Smith v. Travelers Casualty Insurance Company of America

Filing 54

MEMORANDUM OPINION AND ORDER granting 27 MOTION for Summary Judgment Statute of Limitations, mooting 41 MOTION for Summary Judgment On Causation (Signed by Judge Sim Lake) Parties notified. (aboyd, 4)

United States District Court
Southern District of Texas

ENTERED
July 10, 2018

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION

LILLIAN SMITH,

§
§
§
§
§
§
§
§
§
§

Plaintiff,
V.

TRAVELERS CASUALTY INSURANCE
COMPANY OF AMERICA,
Defendant.

David J. Bradley, Clerk

CIVIL ACTION NO. H-16-1527

MEMORANDUM OPINION AND ORDER

Plaintiff
defendant

Lillian

Travelers

Smith

Casualty

("Plaintiff"
Insurance

or

"Smith")

Company

of

sued

America

("Defendant" or "Travelers") in the 25th Judicial District Court of
Gonzales County, Texas. 1

Defendant timely removed to this court. 2

Pending before the court is Defendant's Motion for Summary Judgment
-Statute of Limitations ("Defendant's MSJ")

(Docket Entry No. 27).

For the reasons stated below, Defendant's MSJ will be granted and
this action will be dismissed with prejudice.
I.

Background

Plaintiff alleges that a lightning strike caused damage to the
foundation and the air conditioning unit at her commercial property

1

See Plaintiff's Original Petition and Request for Disclosure
("Original Petition") , Exhibit 3 to Notice of Removal, Docket Entry
No. 1-3.
2

See Notice of Removal, Docket Entry No. 1.

located at 15 Houston Street, Westhoff, Texas 77994 ("Property") . 3
Plaintiff reported the claim to Defendant on September 5, 2013, and
Defendant acknowledged the claim by letter on September 7, 2013. 4
Defendant retained engineers in September of 2013 to inspect the
air conditioning unit and the foundation.
Plaintiff

several

Defendant issued a
policy's

times

in

September

5

and

After speaking with
October

of

2013,

6

letter denying coverage under the insurance

first-party

property

coverage

on

November

13,

2013.

7

Plaintiff retained her own engineer who examined the Property on
December 2,

2014,

and issued a

report that concluded that the

damage to the air conditioning unit and the foundation resulted
from the lightning strike. 8

3

0riginal Petition, Exhibit 3 to Defendant's
Removal, Docket Entry No. 1-3, pp. 2-3 ~ 9.
4

Claim Acknowledgment,
Entry No. 27-3, p. 1.

Notice

of

Exhibit C to Defendant's MSJ, Docket

5

See Original Petition, Exhibit 3 to Defendant's Notice of
Removal, Docket Entry No. 1-3, p. 3 ~ 10; Travelers' Claim Log,
Exhibit E to Defendant's MSJ, Docket Entry No. 27-5, p. 1;
Travelers' Claim Log, Exhibit F to Defendant's MSJ, Docket Entry
No. 27-6, p. 1.
6

Traveler's Claim Log, Exhibit F to Defendant's MSJ, Docket
Entry No. 27-6, p. 1; Travelers' Claim Log, Exhibit I to
Defendant's MSJ, Docket Entry No. 27-9, p. 1.
7

Travelers' Denial of Coverage Letter to Smith, Exhibit K to
Defendant's MSJ, Docket Entry No. 27-11, pp. 1-3.
8

See Original Petition, Exhibit 3 to Defendant's Notice of
Removal, Docket Entry No. 1-3, pp. 3-4 ~~ 11-13; April 24, 2014,
Preliminary Letter Report of Structural Inspection, Exhibit BB to
Travelers' Reply to Plaintiff's Response to Motion for Summary
Judgment ("Defendant's Reply"), Docket Entry No. 38-1, pp. 9-16.
-2-

Plaintiff filed this action on January 25,

2016,

asserting

claims for violations of the Texas Deceptive Trade Practices Act
( "DTPA")

and the Texas Insurance Code,

and breach of contract. 9

Defendant filed its Motion for Summary Judgment on Limitations on
February 27, 2018. 10
II.

Standard of Review

Summary judgment is appropriate if the movant establishes that
there is no genuine dispute about any material fact and the movant
is entitled to judgment as a matter of law.

Fed. R. Civ. P. 56(a).

Disputes about material facts are genuine "if the evidence is such
that a reasonable jury could return a verdict for the nonmoving
party."

Anderson v.

Liberty Lobby,

Inc.,

106 S.

Ct.

2505,

2510

(1986).

The moving party is entitled to judgment as a matter of

law if "the nonmoving party has failed to make a sufficient showing
on an essential element of her case with respect to which she has
the burden of proof."

Celotex Corp. v. Catrett, 106 S. Ct. 2548,

2552 (1986).
A party moving for summary judgment "must 'demonstrate the
absence of a genuine issue of material fact,' but need not negate
the elements of the nonmovant' s case."
37 F.3d 1069, 1075 (5th Cir. 1994)

9

Little v. Liquid Air Corp. ,

(en bane)

0riginal Petition, Exhibit 3 to
Removal, Docket Entry No. 1-3, pp. 4-6.
10

(per curiam)

Defendant's

See Defendant's MSJ, Docket Entry No. 27.
-3-

(quoting

Notice

of

Celotex, 106 S. Ct. at 2553).

"If the moving party fails to meet

this initial burden, the motion must be denied, regardless of the
nonmovant' s response."

Id.

If the moving party meets this burden,

Rule 56(c) requires the nonmovant to go beyond the pleadings and
show

by

affidavits,

admissions on file,

depositions,

answers

to

interrogatories,

or other admissible evidence that specific

facts exist over which there is a genuine issue for trial.

Id.

The nonmovant "must do more than simply show that there is some
metaphysical doubt as to the material facts."

Matsushita Electric

Industrial Co., Ltd. v. Zenith Radio Corp., 106 8. Ct. 1348, 1356
(1986) .

In

reviewing

the

evidence

"the

court

must

draw

all

reasonable inferences in favor of the nonmoving party, and it may
not make credibility determinations or weigh the evidence."

Reeves

v. Sanderson Plumbing Products, Inc., 120 8. Ct. 2097, 2110 (2000).
The court resolves factual controversies in favor of the nonmovant,
"but only when there is an actual controversy, that is, when both
parties have submitted evidence of contradictory facts."

Little,

37 F.3d at 1075.
III.
Defendant

argues

that

it

Analysis
is

entitled

to

summary

judgment

because the statute of limitations bars all of Plaintiff's claims. 11
Plaintiff

11

responds

that

Defendant

has

waived

its

limitations

See Defendant's MSJ, Docket Entry No. 27, pp. 7-11.
-4-

defense and that its causes of action fall within the limitations
periods because the accrual dates have been tolled. 12
A.

Waiver of Limitations Defense

Federal Rule of Civil Procedure 8(c) requires a defendant to
affirmatively plead the statute of limitations in its responsive
pleading.

Fed. R. Civ. P. 8(c).

may result in waiver. "
Thermotek,

Inc.,

"Failure to comply with this rule

Motion Medical Technologies,

875 F.3d 765,

771

failure to comply with Rule 8 (c)
the

\\ ( 1)

de fen dan t

pragmatically

raised

sufficient

time,

(5th Cir. 2017).

v.

A technical

does not result in waiver if

the

affirmative

and

( 2)

prejudiced in its ability to respond."
quotations omitted).

L.L.C.

the

defense

plaintiff

at
was

a

not

Id. (internal citations and

Moreover, a failure to comply with Rule 8(c)

is not waived if "the failure was corrected by amendment [,]" unless
the court erred in permitting the amendment.
Co.,

Combee v. Shell Oil

615 F.2d 698, 700-01 (5th Cir. 1980).
Defendant's First Amended Answer includes a defense entitled

"Policy Provisions Limit or Preclude Coverage" in which Defendant
includes the Legal Action Clause. 13

In Defendant's Second Amended

12

Plaintiff's Response in Opposition to Defendant's Motion for
Final Summary Judgment ("Plaintiff's Response") , Docket Entry
No. 37, pp. 8-15.
13

See Travelers Casualty Insurance Company of America's First
Amended Answer, Docket Entry No. 19, pp. 4, 10 ("No one may bring
a legal action against us under this Coverage Form unless:
(continued ... )
-5-

Answer, filed on February 7, 2018, Defendant affirmatively pleads
the statute of limitations as an affirmative defense. 14

Although

Defendant did not file its Second Amended Answer until more than
two years after Plaintiff filed her Original Petition, Plaintiff
consented to Defendant's amendment of

its pleadings. 15

To the

extent that Defendant failed to plead the limitations defense in
its First Amended Answer,

Defendant cured any failure

to raise

limitations by subsequent amendment and thus has not waived its
limitations defense.

B.

Accrual Date of Statute of Limitations

The statutes of limitations for Plaintiff's state law claims
are

governed

by

Texas

Kansa

law.

Reinsurance

Co. ,

Ltd.

v.

Congressional Mortgage Corp. of Texas, 20 F.3d 1362, 1369 (5th Cir.
1994) .

"Under Texas law,

the party asserting that a

claim is

barred by the statute of limitations bears the burden of proof on
this issue."

Capitol One,

N.A.

v.

Custom Lighting & Electric,

( • • • continued)
The action is brought within 2 years and one day from the date the
cause of action first accrues
.").
13

14

See Travelers Casualty Insurance Company of America's Second
Amended Answer ("Defendant's Second Amended Answer"), Docket Entry
No. 24, p. 15 ("Pursuant to Fed. R. Civ. P. 8, Travelers pleads the
affirmative defense of statute of limitations barring Plaintiff's
claims and suit .
.").
15

See Emails Re: Lillian Smith Defendant's Reply, Docket Entry No.
Counsel:
"I would like to clean up the
to me doing so?" Plaintiff's Counsel:
-6-

pleadings; Exhibit AA to
38-1, p. 3 (Defendant's
pleadings. Will you agree
"Yes, I agree.").

Inc., 2010 WL 4923470 at *3 (S.D. Tex. Nov. 29, 2010)

(citing KPMG

Peat Marwick v. Harrison County Housing Finance Corp., 988 S.W.2d
746, 748 (Tex. 1999)).
the

basis

of

"A defendant who seeks summary judgment on

limitations

must

conclusively

plaintiff's cause of action accrued."

prove

when

the

Seureau v. ExxonMobil Corp.,

274 S.W.3d 206, 226 (Tex. App.--Houston [14th Dist.] 2008)

(citing

KPMG, 988 S.W.2d at 748).
1.

Limitations Periods

Under Texas law the statute of limitations for a breach of
contract action is four years from the day the action accrues.
Tex. Civ. Prac. & Rem. Code§ 16.004(a).

However, this limitations

period may be contractually modified as long as the period is at
least two years.

Id.

§ 16. 070 (a)

("A stipulation,

contract,

or

agreement that establishes a limitations period that is shorter
than two years is void in this state.").

The insurance policy

issued by Defendant provides for a statute of limitations of "2
years and one day from the date the cause of action first accrues
II

16

Because the

Policy sets the limitations period at two

years and one day, and because Plaintiff does not argue that the
Policy is void,

Plaintiff must have filed her breach of contract

claim within two years and one day from the accrual date.
Plaintiff

argues

that

a

four-year

statute

of

limitations

should apply to its claims under the Texas Insurance Code because
16

Texas Changes, section D.b., Exhibit B to Defendant's MSJ,
Docket Entry No. 27-2, p. 52.
-7-

Article

21.55

of

the

Texas

Insurance

Code

does

not

provide

a

limitations period, and because "[w]hile Article 21.21 of the Texas
Insurance

Code

includes

a

specific,

two-year

statute

limitations, it does not control in the present case." 17

of

However,

Plaintiff does not allege violations of Article 21.21 or 21.55, and
those articles have been repealed.

See Tex. Ins. Code arts. 21.21,

21.55

78th

(Repealed

§ 26(a)(1)).

by

Acts

2003,

Legislature,

ch.

1274,

Plaintiff alleges that Defendant violated Sections

541.060 (a) (2) (A),

(a) (2) (B),

(a) (3),

(a) (4) (A),

and

(a) (4) (B)

of

the Texas Insurance Code. 18

Causes of action for violation of the

Texas

subject

Insurance

limitations.

Code

are

to

Tex. Ins. Code§ 541.162(a)

a

two-year

statute

of

("A person must bring an

action under this chapter before the second anniversary .

. ")

(emphasis added) .
Causes of action for violation of the Texas Deceptive Trade
Practices Act are subject to a two-year statute of limitations.
Tex. Bus.

& Com. Code

§

17.565

("All actions brought under this

subchapter must be commenced within two years

.

. ") ; see also

Provident Life and Accident Insurance Co. v. Knott, 128 S.W.3d 211,
221 (Tex. 2003).

Therefore, Plaintiff's contract claim must have

been brought within two years and one day of the accrual date, and
Plaintiff's

17

claims

for

violations

of

the

DTPA

and

the

Texas

Plaintiff's Response, Docket Entry No. 37, p. 11.

18

0riginal Petition, Exhibit 3 to Defendant's
Removal, Docket Entry No. 1-3, p. 5 ~ 16.
-8-

Notice

of

Insurance Code must have been brought within two years of the
accrual date.
2.

Accrual Dates

Defendant argues

that the statute of

limitations began to

accrue on November 13, 2013 -- the date that Defendant issued its
Denial of Coverage Letter. 19
of

limitations

was

tolled

Plaintiff responds that the statute
"because

Travelers'

continued

to

investigate Plaintiff's claim for several years after the purported
" 20

November 13 , 2 013 denial date .
a.

Applicable Law

Ordinarily a claim accrues "when [a] plaintiff has a complete
and present cause of action.

In other words,

the limitations

period generally begins to run at the point when the plaintiff can
file suit and obtain relief."
Inc.,

134

omitted) .

S.

Ct.

1962,

"Under

the

1969

Petrella v.
(2014)

legal-injury

Metro-Goldwyn-Mayer,

(citations
rule,

a

and quotations

cause

of

action

generally accrues when a wrongful act causes some legal injury,
regardless of when the plaintiff learns of the injury, and even if
all resulting damages have not yet occurred."

Seureau, 274 S.W.3d

at 226.
Causes of action for breach of first-party insurance contracts
and violations of the DTPA and the Texas Insurance Code accrue on

19

Defendant's MSJ, Docket Entry No. 27, pp. 9, 10.

20

Plaintiff's Response, Docket Entry No. 37, pp. 10-11.
-9-

the date the insurer denies the insured's claim.
Federal Insurance Co.,

649 F.3d 367, 373

Murray v. San Jacinto Agency,

Citigroup Inc. v.

(5th Cir. 2011)

Inc., 800 S.W.2d 826, 828-29 (Tex.

1990)); Provident Life and Accident Insurance Co. v.
S.W.3d 211, 221 (Tex. 2003).

(citing

Knott,

128

But "when there is no outright denial

of a claim, the exact date of accrual of a cause of action .
should be a question of fact to be determined on a case-by-case
basis."

Knott,

128 S.W.3d at 221-22

citations omitted) .

(internal quotations and

A notice of denial does not need to include

"magic words" of denial "if an insurer's determination regarding a
claim and its reasons for the decision are contained in a clear
writing to the insured."

Id.

"[C]losing a claim file

at 222.

[also] constitutes an outright denial of coverage and triggers the
limitations period."

De Jongh v. State Farm Lloyds, 664 F. App'x

405, 409 (5th Cir. 2016).
request

does

not

Reopening the claim upon the insured's

change

the

accrual

date

for

purposes

of

"Even if the insurance company is willing to

limitations.

review additional information, if it does not change its position
on the claims, the limitations period is not tolled or extended."
Morales v. Lloyd's, Civil Action No. 7:14-1001, 2016 WL 7734651 at
*4

(S.D.

Lloyds,

Tex.
210 F.

insurance

March 30,

2016)

App'x 390,

company may

denying or paying a

394

not

claim."

(citing Castillo v.
(5th Cir.

"string []
Knott,
-10-

an

2006)).
insured

State Farm
However,

the

along

without

128 S.W.3d at 222

(citing

Kuzniar v.

State Farm Lloyds,

52 S.W.3d 759,

761

(Tex.

App.--

San Antonio 2001, pet. denied).
Texas courts have held that some circumstances warrant tolling
the accrual date.

For example, in Pena v. State Farm Lloyds one of

the insured's claims for damages from slab foundation movement was
expressly

denied,

but

over

a

year

later

the

insured made

an

additional claim under a new claim number for damages related to
the same slab foundation movement.
App.--Corpus

Christi,

1998,

reh'g

9 8 0 S . W. 2 d
overruled).

94 9 ,
The

9 54

( Tex .

insurance

company investigated the second claim and made payments on it.

Id.

The court held that "[b]ecause the slab foundation problems were
essentially on-going,

and its subsequent reinvestigation of and

partial payment for the same reported problems, it appears that the
denial

of

the

[first]

claim was

effectively

reconsidered

and

withdrawn by [the insurance company] , thus resetting the starting
date for limitations."
b.
Unlike

Id.

Application
in Pena,

the evidence before the court

shows

that

Plaintiff never made a claim for additional damages, Defendant made
no additional payments and never reopened the claim, and there is
no evidence that otherwise indicates that Defendant changed its
decision to deny coverage.

Defendant expressly denied Plaintiff's

claim in its Denial of Coverage Letter when it stated "we will be
unable to provide coverage for your claim as the damages sustained
-11-

are excluded in the policy." 21

In December of 2013 Plaintiff hired

an engineer to inspect the damage to her property and prepare a
report.

22

In August of 2014 Plaintiff requested that Defendant

reconsider

the

denial

of

coverage

in

light

of

Plaintiff's

engineer's report and pay $750,000, otherwise Plaintiff would file
suit. 23
your

Defendant responded on October 13, 2014, stating "[w]hile
letter

does

not

contain

any

additional

or

different

information which would cause Travelers to change its position in
this matter, if you will provide me some dates that the property is
available for inspection, we will hire a third engineer to conduct
an investigation

, 24

On April

9,

2015,

Defendant sent

Plaintiff the report from its third engineer. 25
Any requests by Plaintiff to reinvestigate its claim and any
subsequent review by Defendant have no effect on the statute of
21

See Denial of Coverage Letter, Exhibit K to Defendant's MSJ,
Docket Entry No. 27-11, pp. 1-3.
22

See April 24, 2014, Preliminary Letter Report of Structural
Inspection, Exhibit BB to Defendant's Reply, Docket Entry No. 38-1,
pp. 9-16.
23

August 11, 2014, Letter Notice of Smith's Claim against
Travelers, Exhibit BB to Defendant's Reply, Docket Entry No. 38-1,
pp. 4-7.
24

Travelers' October 13, 2014, Response to Notice of Smith's
Claim, Exhibit F to Plaintiff's Response, Docket Entry No. 37-6,
p. 1 (emphasis added).
25

See April 9, 2015, Email from Rebecca Moore to David Sergi,
Exhibit G to Plaintiff's Response, Docket Entry No. 37-7, p. 1
("Please find attached the evaluation report from Acute Engineering
for your review."). Neither party has provided the court with the
engineer's report.
However, Defendant argues that the report
"supported its denial of coverage" and Plaintiff does not dispute
that assertion.
-12-

I

I

I

!

I
~

I

"

limitations because Defendant did not alter its original decision
to deny coverage.

Even were the court to conclude that Defendant's

third engineer's

report

constituted a

formal

denial,

a

second

denial issued after Plaintiff's request for reconsideration does
not restart the limitations period.

Pace v. Travelers Lloyds of

Texas Insurance Co., 162 S.W.3d 632, 635 (Tex. App.--Houston [14th
Dist.] 2005, no pet.).
raise

a

genuine

limitations.

The court concludes that Plaintiff fails to

issue

of

material

fact

as

to

tolling

of

Because Defendant denied Plaintiff's claim in its

Denial of Coverage Letter and because Defendant never changed its
position

on

the

claim,

the

limitations

period

for

all

of

Plaintiff's causes of action accrued on November 13, 2013.
IV.

Conclusions and Order

Because Plaintiff filed suit on January 25, 2016, after the
statute of limitations had elapsed on each of Plaintiff's causes of
action, Defendant is entitled to summary judgment. 26

Accordingly,

Defendant's Motion for Summary Judgment- Statute of Limitations
(Docket Entry No. 27) is GRANTED.
SIGNED at Houston, Texas, on this the lOth day

ly

1

2018,

SIM LAKE
UNITED STATES DISTRICT JUDGE

26

Travelers also filed Defendant's Motion for Summary Judgment
on Causation (Docket Entry No. 41). Because the court will grant
Defendant's Motion for Summary Judgment on limitations, Defendant's
Motion for Summary Judgment on Causation is moot.
-13-