Claim Denial lawyers need to have a full understanding of the rules regarding the time periods for filing a lawsuit and how to avoid pitfalls in this area of the law. This is discussed in a Western District of Texas, Austin Division opinion styled, Kobra Dadfar and Esmail Roostaie v. Liberty Mutual Insurance Company.
This is a summary judgment opinion wherein the underlying case contains allegations of Insurance Code violations and breach of contract among other causes of action.
Liberty filed a motion for summary judgement alleging that Plaintiffs have let the statute of limitations expire and thus, the case should be dismissed.
The parties do not the dispute that all of the Plaintiffs’ claims are governed by a two year statute of limitations. There also does not appear to be any dispute that the claim accrued on September 27, 2017, when Liberty sent its “decision letter” to the Plaintiffs. Liberty asserts that Plaintiffs’ claims are barred because Liberty Mutual was not served with process until December 23, 2019, nearly three months after the expiration of the limitations period and nine months after the suit was initially filed. Plaintiffs respond that the limitations period should be tolled because they filed the suit within the limitations period and promptly attempted service. They argue that originally they thought they had served the correct party, and when they were told otherwise,they worked diligently to effect service as soon as possible. The U.S. 5th Circuit has stated that “Texas law applies in a diversity case to determine whether [Plaintiff] tolled the statute of limitations when [he]filed suit.”
In order to toll a statute of limitations, Texas requires a plaintiff to satisfy two requirements. A plaintiff must file suit not only within the statutorily prescribed limitations period, “but also use diligence to have the defendant served with process.” A plaintiff’s failure to serve defendant with process until after the limitations period has expired is excused only if the plaintiff exercised due diligence in effectuating service.
Plaintiffs first argue that the question of whether they acted with due diligence is a fact issue that cannot be resolved upon summary judgment. They are correct that the determination of due diligence is usually a fact question. The Court applies an “ordinary prudent person” standard, and lack of due diligence maybe found as a matter of law if the plaintiff offers no excuse for his failure to procure service, or if the plaintiff’s excuse conclusively negates diligence. It is the plaintiff’s burden to present evidence regarding the efforts that were made to serve the defendant, and to explain every lapse in effort or period of delay. Courts have held that an unexplained delay of several months in serving process shows a lack of due diligence as a matter of law. A plaintiff must give a reasonable explanation for the delay and show persistent, determined attempts to serve the defendant during the period of delay. A plaintiff’s explanation of the efforts in obtaining service may demonstrate a lack of diligence “as a matter of law” when one or more lapses between service efforts are unexplained or patently unreasonable.
On the merits of the service question, and whether the Plaintiffs were diligent in attempting service, the facts Plaintiff relies on are as follows:
Plaintiffs filed this suit on April 1st, 2019, for a loss that occurred when a tornado hit their home on April 4th, 2017. Defendant was served on April 17th, 2019, via the Travis County Constable for Precinct 5, by direct service to defendant’s president, Spencer Donkis, at defendant’s primary place of business. A true and correct copy of this petition and the Officer’s Return are attached hereto as Exhibit A and B. Defendant was also provided with a courtesy copy of plaintiff’s original petition on the day of filing, April 1st, 2019, via their attorneys, Sheila Tan and Ally Morgan, with whom plaintiff had already participated in an unsuccessful mediation attempt prior to filing suit. On June 17, 2019, Ms. Tan claimed via email that the service of process was not effective, not their registered agent. On June 20th, 2019, plaintiff’s counsel asked if defendant would be willing to accept service via their attorney or simply file an answer and appear, waiving this issue, since there was no question that the defendant had the suit. Ms. Tan indicated they did not have the authority to accept service, and claimed she did not have their registered agent’s information available. On August 6th, 2019 plaintiff’s counsel asked Ms. Tan to confirm the registered agent he was attempting to serve was the correct one, and served her with an amended pleading. On August 28th, 2019, Ms. Tan indicated that defendant’s registered agent still had not been served. Plaintiff’s counsel resent the updated pleading, and again asked if they would file an answer at this point. Plaintiff’s counsel did not yet have the new return, and after repeated attempts to track down the delay with the Travis County District Clerk in which he was sent between the District Clerk, who claimed to have issued and sent the August citation to Precinct 5, and Precinct 5, who claimed they never received it, plaintiff’s counsel eventually had to refile and resubmit the request for the reissuance of service on December 20th, 2019. On December 23rd, 2019, the third issued service was executed and returned, a true and correct copy of which is attached hereto as Exhibit C. On January 22nd, 2020, Defendant removed this case to federal court and filed their original answer & verified denial, claiming they are not a proper party to the lawsuit, and that “Liberty Insurance Corporation” is in fact the issuer of the policy at hand.
The only facts Liberty offers on these issues are contained in an Affidavit signed by its counsel, Ms. Tan, where she states:
When counsel for Plaintiffs contacted me to tell me that he had served Liberty Mutual Insurance Company through its president Spencer Donkis, I contacted Liberty Mutual and learned that Spencer Donkis is not a Liberty Mutual employee and is not the registered agent for Liberty Mutual Insurance Company or Liberty Insurance Corporation. I then conveyed that information to counsel for Plaintiffs. When counsel for Plaintiffs asked me to identify the registered agent for Liberty Mutual Insurance Company, I directed him to the Secretary of State or Texas Department of Insurance which has a tool to lookup registered agent information on its website.
As Plaintiffs note, they also sent a courtesy copy of the suit to Ms. Tan. When they inquired in June 2019 whether Liberty had received the suit, they were told that they had not served the correct person for Liberty. The first step Plaintiffs took to cure this problem was to ask Liberty’s attorney who the registered agent for service was. This was a diligent step to take, given that Ms.Tan had represented Liberty when it mediated this very dispute before suit was filed. Ms.Tan further seemed to have the requisite knowledge, or at least easy access to it, since she knew that Mr.Donkis was not the agent. Unfortunately, Ms. Tan chose to not provide the information, or agree to accept service of the suit. Thus, the next step the Plaintiffs took was to amend their pleading, send a courtesy copy to Ms. Tan, and ask her to confirm that the agent they were intending to serve was in fact the correct person. The evidence is silent on whether Ms. Tan confirmed the information. Plaintiffs followed up and learned in late August 2019 that the agent had not yet received the suit. The evidence shows that the Plaintiffs’ attorney then inquired into the status of service, and got bounced back and forth between the Travis County District Clerk and the Precinct 5 Constable, each contending that the failure to effect service was the other’s fault. Finally, Plaintiffs’ counsel had citation reissued, and requested service anew, which led to the service on December 23, 2019.
The Court finds that the uncontroverted evidence shows that Plaintiffs have in fact offered an excuse for their delay in service, and the excuse offered shows enough diligence such that the filing of the suit tolled the statute of limitations. Plaintiffs’ counsel was in regular communication with Liberty’s attorney from the time he filed the lawsuit, as the parties had already mediated Plaintiffs’ claims, and the same counsel represented Liberty at both the mediation and in this suit. Plaintiffs’ counsel even provided a courtesy copy of both the original petition and the amended petition to Liberty’s attorney. Though Plaintiffs struggled to effectuate service quickly, the evidence shows that their counsel was working diligently to do so, and at least some of the delay could have easily been avoided had Liberty wanted to do so. Indeed, it is a bit disingenuous for Liberty to fault Plaintiffs for slow service when Liberty refused to allow their counsel to accept service, and was cagey regarding who Plaintiffs needed to serve. Moreover, though Liberty quibbles with Plaintiffs’ evidence related to the Clerk’s and Constable’s finger pointing, it offers no evidence to controvert the Plaintiffs’ evidence. This is Liberty’s motion for summary judgment, and without any evidence from Liberty to controvert Plaintiffs’, the Court must accept the admissible evidence before it. The Court finds that Plaintiffs have established that they made sufficiently regular and sustained efforts to effectuate service on Liberty for the filing of suit to toll the statute of limitations.