Judgment for Insurer Because Suit Filed Late

Private Limitation of Action Provision Defeats Suit Against Insurer
Post 5049

This case involves a contractual statute of limitations in an insurance policy. Sidney and Shatika Davis (together, "Davis") argue the trial court erroneously granted summary judgment in favor of Homeowners of America Insurance Company ("HAIC").

In Sidney Davis And Shatika Davis v. Homeowners Of America Insurance Company, No. 05-24-00035-CV, Court of Appeals of Texas, Fifth District, Dallas (April 7, 2025) because: (i) the contractual limitations period was valid (ii) the limitations was not tolled, (iii) HAIC did not breach the contract by failing to pay the amounts claimed, and (iv) HAIC addressed the fraud claim in its summary judgment motion.

BACKGROUND

HAIC issued an insurance policy for the Davis property (the "Property"). The Policy includes a contractual limitations period that requires suit to be filed by the earlier of two years and one day from the date the claim is accepted or rejected by HAIC or three years and one day from the date of the loss.

HAIC's independent adjuster (the "IA") met with the Davis contractor to inspect the Property. The inspection revealed hail damage to the roof, gutters/downspouts, and a storage shed. No interior damage was claimed or found. Additionally, inspection of the attic revealed foam insulation in the attic on the underside of the roof decking and framing. The foam insulation was intact, fully adhered, and undamaged and Davis did not claim that the foam insulation was damaged by the storm.

HAIC accepted the Claim on November 20, 2017 based on the IA's findings which estimated $19,662.75 for storm damage repairs to the roof, gutters/downspouts, and shed. HAIC issued payment on the Claim in the amount of $6,612.75.

On March 1, 2018, HAIC issued a supplemental payment of $11,591.53 on the Claim. In issuing the supplemental payment, HAIC made clear that the payment was based on the contractor's higher estimate and its position on coverage for foam insulation remained unchanged.

Davis attempted to invoke appraisal sometime between March 14, 2018, and April 27, 2018. There is no evidence that either party followed through or attempted to timely pursue, engage in, or complete the appraisal process in 2018 or 2019.

In an August 5, 2020 e-mail to Davis's counsel, HAIC declined to reopen the Claim for further action because the appraisal request was made outside the two-years-and-one-day period required by the Policy for filing suit.

Davis sued HAIC on August 5, 2020, asserting claims for breach of contract, anticipatory breach, violations of the Insurance Code and Deceptive Trade Practices Act ("DTPA"), breach of the duty of good faith and fair dealing, fraud, and conspiracy. The court entered an order granting HAIC's summary judgment motion on limitations in its entirety and dismissing the case with prejudice.

ANALYSIS
The Contractual Limitations Period

Davis argued the contractual limitations period is invalid because it has the effect of imposing a limitations period of less than two years as proscribed by the Texas code.

Generally, the limitations period for a breach of contract cause of action is four years after the day the cause of action accrues. In the context of insurance policies, insurance provisions that limit the time within which to file a suit to two years and a day are valid and binding.

The two-year period expired before the three-year period, and therefore, the two years and a day provision applied. Moreover, even if the three-year period applied, Davis's August 5, 2020 suit was not timely filed.

Did the Supplemental Payment or the Appraisal Process Toll Limitations?

Appraisal under an insurance policy involves a contractual process by which the insurer and the insured select third parties to determine the amount of a claimed loss when the insurer and the insured cannot agree what the amount of loss.

In the present case, the November 20, 2017 letter was an unambiguous denial of coverage for foam insulation.

An insurer's consideration of additional information from the insured after denying coverage does not alter the finality of an otherwise unambiguous decision to deny coverage.

Although Davis adduced no evidence to controvert HAIC's denial of his claim for foam insulation on November 20, 2017, he suggests that limitations began to run when HAIC made the supplemental payment on March 1, 2018. The supplemental payment, however, did not include payment for the foam insulation and HAIC made clear that its position on that aspect of the Claim remained unchanged. The supplemental payment did not restart the limitations period and even if the limitations period began to run on March 1, 2018, Davis would have been required to file suit by March 2, 2020, and his August 5, 2020 petition is still untimely.

The nature of the appraisal process is such that it would typically not come into play until a claim is denied. With the claim denied there would be no disputed amount to appraise.

CONDITION PRECEDENT

A condition precedent in a contract is an event which must occur or an act that must be performed before a right can accrue to enforce an obligation. A cause of action for breach of contract does not accrue until all conditions precedent to the parties' right to file suit have been satisfied. Therefore, the insurer's interpretation of the Policy to require performance of the condition precedent before a cause of action accrues is not unreasonable.

The evidence shows that the Policy condition requiring demand for appraisal was met. The undisputed evidence established that, at best, the appraisal process was demanded but never commenced.

THE FRAUD CLAIM.

HAIC specifically identified fraud as one of Davis's claims, and throughout the motion argued that the Policy's limitations period applied to all of Davis's claims. Since the breach of contract claim was time barred by the Policy's two years and a day limitations period the extra-contractual claims were also time barred.

The judgment of the trial court was AFFIRMED.

ZALMA OPINION

As the court clearly stated an insurance policy is a contract. Failure to comply with a policy condition - file suit within two years and one day - is clear, unambiguous and enforceable. HAIC established that the suit was filed more than two years and one day after the claim was unambiguously denied for amounts greater than that already paid. Every policyholder and policy holder lawyer that wishes to sue an insurer must read and understand the policy and when it has a private limitation of action provision must file suit before the limitation provision expires.

(c) 2025 Barry Zalma & ClaimSchool, Inc.

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