Insurance Claims And Statute Of Limitiations

The Statute of Limitations for insurance claims will vary with the facts of the case.  In general this limitation begins to run once a claim is denied.  A Southern District , Galveston Division case arose in 2016, that is a good read.  The case is styled, Linda Grayson v. Lexington Insurance Company.

The case was a summary judgment decided in favor of Lexington.

On September 22, 2009, Grayson’s home was damaged by fire resulting from a lightning strike.  The house was insured for $370,000.00.  As Lexington began to adjust the claim, Grayson expressed concern about the potential for lingering smoke odor.  Lexington determined the damage could be repaired and all smoke odor could be eliminated by a process of “encapsulation.”  Grayson decided to insist that the entire house be demolished and rebuilt.

On June 4, 2010, Lexington notified Grayson, by letter, that it had made a “final determination” of the claim in accordance with the “encapsulation” remedy.  Thus, Lexington paid about $167,000 and withheld about $32,300 as recoverable depreciation, pending the completion of repairs.  Lexington also demanded a contractual appraisal if Grayson disagreed.  On October 25, 2010, Lexington paid additional $5,000 to cover demolition costs.  Payment was made around November 8, 2010.  On January 19, 2011, Lexington closed its file.

Grayson hired an attorney and letters exchanged with Lexington pointing out the June 4, 2010, letter.

In the meantime, Grayson had the house demolished and rebuilt.  Lexington then sent Grayson the entire holdback in early May 2013.

On November 11, 2014, Grayson requested an appraisal.  Lexington did not respond.  As a result, Grayson filed suit on April 23, 2014.  This summary judgment was filed by Lexington, claiming the statute of limitations had run.

Texas Civil Practice & Remedies Code, section 16.051 says bringing a breach of contract action must occur within four years.  Once a claim is denied the limitations period begins to run.  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.  However, the final denial of a claim is controlling.  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.  A willingness to review additional information, alone, is not action inconsistent with a final decision denying a claim.

By June 4, 2010, Lexington had decided that repair and encapsulation was the solution of Grayson’s fire damage.  That opinion never changed.  While Lexington did reassess its financial liability and pay additional money for the insufficient allowance it had made for necessary demolition, the Court does not consider that to be a change of “position” or an action inconsistent with Lexington’s original decision.  But even if it were the limitations period would have restarted on November 8, 2010 and, therefore, expired on August 11, 2014, five months before Grayson filed suit.

Grayson argues that it was not clear that Lexington had made a final decision to deny her claim until it paid only the holdback amount and not the remainder of the policy limits.  This Court did not doubt that Grayson may have believed that, but under the applicable law that belief is clearly unreasonable given the facts in this case.