Shannon O’Malley | Zelle
This is a regular occurrence: an insured makes a claim for damage to its property, the damage is investigated and the insurer finds no evidence that an insured peril caused damage to the property. A year or so later, the insured comes back with a public adjuster, or lawyer, or engineer report that essentially says “here is additional evidence of damage, please reconsider your coverage decision.” The insurer then properly reopens its investigation, examines the new evidence provided by the insured, finds some damage that could be contributed to the claimed occurrence, but the cost to repair the damage falls under the policy’s deductible. The insurer issues another letter acknowledging the new information, damage found but reaffirms that no payment will be made. Another year goes by. The insured now brings a lawsuit, but it is more than two years and a day after the first coverage denial was sent to the insured.
Can the insurer rely on the policy’s suit limitation clause, which prohibits bringing suit more than two-years and one-day after “a cause of action accrues,” based on the date of the initial denial?
The court in Oaks on the Lane Condo. Assoc. v. United. Spec. Ins. Co., No. 05-24-00128, 2026 WL 50763 (Tex. App.—Dallas Jan. 7, 2026) recently determined that an insurer’s reinvestigation and reaffirmation of a prior denial does not restart the clock to bring suit against an insurer.
In Oaks on the Lane, the insurer denied coverage for a 2019 storm claim in January 2020. The insurer determined the roof conditions at the property were attributable to age and weathering rather than storm damage. In the denial letter, the insurer stated it was “unable to make a payment,” but noted it would “consider additional information the Association believed brought the claim within coverage.” Id. at *2.
The Association provided an engineering report which alleged substantial evidence of hail damage requiring roof replacement. The insurer retained its own engineer, who inspected the property, found some hail and wind damage, but concluded that the hail was too small to damage the roofs requiring their replacement. The insurer determined that the limited damage found by its engineer would cost $1,907, which is under the deductible.
The insurer sent a second letter in January 2021 reiterating that the claim had been denied in January 2020, summarizing its review of the additional engineering reports and estimates, that the limited damage could be repaired for far less than the deductible, and concluding “our previous claim decision remains unchanged.” Id.
In May 2022, the insured brought suit alleging breach of contract and bad faith. The carrier moved for summary judgment alleging that the insured failed to file suit within two years and one day after its claims accrued – January 2022. The insured argued that the reinspection and reassessment restarted the limitations period and that it had until January 2023 to file suit.
The court determined that all of the plaintiff’s claims were based on a two-year statute of limitations or contractual limitations period that starts when the cause of action “accrues.”
The court found that a bad faith cause of action accrues “when the insurer wrongfully denies coverage. At that moment, the insurer’s wrongful conduct first causes harm to the insured, and limitations begin to run.” Id. at *4. Similarly, a breach of contract action accrues when the wrongful conduct first occurs.
Notably, the court noted that “for accrual purposes, an insurer need not use ‘magic words’ to deny a claim if the insurer clearly communicates, in writing, that it will not pay the claim and the reasons for that determination.” Id.
The insured argued that the limitations period was restarted when the insurer agreed to consider additional information. The court recognized that “in limited circumstances, some Texas state and federal courts have concluded that an insurer may restart the limitations period by expressly or impliedly withdrawing its prior denial, for example, by making an additional payment or otherwise taking action inconsistent with that denial.” Id. The court recognized that cases finding a limitations period has restarted typically “involve a genuine change in the insurer’s position, such as reopening a claim and paying additional benefits.” Id.
But when an insurer merely considers new information and reaffirms its position, the limitations period is not restarted. “Reinvestigation alone, even when prompted by additional information from the insured does not restart limitations absent a withdrawal or alteration of the original denial.” Id.
The court rejected the insured’s many arguments that the limitations period was restarted. Notably, the court determined the following:
- Even though a letter does not expressly reference a peril (for example, wind vs. hail), that does not restart the limitations period because accrual turns on the insurer’s refusal to pay, not on whether the insurer addressed every asserted theory of coverage.
- When a letter unambiguously advises that an insurer will not pay the claim and explains the basis, that is sufficient for accrual because once an insured knows the insurer will not pay the claim, the insured has sufficient facts to seek a judicial remedy.
- An insurer is not required to “close its file” for a limitations period to begin to accrue. “An insurer’s claim decision triggers the accrual when it clearly indicates that no payment will be made, whether or not the file is formally closed.”
- A recognition of additional covered damage that is still below deductible along with statements reaffirming the insurer’s decision not to make a payment does not restart the limitations period.
- Even if the insurer sends additional letters addressing information raised by the insured, when the insurer continues to expressly reaffirm its original claim decision (i.e. denial and refusal to pay), the limitations period will not restart.
The Lowdown: This case confirms that an insurer should continue to consider information provided by an insured in good faith as part of its investigation. If the additional information supports a finding of coverage, then payment should be made based on that additional information. But if the new information does not lead the insurer to change its initial coverage position, and there is an enforceable suit limitations provision, a court will find that the cause of action against the insurer accrued with the initial denial.
Texas law is very clear on this issue. Reinvestigation alone, even when prompted by additional information from the insured does not restart limitations absent a withdrawal or alteration of the original denial. The Oaks on the Lane case addresses the limited and unique situation where the insurer does find some additional damage, but its ultimate coverage position remains the same as the damage measure was below the deductible. In this situation, the revised below deductible measure does not restart limitations.
When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 801.641.8304, or email experts@adviseandconsult.net.