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by Austin Taylor

In Texas, once a claim denial has been issued, the clock starts ticking for an insured to file a lawsuit. In Texas, the default statute of limitations for breach of contract claims is four years. However, Texas has long recognized that parties are free to contract around this default rule and may agree to a shortened limitations period so long as the period is at least two years from the date the cause of action accrues. See TEX. CIV. PRAC. & REM. CODE § 16.070(a). In practice, this means that the shortest limitations period parties can agree to is two-years and one-day.

A recent decision from a federal court in Texas highlights a novel argument by the insured to avoid the enforcement of a contractual “suit limitation” in property insurance policies. In Christian Care Center v. American Alternative Insurance Corporation, the insured argued that the policy’s appraisal clause was a precondition to filing suit, and because neither party had invoked appraisal previously, the contractual limitations period had not begun to run. No. 4:25-CV-00321-O, 2025 WL 2831472 (N.D. Tex. Oct. 6, 2025). The United States District Court for the Northern District of Texas, Fort Worth Division, soundly rejected this argument, holding that the insured claim was time-barred pursuant to the policy’s contractual limitations period.

Factual and Procedural Background

The dispute arose after Christian Care Center (“Christian Care”), reported damage from an April 27, 2020 storm event to its insurer, American Alternative Insurance Corporation (“American”). The claim was submitted on February 2, 2022. Following an investigation, American denied coverage on July 28, 2022, stating that the damage was attributable to prior claims rather than the reported storm.

More than two years later, on February 18, 2025, Christian Care filed suit in Texas state court alleging breach of contract and violations of the Texas Insurance Code related to unfair claims practices, and American’s failure to promptly pay the claim. American removed the matter to federal court in the Northern District of Texas and moved for summary judgment, arguing that all claims were time-barred under the policy’s contractual limitations clause. Christian Care argued that its claims were not time barred and also asked the court to compel appraisal and pause the case.

Court’s Analysis

The court addressed three interrelated questions: when the claims accrued, what deadlines applied, and whether the policy’s appraisal provision had to be invoked before suit.

First, the court identified the accrual date—the point at which the legal claim arises and the limitations clock begins to run. Pursuant to Texas law, the court concluded that the clock began to run from the date of American’s denial letter dated July 28, 2022. The court, accordingly, treated July 28, 2022 the accrual date Christian Cares’ claims.

Second, the court examined what limitations period applied. Although breach-of-contract claims in Texas typically have a four-year statute of limitations, parties may agree by contract to a shorter period so long as it is at least two years from accrual. The policy at issue included a “two years and one day” suit limitation provision, which would be measured from the date the cause of action accrued. The court contrasted this approach with policies that improperly start the clock at the date of loss, which can unlawfully shorten the window to less than two years in violation of Texas law. Because this policy tied the deadline to denial—and provided at least two years—the clause was enforceable.

The court then considered the Insurance Code claims. Texas Insurance Code Chapter 541 (unfair claims practices) has its own two-year statute of limitations. Accordingly, those claims had to be filed by July 28, 2024. Chapter 542 of the Texas Insurance Code (prompt payment of claims) does not include a specific limitations period and is considered a contract-based remedy; thus, the court reasoned that it can be limited by the policy’s suit limitation clause. As a result, the policy’s two-years and one-day deadline applied to both the breach-of-contract claim and the prompt-payment claim.

Applying these limitations periods, the court held that Christian Care’s lawsuit, filed on February 18, 2025, was untimely across the board. The Chapter 541 claim was late under the two-year statute. The contract and Chapter 542 claims were late under the policy’s “two years and one day” limitation from the denial date.

Finally, the court addressed the policyholder’s argument that appraisal was a required precondition to filing suit and therefore extended the deadline. The policy stated that either party “may” demand appraisal if they disagree on the amount of loss. The court read “may” as permissive, not mandatory. Because appraisal was optional and contingent on a disagreement over the amount of loss, it was not a condition that had to be satisfied before filing suit. Nor did the policy’s language convert appraisal into a tolling mechanism. In short, appraisal did not pause or extend the suit limitations period, and the court would not rewrite the clause to make appraisal an unwritten prerequisite to litigation. The court also noted the practical inconsistency of claiming appraisal was required when Christian Care had filed suit before attempting to invoke it.

Conclusion

The Christian Care Center v. American Alternative Insurance Corporation decision reinforces the enforceability of properly drafted suit limitation clauses in Texas insurance policies. The court's ruling confirms that insurers can rely on these contractual provisions—so long as they comply with statutory minimums—as a defense to time-barred claims. Additionally, the court rejected attempts to use the appraisal clause as a tolling mechanism, affirming that optional appraisal provisions do not delay or extend the deadline to file suit. For carriers, this case is a strong reminder of the value of clear policy language that complies with Texas’s statutory minimums for contractual limitations periods.

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The opinions expressed are those of the authors and do not necessarily reflect the views of the firm or its clients. This article is for general information purposes and is not intended to be and should not be taken as legal advice.