Statute Of Limitations In Insurance Policy

Here is one for policy holders in Grand Prairie, Arlington, Dallas, Fort Worth, Garland, Mesquite, Irving, Richardson, Wylie, Highland Park, Oak Cliff, and other parts of Texas to consider. What is the statute of limitations for sueing under an insurance policy? Well, it depends.
The Texas Civil Practices & Remedies Code, Section 16.051, says:
Every action for which there is no express limitation period, except an action for the recovery of real property, must be brought not later than four years after the day the cause of action accrues.
However, the above statute must be read with Section 16.070(a), which says:
Except as provided by Subsection (b), a person may not enter a stipulation, contract, or agreement that purports to limit the time in which to bring suit on the stipulation, contract, or agreement to a period shorter than two years. A stipulation, contract, or agreement that establishes a limitations period that is shorter than two years is void in this state.
The statute of limitations in insurance breach of contract suits is four years, the same as other breach of contract suits. However, insurance companies have begun to use endorsements intended to reduce the period in which an insured may bring suit against the insurance company. State Farm, for example, has begun using a “Suit Against Us Endorsement,” which provides that “an action against us must be made within two years and one day after the cause of action accrues.” Insureds should be aware of these contractual limitations periods.
A 1984, Houston, 14th District, Court of Appeals, case styled, Curtis J. Duster v. Aetna Insurance Company is worth reading.
In the Duster case, Duster insured a yacht with Aetna Insurance Company. In September of 1979, Dusters’ yacht was damaged. He filed suit against Aetna in February of 1982. The insurance agreement stated that action against Aetna was limited to a twelve month period following damage or loss. The limitation paragraph also contained a savings clause which stated:
“Provided that where any of the above limitations of time is prohibited or invalid by or under any applicable law, then and in that event no suit or action shall be commenced or maintainable unless commenced within the shortest limitation of time permitted under such law.”
Attorneys for Duster pointed out that it is illegal to fix a limit on actions on a contract to a period of not less than two years.
The court held that a twelve month period is void as a matter of law. The question then became whether of not the saving clause then allowed the shortest time allowed by law (two years) to become the limitations period.
This court then stated,
“There are two rules of construction which provide guidance on how this savings clause should be interpreted … . Our Supreme Court has told us in … , that ambiguities in a writing are to be strictly construed against the author and in a manner which will give effect to the intent of the parties. If two constructions are possible, the one requiring execution or performance is to be favored.
The second general rule of construction is that provisions denying benefits under an insurance policy should be construed strictly against the insurer. Consistent with these two rules, we hold that the savings clause in this case was inadequate to invoke the two year limitation … .”
The savings clause in this case was not sufficiently specific to invoke the two year limitation statute. In order to invoke the two year statute, the maker of the contract must specifically state the period of limitation he wished as a term of the insurance policy. The statute allows the parties to fix the limitation at any period under four years, so long as it is not less than two years.
The agreement in the Dusters case failed to specify a lawful period of limitations. The four years statute of limitations governing written contracts then applied.
These cases are not really that difficult, however it is necessary for an experienced Insurance Law Attorney to read the insurance policy in order to properly advise a client. Additionally, there plenty of actions in the Texas Insurarance Code, an insurance company can take or fail to take that only have a two year limitations period regardless of anything written in the insurance contract. This is the part that can become very confusing.