Glen Kuzniar and Cynthia Kuzniar v. State Farm Lloyds--Appeal from 288th Judicial District Court of Bexar County

No. 04-98-00501-CV
Glen KUZNIAR and Cynthia Kuzniar,
Appellants
v.
STATE FARM LLOYDS,
Appellee
From the 288th Judicial District Court, Bexar County, Texas
Trial Court No. 98-CI-06338
Honorable Janet Littlejohn, Judge Presiding
ON MOTION FOR EN BANC RECONSIDERATION

Opinion by: Paul W. Green, Justice

Dissenting opinion by: Alma L. L pez, Justice, joined by Phil Hardberger, Chief Justice, and Catherine Stone, Justice

Sitting en banc: Phil Hardberger, Chief Justice

Tom Rickhoff, Justice

Alma L. L pez, Justice

Catherine Stone, Justice

Paul W. Green, Justice

Sarah B. Duncan, Justice

Karen Angelini, Justice

Delivered and Filed: January 17, 2001

SUMMARY JUDGMENT AFFIRMED.

The motion for en banc reconsideration is granted. The panel opinion and judgment dated July 12, 2000 are withdrawn and the following is substituted.

* * *

In this limitations case, the insureds delayed four years before filing suit on a policy claim. The insurance policy contains a contractual two-year limitations period and, based on this, the insurer won a summary judgment on its limitations defense. On appeal, the insureds claim the limitations period was tolled because they were never told whether their claim had been rejected. The summary judgment is affirmed.

Facts

The Kuzniars reported in August 1992 that they suspected a plumbing leak under their home. State Farm opened a claim file and sent its adjuster to investigate the claim. The adjuster asked the Kuzniars to hire a plumber to confirm the leak. However, neither the adjuster nor State Farm heard back from the Kuzniars and the claim file was closed in January 1993. It is undisputed that all communications between the parties regarding the claim occurred during 1992. Suit for failure to pay the claim was filed in August 1996.

Discussion

We must determine when the cause of action accrued, which is a question of law. Willis v. Maverick, 760 S.W.2d 642, 644 (Tex. 1988). Generally, "a cause of action accrues when a wrongful act causes some legal injury, even if the fact of injury is not discovered until later." S.V. v. R.V., 933 S.W.2d 1, 4 (Tex. 1996). This is generally known as the legal injury rule. All claims are treated in accordance with the legal injury rule unless the claim falls within either of two types of cases. Accrual will be deferred if 1) the cause of action is not discovered as a result of fraud or fraudulent concealment, or 2) the cause of action is one that is "inherently undiscoverable." Id. at 6. The Kuzniars do not contend State Farm acted fraudulently to conceal the fact of injury, nor do they contend their claim is one that is "inherently undiscoverable" as that term has been described by the supreme court. See id. at 7 ("An injury is inherently undiscoverable if it is by nature unlikely to be discovered within the prescribed limitations period despite due diligence."). Accordingly, the time of accrual of the Kuzniars' cause of action must be determined in accordance with the legal injury rule.

The legal injury in this case occurred when State Farm unreasonably failed to pay the Kuzniars' claim, which at the very latest was when the claim file was closed on January 13, 1993. (1) The Kuzniars argue, however, the legal injury should derive from State Farm's failure to comply with its statutory duty to timely accept or reject the policy claim. But the failure to comply with a statutory duty has nothing to do with, and fails to vitiate, the Kuzniars' own responsibility to exercise diligence in pursuing their claim. The closing of the claim file was an objectively verifiable event that unambiguously demonstrated State Farm's intent not to pay the claim, "even if the fact of injury [was] not discovered until later." See id. at 4.

The dissent relies on a footnote in Murray v. San Jacinto Agency, Inc., 800 S.W.2d 826 (Tex. 1990) to support its argument that the legal injury rule does not apply in this case, but that a "special" and different test is applied in determining when a cause of action accrues against an insurance company in a bad faith failure to pay case. See Murray, 800 S.W.2d at 828 n.2. The dissent argues that in bad faith cases a fact issue may exist concerning when the cause of action accrues when the insurer fails to timely pay or deny the claim. However, reliance on Murray is misplaced for at least two reasons. First, the court candidly admits the legal point it was making in the footnote was dictum and had nothing to do with the case. Id. ("When, unlike this case, there is no outright denial of a claim . . . .")(emphasis added). The footnote cannot, therefore, be relied on as if it were the holding of the court.

More importantly, the Murray footnote refers to a scenario where the insurance company "strings an insured along without denying or paying a claim." Id. It seems obvious the court was referring to fraudulent conduct on the part of the insurer. If the Kuzniars had alleged State Farm acted fraudulently in connection with its denial of the claim, then perhaps a fact issue would exist concerning when the cause of action accrued. See S.V., 933 S.W.2d at 6 (accrual of cause of action deferred in cases of fraud or fraudulent concealment). However, as we have noted, the Kuzniars made no such claim. And there is nothing in this record, even after indulging all inferences and doubts in favor of the Kuzniars, to suggest State Farm was wrongfully stringing along the Kuzniars. Indeed, the parties did not even communicate with each other after 1992.

And even if fraud had been alleged, the Kuzniars would have had a very difficult burden to overcome. The lawsuit was filed four years after the original claim was made. That means there was a delay of at least two full years before the earliest date the cause of action could have accrued for the suit to remain viable. The Kuzniars would have had the burden of proving this very lengthy delay was not a lack of diligence as a matter of law.

Conclusion

The legal injury rule applies in this case because the Kuzniars made no allegation that would defer the accrual of the cause of action. The Kuzniars sustained a legal injury, at the latest, when State Farm closed its claim file in January 1993 without paying the Kuzniars' claim. Because there is no genuine issue of material fact that suit was filed more than two years after January 1993, the summary judgment is affirmed.

PAUL W. GREEN,

Justice

PUBLISH

1. The term "unreasonably failed to pay" means the point when facts come into existence, whether known by the claimant or not, that authorize the claimant to seek a judicial remedy. Murray v. San Jacinto Agency, Inc., 800 S.W.2d 826, 829 (Tex. 1990).