Insurance Policies And The Statute Of Limitations

What insurance attorney hasn’t had someone call after the statute of limitations has already run on the case?

The Dallas Court of Appeals issued an opinion in July 2022, that deals with statute of limitations issues.  The opinion is styled, Knox Mediterranean Foods, Inc., v. Amtrust Financial Services.

Knox has incurred a burglary loss on June 16, 2016, and submitted a loss claim to its insurance company, Amtrust.  Amtrust paid part of the claim March 15, 2017, along with a letter requesting further information.  On June 13, 2017, Amtrust sent a follow up letter that stated in relevant part that due to the requested information not being provided that Amtrust was closing the file.  The current lawsuit was filed on May 20, 2020.  This summary judgment motion was filed by Amtrust asserting the statute of limitations defense.  The judgment was granted.

Summary judgment is appropriate when the movant carries its burden to show that there is no genuine issue of material fact and that judgment should be granted as a matter of law.

Limitations statutes afford plaintiffs what the legislature deems a reasonable time to present their claims and protect defendants and the courts from having to deal with cases in which the search for truth may be seriously impaired by the loss of evidence, whether by death or disappearance of witnesses, fading memories, disappearance of documents or otherwise.

The time in which a plaintiff must file suit is defined, as the name suggests, by statute as seen in Texas Civil Practices & Remedies Code, Sections 16.002 – .013.  However, parties may contract for a shorter limitations period, provided that the contractual limitations period is not shorter than two years, as was done in the present case.

To establish a limitations defense, the defendant must (1) conclusively prove when the cause of action accrued, and (2) negate the discovery rule if it applies.  A cause of action accrues and the
limitations period begins to run when facts come into existence that authorize a party to seek a judicial remedy.  In first-party insurance actions, the insured’s cause of action accrues when the insurer denies a claim.  Generally, when a cause of action accrues is a question of law.  However, when there is no outright denial of a claim, the exact date of accrual of a cause of action should be a question of fact to be determined on a case-by-case basis.

There is no dispute that insurance policy at issue sets a limitations period of two years and one day from the date of accrual.  The issue is limited to whether Knox filed suit later than two years and one day after its causes of action accrued.

Knox contends that its causes of action had not yet accrued even by the time it filed suit.  Although Knox acknowledges the letter’s statement that Amtrust was “closing this claim,” Knox argues that the letter was not an outright denial because the parties continued discussing its claim after that date.  Knox further contends that the letter was not an outright denial because it was ambiguous, relying on the last paragraph in the letter:  “If this information is incorrect, or if you have additional relevant information you wish for us to review, please contact me at the number listed below.”  Amtrust responds that neither this language nor the parties’ continued discussions after June 13, 2017 (which Amtrust denies occurred) affect whether the letter was a denial.  This Court agreed with Amtrust.

Although an insurer’s denial must be in writing to trigger the statute of limitations, there are no magic words that must be used to deny a claim.  If an insurer’s determination regarding a claim and its reasons for the decision are contained in a clear writing to the insured, the denial will not be held to be ambiguous.  Here, the June 13 letter states that Amtrust is “closing
this claim . . . with no additional payment.”  Amtrust provided the reasoning for its decision: Knox’s failure to provide supporting documentation that Amtrust had requested.

The Court rejected Knox’s argument that the parties’ later communications affected the finality of Amtrust’s denial.  Even if the parties continued communicating about Knox’s claim after Amtrust denied it, such communications could not affect the limitations period.  To hold otherwise would be to denude the statute of limitations of its meaning, giving full control of when a claim accrues over to the plaintiff’s discretion.

Knox’s argument that the last paragraph of the June 13 letter rendered it ambiguous is unpersuasive.  When an insurer denies a claim, its mere willingness to reconsider that denial does not restart the limitations period.

Amtrust’s June 13 letter to Knox unequivocally communicated a decision to deny coverage.  Amtrust established as a matter of law that Knox’s claim accrued—and the contractual limitations period began to run—on June 13, 2017. Because Knox filed this lawsuit on May 20, 2020, nearly three years after its claim accrued, its claim was time-barred.

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