The Fifth Circuit U.S. Court of Appeals, applying Texas law, held that the reopening of a closed claim file does not restart the statute of limitations for an insured’s bad faith claim against an insurer. De Jongh v. State Farm Lloyds, 2016 WL 7009088 (5th Cir. Nov. 30, 2016).
An insurer investigated an insured’s hail damage claim and informed the insured that the claim was not covered. While internal notes indicated the insurer intended to send a coverage denial letter, it did not send the letter and closed the claim file without payment. The next month, the insured requested that the insurer reopen the claim file and reinvestigate the loss. The insurer did, and upon inspection, the insurer found new damage but nonetheless denied the claim again because the amount was under the deductible. The insurer so advised the insured, who subsequently sued.
The insurer argued that the insured’s claims were barred by the two-year-and-one day limitations period in the policy, and that the insured’s cause of action accrued on the date the insurer closed the claim file -- two years and two days before the insurer was first named in the lawsuit. The Fifth Circuit agreed, holding that the insured’s legal injury arose at the time the insurer closed the claim file because “the closing of the claim file was an objectively verifiable event that unambiguously demonstrated [the insurer’s] intent not to pay the claim, even if the fact of the injury was not discovered until later.” The Fifth Circuit held that the insurer’s reopening of the claim file at the insured’s request did not “reset the limitations clock,” meaning the original date of denial remained the trigger for the limitations period.