Delivery of Policy Starts the Running of the Statute of Limitations

Barry Zalma
Aug 7, 2023

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Wooten purchased seven Northwestern Mutual insurance policies. Three are disability income policies. Four are various whole-life policies. Wooten purchased and reviewed the last of the policies in December 2005. He sued claiming he was deceived about what he bought ten years before the suit.

In Wrenn Wooten v. The Northwestern Mutual Life Insurance Company, Jimzara, And Patrick Matthews, No. 05-20-00798-CV, Court of Appeals of Texas, Fifth District, Dallas (July 31, 2023) the Court of Appeals resolved Wooten's complaint that the trial court's grant of summary judgments in favor of appelees, was wrong.

BACKGROUND

On April 17, 2018 Wooten sued. He alleged he was sold policies based on misrepresentations on coverage and benefits, wrongfully advised him, and concealed misrepresentations.

Wooten bought the disability policies to provide income if he became disabled and unable to work in his present capacity of MRI radiologist. Wooten alleged Zara misrepresented that the policy would provide disability income even if he were able to work in another field. Wooten also alleged the disability policies were unsuitable because they did not contain a waiver-of-premium term, contrary to Zara's misrepresentations "and/or" omissions. He alleged a waiver-of-premium term would have allowed him to receive disability income without paying premiums. Wooten has not filed a disability claim under the policies.

The suit alleged claims for fraud, negligent misrepresentation, breach of fiduciary duty, and violations of the Texas Insurance Code and the Texas Deceptive Trade Practices-Consumer Protection Act (DTPA).

Wooten alleged he did not discover the injury "and/or" misconduct that forms the basis of this lawsuit until within two years of his filing the lawsuit. The trial court granted Northwestern Mutual's traditional motion for summary judgment. The trial court did not state a ground upon which it granted the traditional motions

STATUTE OF LIMITATIONS

Wooten alleged causes of action with two- and four-year periods of limitation. The statute of limitations for Wooten's claims for negligent misrepresentation and for violation of the Texas Insurance Code and the DTPA is two years.

The court concluded that the appellees carried their summary judgment burden of conclusively proving Wooten's claims for violations of the Insurance Code and DTPA, negligent misrepresentation, and fraud accrued at the time Wooten purchased each policy.

Much to the surprise of Mr. Wooten and most insureds, an insured has a duty to read the policy, and failing to do so, is charged with knowledge of the policy's terms and conditions. When the insured receives the written policy, it has sufficient facts in its possession to seek a legal remedy based on an alleged misrepresentation about policy terms by the insurer.

Appellees conclusively demonstrated Wooten purchased his last Northwestern Mutual policy in December 2005. The longest applicable statute of limitations for his claims on that policy-and all his policies-is four years. Wooten's claims for fraud, negligent misrepresentation, breach of fiduciary duty, and violations of the Texas Insurance Code and the DTPA are barred by limitations-unless Wooten was otherwise authorized to subsequently file his lawsuit and timely did so.

The Discovery Rule

An injury is not inherently undiscoverable when it is the type of injury that could be discovered through the exercise of reasonable diligence. Wooten testified he reviewed each of the life insurance policies and disability insurance policies when they were delivered to him. Summary judgment evidence conclusively demonstrated that Wooten actually reviewed the policies. Wooten knew, or should have known, at the time he bought the policies-and when he reviewed the policies-that they did not provide the coverage or benefits appellees allegedly misrepresented.

Consequently, appellees conclusively demonstrated in the trial court that the alleged injuries are not "inherently undiscoverable" and that the discovery rule does not apply.

Even in a breach of fiduciary duty case where a fiduciary's misconduct is inherently undiscoverable, a breach of fiduciary duty claim accrues when the claimant knows or in the exercise of ordinary diligence should know of the wrongful act and resulting injury. The Court of Appeals concluded that by 2005, at the latest, Wooten knew, or exercising reasonable diligence, should have known of the facts giving rise to the cause of action.

An insurance agent has no duty to explain policy terms to an insured. Instead, an insured has a duty to read the policy, and failing to do so, is charged with knowledge of the policy terms and conditions.

Therefore, appellees carried their summary judgment burden to conclusively prove Wooten's last claim accrued in December 2005 and to negate applicability of the common-law discovery rule to his common-law claims of fraud, negligent misrepresentation, and breach of fiduciary duty.

ZALMA OPINION

An insured has a duty to read a policy to confirm that it received the coverage the sales person represented. Although Wooten was neither dead or disabled, he sought damages against the insurer and sales persons when, ten years late, he found the policies did not cover the events he was promised. He sat on his rights well past the running of every applicable statute of limitations.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

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