; or 2) is “inherently undiscoverable”.

The Sheppard case argues several different reasons why the statute of limitations should be extended because of the facts in the case. Sheppard lost his arguements but the discussion is a good point of reference for seeing how the Courts look at these matters. An experienced Insurance Law Attorney is going to understand and know about these arguements. The important thing is that anytime an insured person has a claim, that they immediately seek legal advice if the insurance company does not immediately handle the claim. Otherwise they run the risk of having one or more of the statutes of limitations expire on their case.