Bad Faith Insurance And The Statute Of Limitations

Insurance attorneys must know the time period from which the statute of limitations starts.  This issue is addressed in a 2022, opinion from the Southern District of Texas, Houston Division.  The opinion is styled, Patriot Logistics v. Travelers Property & Casualty Company of America.

This case deals with various issues and the facts of the case can be read in the opinion.  It is a summary judgment opinion.  Here, the focus is the statute of limitations on the bad faith claim.

The Fifth Circuit holds that under Texas law the statute of limitations begins to run when the particular cause of action generally accrues—being ‘“when facts come into existence that authorize a party to seek a judicial remedy . . . regardless of when the plaintiff learns of the

Travelers notes that it denied coverage on January 25, 2018.  It contends that any and all causes of action for breach of contract accrued on that date, thus meaning that Patriot Logistics was required to bring action by January 26, 2020—and Patriot Logistics didn’t initiate this action until September 18, 2020.

As to breach of the duty of good faith and fair dealing, any claim must be brought within two years of the date the cause of action accrues, if at all.  Such claim accrues when “facts come into existence which authorize a claimant to seek a judicial remedy.

As to Chapter 541 of the Texas Insurance Code, it establishes a cause of action for unfair methods of competition and unfair or deceptive acts or practices.  By express provision, such claims must be brought within two years from the date on which such act or practice occurred
or was by reasonable diligence discovered or should have been discovered according to Texas Insurance Code § 541.162(a)(1) & (a)(2).  And where an insured “establishes that [the insurer’s] alleged misrepresentations caused it to be deprived of that benefit, [the insured] can recover the resulting defense costs it incurred as actual damages under Chapter 541.”

The Fifth Circuit has long held under Texas law that Chapter 541 claims accrue upon issuance of a denial letter.  The unfair act alleged by Patriot Logistics is thus the date on which Travelers
denied coverage, being January 25, 2018.  That is the appropriate marker for accrual here, thus placing the filing of this suit in September 2020 beyond the two-year limitations period.

Summary judgment on the claim for violation of Chapter 541 of the Texas Insurance Code will be granted.


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