Appraisals are a common alternative to litigation to resolve property insurance disputes. Still, the time to file a lawsuit varies from state to state, even when an assessment is invoked. Policyholders should be aware that even if an assessment is invoked, some states still allow time to file a lawsuit despite the pending assessment. Statutes of limitations when an appraisal is involved can be a complex and often overlooked aspect of a claim with disastrous results if the issue is not analyzed legally.
A recent Texas court decision1 involved a policyholder who was dissatisfied with a valuation and sued. The insurer argued that the two-year period for filing suit began to run on the date the insurer paid the valuation award. The Texas federal court agreed that:
Generally, in first-party insurance cases like this one, the statute of limitations 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, Dailey̵
7;s insistence that only an outright denial of a claim can conclusively establish the vesting date in a first-party insurance case under Texas law is simply incorrect; The date a carrier made its final payment on an insurance claim can also—and often does—definitely establish the vesting date. See Castillo v. State Farm Lloyds, 210 Fed. App’x 390…(5th Cir. 2006) (‘Castillo contends that because State Farm made installment payments without any indication of finality, the statute of limitations did not begin to run until July 28, 2003 at the earliest, when State Farm sent a letter [in response to a settlement offer from Castillo’s attorney] stated that “claims remained closed.” However, State Farm issued a final decision on all of Castillo’s claims by March 31, 2003, when State Farm sent the payments for the kitchen and bathroom claims, along with decision letters on both claims. This was the last payment made to Castillo.’)…’ For a breach of contract claim from first party insurance, the cause of action arises when the insurance company sends a letter to the insured describing its decision to deny the claim or its decision to pay the claim with payment included as the insured disagree, as long as the insurance company never changes its position on the claim.”….Second, Enstar’s February 18, 2019 letter enclosing the post-appraisal payment unequivocally stated: (1) that Enstar believed the total loss amount was conclusively established by the appraisal award; and (2) that the only additional payment Enstar would consider issuing to Dailey would be the withheld recoverable depreciation calculated in the appraisal. There is absolutely no evidence in the record to suggest that Enstar ever changed its position on Dailey’s claim that Enstar set forth in the February 18, 2019 payment letter. Accordingly, Dailey’s cause of action accrued on February 18, 2019.
The lesson from this case is that when an insurer pays a valuation award in Texas, a policyholder should be safe and mark that date as the date the time to file a lawsuit begins to run.
Today’s thought
Better three hours early than one minute late.
—William Shakespeare
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1 Carroll v. Certain Underwriters at Lloyd’s of LondonNo. 4:21-cv-1957 (SD Tex. July 19, 2022).
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