In TIG v. Aon, the Fifth Circuit applied Texas law to dismiss a seemingly viable claim on statute of limitations grounds, even though the plaintiff there may not have even known of its claim before the limitations period had run. The Fifth Circuit’s opinion points up the issues and difficulties in statute of limitation’s analysis. Comparing that opinion to the law in other jurisdictions highlights a further problem—different states can and do follow different rules and theories in this area, which can lead to diametrically different results.

Lexis.com subscribers may access a copy of the TIG v. Aon decision here.

TIG v. Aon arose when TIG, an insurer in a dispute with its reinsurer, learned that its broker, Aon, had failed to provide the reinsurer with certain loss information about the business. Because of that failure, the reinsurer successfully rescinded the reinsurance agreement in an arbitration with TIG. TIG promptly thereafter sued Aon for its failures in not representing TIG’s interests properly in the placement of the reinsurance.

The problem for TIG was that the reinsurance was placed in 1998, but the underlying arbitration was not filed until late 2002 or early 2003, and the arbitrator’s decision on rescission came only in May, 2004. TIG sued Aon promptly thereafter, but the Fifth Circuit held that, under Texas’s relatively strict interpretation of both accrual of a cause of action and the “discovery rule” (which might have tolled the statute), TIG’s claim in 2004 against Aon was barred. TIG was at least arguably unaware of the Aon’s wrongdoing until the arbitration was filed. The court reasoned, though, that under Texas law the cause of action accrued in 1998, because at that moment TIG suffered harm from the wrongful non-disclosure. Because TIG objectively could have discovered that wrong, the claims were barred two or four years later, when the limitations periods ran out, even though the reinsurer did not actually claim its right to rescission until after that point in time.

Mr. Ossyra writes: “Application of the statute of limitations can be a uniquely local (and difficult) issue, and accordingly, it can be a devastating trap for the unwary practitioner or plaintiff client, or a golden opportunity for the astute defendant. Statutes of limitations are a black and white issue; if a claim is filed after the limitations period has run, it is subject to early and likely complete dismissal.”

Mr. Ossyra further notes: “The lesson of TIG v. Aon is that where a wrong has occurred, even if that wrong is nascent, all avenues of recovery must be promptly evaluated with statute of limitations issues firmly in mind. While a cost-conscious approach might lead to putting off an investigation until the real harm is developed, that can be fatal. And, a cursory review to determine the applicable limitation period is clearly not enough; concepts of tolling and accrual can have dramatic impacts on the analysis. TIG v. Aon is a clear example.”

Subscribers can access the complete commentary on lexis.com. Additional fees may be incurred.