IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 18-20465

LILLIAN SMITH, 

 Plaintiff - Appellant

v.

TRAVELERS CASUALTY INSURANCE COMPANY OF AMERICA, 

 Defendant - Appellee

Appeal from the United States District Court

for the Southern District of Texas

Before OWEN, SOUTHWICK, and HIGGINSON, Circuit Judges.

STEPHEN A. HIGGINSON, Circuit Judge:

Lillian Smith sued her insurer, Travelers, for contractual and statutory 

violations arising from the denial of her commercial property insurance claim. 

Travelers asserted a limitations defense. While Smith concedes that Travelers

sent her an unambiguous denial letter, she insists that her causes of action did 

not accrue until months later because Travelers agreed, upon her request, to 

re-investigate the property damage. Smith also urges that Travelers waived 

its limitations defense by failing to raise it until litigation had been underway 

for two years. The district court granted summary judgment for Travelers. We 

affirm.

United States Court of Appeals

Fifth Circuit

FILED

July 26, 2019

Lyle W. Cayce

Clerk

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I. Factual Background

Plaintiff-Appellant Lillian Smith (“Smith”) had a contract with 

Defendant-Appellee Travelers Casualty Insurance Company (“Travelers”) for 

commercial property insurance. According to Smith, a lightning strike caused 

damage to the foundation and air conditioning unit on her property on August 

27, 2013. On September 5, 2013, she submitted a claim to Travelers. Travelers 

acknowledged receipt of the claim two days later, in a letter sent to Smith.

Throughout September and October, Travelers retained engineers to 

inspect the damage and determine its cause. Travelers regularly kept Smith 

apprised of the investigation. During this time, Smith hired her own 

engineering consultant, with whom Travelers kept in regular contact as well. 

Smith’s consultant took the position that the damage could only have 

been caused by lightning. Travelers’s consultants disagreed; electrical 

engineers concluded that the AC unit damage was attributable to “wear and 

tear” and structural engineers traced the foundational cracking to “compacting 

and shifting soils,” both of which were excluded from coverage under the policy. 

Smith refused to accept those findings. She accused the engineers of being 

“only hired to do work for the insurance companies” and warned that she would 

“see [Travelers] in court.”

On November 13, 2013, Travelers sent a letter to Smith stating, “Base[d] 

on the policy language . . . , the findings of the inspection, and the expert 

reports received, we will be unable to provide coverage for your claim as the 

damages sustained are excluded in the policy[.]”The letter explained that 

Travelers had “conducted a [lightning] strike report to determine if there were 

any strikes in the area” and found that the “closest recorded strike was over 3 

miles away.” The letter also reported that Travelers’s consultant engineers had 

determined that the property damage was caused by “wear and 

tear/breakdown” and “shifting and earth movement,” which were both 

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excluded from coverage under the policy. The parties agree that this letter 

communicated the denial of Smith’s claim.

Nine months passed during which Travelers made no payments to, and 

heard nothing from, Smith with regard to the policy. On August 11, 2014, 

Smith’s counsel sent Travelers a letter, which stated that it served as “notice 

of [Smith’s] claim” and an opportunity “to resolve this matter without 

litigation.” The letter explained that Smith had hired another engineer who 

had examined the property in December 20131 and determined (like her first 

engineer did) that the damage was caused by a lightning strike. Attached to 

the letter was Smith’s second engineer’s report, dated April 24, 2014. 

The August 2014 letter from Smith’s counsel alleged that Travelers had 

committed various contractual and statutory violations—for example, that 

Travelers had “failed to in good faith attempt to bring about a prompt, fair, and 

equitable settlement of a claim once its liability became reasonably clear” and 

failed to “provide Ms. Smith with an explanation as to why coverage was 

denied.” The letter also accused Travelers of “refus[ing] to pay a claim without 

conducting a reasonable investigation.” In closing, the letter advised that 

Smith preferred to resolve the matter “without filing suit,” and stated a 

settlement demand. “If this sum is not paid within 60 days of receipt of this 

notice,” the letter warned, “suit will be filed against you.”

Counsel for Travelers responded to the letter on October 13, 2014. 

Because this response is central to the issue on appeal, we quote its relevant 

content in full:

Your letter fails to provide Travelers with proper notice of a claim 

under the referenced statutes. The letter sets forth only conclusory 

allegations of underpayment and does not provide adequate details 

 

1 The letter states that the examination took place on December 2, 2014” (emphasis 

added). That error seems to have carried over to the district court’s opinion. The engineer’s 

report itself presumably reflects the correct examination date of “December 2, 2013” 

(emphasis added).

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of any claimed violation of the Insurance Code or DTPA. It does 

not identify any covered damages that are claimed to have been 

underpaid, the amounts by which any such damages are claimed 

to have been underpaid, or any factual basis for your demand . . . .

While your 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 as to the cause of claimed damage at the property in 

an attempt to resolve this matter amicable [sic]. However, please 

be advised that Travelers continues to reserve all its rights, 

specifically including, but not limited to its contractual right of 

appraisal in the event that the parties are unable to reach 

agreement regarding the “amount of loss” should the claimed 

damage be found to be a result from a covered cause of loss.

On April 9, 2015, Travelers emailed Smith a copy of its third engineer’s report, 

which supported Travelers’s original position that the property damage was 

not caused by lightning. The email advised that Travelers’s counsel would 

“have a more formal response letter” sent to Smith soon. None was ever sent.

Upon receipt of the third engineer’s report, Smith’s counsel sent an email 

to Smith that said, “Please review and respond as it looks like we are worlds 

apart.”

II. Procedural History

On January 25, 2016, Smith filed suit against Travelers in Texas state 

court, alleging breach of contract as well as multiple causes of action under the 

Texas Deceptive Trade Practices Consumer Protection Act (“DTPA”) and the 

Texas Insurance Code. In May, Travelers filed a state court answer generally 

denying the allegations. The same month, Travelers filed a notice of removal.

Two months later, the federal district court entered a Docket Control 

Order that included deadlines for discovery, expert reports, non-dispositive 

motion filing, the joint pretrial order, and docket call. On the Docket Control 

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Order form, the word “None” was written next to a space indicating a deadline 

for motions to amend pleadings. 

Six months passed. In February 2017, the parties submitted a joint 

motion to continue all Docket Control Order deadlines, which the court 

granted.

On June 15, 2017, Travelers filed its first federal court answer, which 

asserted various affirmative defenses. The “Second Defense” was entitled 

“Policy Provisions Limit or Preclude Coverage.” That defense stated, in 

relevant part:

Some or all of Plaintiff’s claims are excluded or limited by 

applicable policy terms, conditions, and exclusions contained in the 

Policy. The insurance policy issued by Travelers contains 

exclusions, provisions, conditions, and endorsements that preclude 

or limit coverage, in whole or in part, including, but not limited to, 

the following:

4. Legal Action Against Us

No one may bring a legal action against us under this Coverage 

Form unless:

[. . .]

b. The action is brought within 2 years and one day from the date 

the cause of action first accrues on the date of the initial breach of 

our contractual duties as alleged in the action.

Over the next five months, the parties submitted two more joint motions for 

continuance, both of which were granted. In late January 2018, counsel for 

Travelers sent Smith’s counsel an email stating:

I would like to clean up pleadings. Will you agree to me doing so? 

I think I need your consent under the rules so I do not have to file 

a Motion to Leave. If not, I can file the Motion to Leave, just 

thought this would be easier. 

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Smith’s counsel responded, “Yes, I agree.” On February 7, Travelers filed its 

Second Amended Answer, which specified that the amendment was “consistent 

with Plaintiff’s written consent.”2 The Second Amended Answer included the 

same Second Defense as the first answer did, and added the following defense:

TENTH DEFENSE

Statute of Limitations

Pursuant to Fed. R. Civ. P. 8, Travelers pleads the affirmative 

defense of statute of limitations barring Plaintiff’s claims and suit 

pursuant to Tex. Bus. & Com. Code §17.565 and/or §15.50(c) and 

(d), and Tex. Insur. Code §541.162, and Tex. Civ. Prac. & Rem. 

Code §16.003(a), and the Policy’s contractual limitations for any 

alleged breach of contract action as cited above, Second Defense of 

Policy Provisions Limit or Preclude Coverage, page 10.

Three weeks later, Travelers moved for summary judgment on its affirmative 

defense of limitations. Over the next five weeks, Smith was granted two 

unopposed extensions of time to respond to the motion. 

In July 2018, the district court granted Travelers’s motion for summary 

judgment.3 Smith timely filed a notice of appeal. 

On appeal, Smith urges that Travelers waived its affirmative limitations 

defense by failing to raise it in the First Amended Answer or anytime, in fact, 

before the litigation had been underway for two years. In the alternative, 

Smith argues that a genuine factual dispute remains over when her claims 

accrued because Travelers’s “correspondence and reinvestigation” would have 

led a reasonable person to conclude that the November 2013 denial letter “had

been rescinded, revoked, or withdrawn pending additional investigation.”

Travelers counters that its First Amended Answer provided fair notice 

to Smith of the limitations defense. Moreover, according to Travelers, Smith 

 

2 See Fed. R. Civ. P. 15(a)(2) (“[A] party may amend its pleading only with the opposing 

party’s written consent or the court’s leave.”).

3 Travelers had filed a motion for summary judgment on causation in May 2018. The 

district court disposed of it as “moot” in its order granting summary judgment on limitations. 

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waived any argument that Travelers had waived its affirmative defense when 

she consented unqualifiedly to Travelers’s amendment of the First Amended 

Answer. Further, Travelers insists that Smith’s claims were time-barred 

because Travelers unequivocally denied coverage in November 2013 and never 

indicated that such denial had been altered.

III. Standards of Review

The waiver ruling—that is, the district court’s determination that 

Travelers did not waive its limitations defense—is reviewed for abuse of 

discretion. Motion Med. Techs., L.L.C. v. Thermotek, Inc., 875 F.3d 765, 771 & 

n.1 (5th Cir. 2017); LSREF2 Baron, L.L.C. v. Tauch, 751 F.3d 394, 398 (5th 

Cir. 2014).

The merits question—whether Smith filed suit after the limitations 

period had run—is presented as a challenge to the district court’s grant of 

summary judgment. Therefore, it receives de novo review, with all inferences 

drawn in favor of Smith. HSBC Bank USA, N.A. as Trustee for Merrill Lynch 

Mortg. Loan v. Crum, 907 F.3d 199, 202 (5th Cir. 2018). 

Under Federal Rule of Civil Procedure 56, summary judgment is proper 

“if the movant shows that there is no genuine dispute as to any material fact 

and the movant is entitled to judgment as a matter of law.”

IV. Discussion

A. Waiver

Generally, “[i]n responding to a pleading, a party must affirmatively 

state any avoidance or affirmative defense, including . . . statute of limitations.” 

Fed. R. Civ. P. 8(c). Failure to do so may result in waiver. Lucas v. United 

States, 807 F.2d 414, 417 (5th Cir. 1986). “Where the matter is raised in the 

trial court in a manner that does not result in unfair surprise, however, 

technical failure to comply precisely with Rule 8(c) is not fatal.” Allied Chem. 

Corp. v. Mackay, 695 F.2d 854, 855–56 (5th Cir. 1983). This “play in the joints” 

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is permissible because “Rule 8(c)’s purpose is to give the plaintiff fair notice.” 

Motion Med., 875 F.3d at 771 (quoting Rogers v. McDorman, 521 F.3d 381, 385 

(5th Cir. 2008)).

“[T]he defendant does not waive an affirmative defense” if the issue is 

raised “at a pragmatically sufficient time,” and if the plaintiff “was not 

prejudiced in its ability to respond.” Lucas, 807 F.2d at 418 (quoting Allied, 695 

F.2d at 856). Proper amendment to an answer, pursuant to Rule 15(a), is one 

way—though not the only way—to preserve an affirmative defense. Lafreniere 

Park Found. v. Broussard, 221 F.3d 804, 808 (5th Cir. 2000) (explaining that, 

to avoid waiver, the defendants “should have either pleaded [the defense] in 

their original answer or sought to amend their answer pursuant to Rule 15(a)” 

but reasoning that it was sufficient for the defendants to have “raised the 

defense in a motion for summary judgment” because it was a “pragmatically 

sufficient time” and the plaintiff “was not prejudiced”). See also Pasco ex rel. 

Pasco v. Knoblauch, 566 F.3d 572, 577 (5th Cir. 2009) (“[U]nder Rule 8(c) we 

do not take a formalistic approach to determine whether an affirmative defense 

was waived. Rather, we look at the overall context of the litigation and have 

found no waiver where no evidence of prejudice exists and sufficient time to 

respond to the defense remains before trial.”). “[T]he prejudice inquiry 

considers whether the plaintiff had sufficient notice to prepare for and contest 

the defense, and not simply whether the defense, and evidence in support of it, 

were detrimental to the plaintiff (as every affirmative defense is).” Rogers, 521 

F.3d at 387.

The district court recognized this standard and applied it carefully, 

concluding that Travelers did not waive its limitations defenses. As the district 

court observed, Travelers’s First Amended Answer highlighted the contract’s 

limitations provision: 

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No one may bring a legal action against us under this Coverage 

Form unless . . . [t]he action is brought within 2 years and one day 

from the date the cause of action first accrues . . . .

Even though the exact term “limitations” does not appear therein, the plain 

language of that section gives “fair notice” of Travelers’s intent to assert a 

contractual limitations defense. Motion Medical, 875 F.3d at 771 (citing

Rogers, 521 F.3d at 387) (“Rule 8(c)’s purpose is to give the plaintiff fair 

notice.”). Cf. Starcraft Co., A Div. of Bangor Punta Operations v. C.J. Heck Co. 

of Tex., 748 F.2d 982, 990 n.11 (5th Cir. 1984) (a defendant is “not required to 

state certain magic words in order to assert a successful defense”).

Whether Travelers waived statutory limitations defenses—that is, 

limitations defenses to the DTPA and Texas Insurance Code claims as opposed 

to the breach-of-contract claim—is a slightly trickier question. The First 

Amended Answer made no mention of Travelers’s intent to press statutory 

limitations. Nevertheless, as the district court found, the Second Amended 

Answer cured that problem in time to prevent waiver. 

As summarized above, after Travelers filed its First Amended Answer in 

June 2017, the parties submitted two joint motions for continuance, both of 

which were granted. In January 2018, counsel for Travelers sent an email 

asking consent to “clean up pleadings,” which Smith’s counsel granted. On 

February 7, Travelers filed its Second Amended Answer, which expressly 

stated both statutory and contractual limitations defenses. At that time, the 

discovery deadline was still approximately four months away.4

 

4 Smith’s suggestion that discovery “was to be completed by August 25, 2017” is 

perplexing. That had been a discovery deadline earlier in the case, before the parties jointly 

moved for continuance. But the docket control order that had been in effect for three months 

by the time Travelers filed its Second Amended Answer specified that discovery would be due 

on June 5, 2018. 

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To support the argument that this amendment failed to raise the 

limitations defense “at a pragmatically sufficient time,” and that Smith was 

“prejudiced in [her] ability to respond,” Lucas, 807 F.2d at 418 (quoting Allied, 

695 F.2d at 856), Smith emphasizes that the amendment took place “more than 

two years after the [case’s] inception” and “long after the parties had begun 

engaging in costly discovery practices.” These arguments fall short. 

First, with respect to the “more than two years” point, Smith was largely 

responsible for the amount of time that had elapsed by the time the Second 

Amended Complaint was filed. This is not a case where a foot-dragging 

defendant injected a new defense at the eleventh hour. Rather, this case was 

prolonged in large part because three unopposed continuances were filed due 

to scheduling issues traceable to Smith. Accordingly, Smith’s assertion of 

prejudice on the grounds that the case had been alive for more than two years 

is unpersuasive.

Second, that the parties had already begun discovery—and that the 

discovery deadline was approximately four months away—are not reasons to 

find abuse of discretion here. In Pasco ex rel. Pasco v. Knoblauch, we affirmed 

a no-waiver ruling when the defendant first raised an affirmative defense of 

qualified immunity in a summary judgment motion filed two months before 

discovery was due. 566 F.3d at 578. In the instant case, there was twice as 

much time remaining before discovery closed. 

Finally, in rebutting Smith’s assertion of unfairness, Travelers 

accurately points out that Smith consented “unqualifiedly” to the Second 

Amended Answer without inquiring “as to the nature, scope, or text of any 

proposed amendment” and without requesting to preview a draft of the 

proposed amendment. We note that Travelers’s counsel’s email was somewhat 

misleading insofar as it stated that the amendment would “clean up pleadings” 

rather than raise a new defense. But Smith was under no obligation to consent 

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to Travelers’s opaque request—especially without inspecting a draft. 

Ultimately, we cannot say that any misdirection by Travelers amounted to a 

level of prejudice that would make the district court’s conclusion reversibly 

erroneous. And the overall timeframe of the amendment, in the context of this 

litigation, is consistent with our caselaw.

In sum, we agree with the district court that all of Travelers’s limitations 

defenses were raised “a pragmatically sufficient time” and that Smith “was not 

prejudiced in [her] ability to respond.” Lucas, 807 F.2d at 418 (quoting Allied, 

695 F.2d at 856). Accordingly, we proceed to the merits of those defenses.

B. Whether Limitations Precludes Recovery

As this is a diversity case containing only state-law claims, Texas law 

governs. Ocwen Loan Servicing, L.L.C. v. Berry, 852 F.3d 469, 473 (5th Cir. 

2017). 

1. Limitations Period

The limitations period for all claims in this case is essentially two 

years—more precisely, it is two years for the statutory claims and two years 

plus one day for the breach-of-contract claim. See TEX. BUS. & COM. CODE § 

17.565 (establishing DTPA’s two-year limitations period); TEX. INS. CODE § 

541.162 (establishing Texas Insurance Code’s two-year limitations period); 

TEX. CIV. PRAC. & REM. CODE § 16.004(a) (setting four-year default limitations 

period for breach of contract claims); id. § 16.070(a) (permitting contracting 

parties to modify the four-year default period so long as it remains at least two 

years; here, the contract provided that an action must be brought “within 2 

years and one day from the date the cause of action first accrues”).

In Texas, “[c]auses of action accrue and statutes of limitations begin to 

run when facts come into existence that authorize a claimant to seek a judicial 

remedy.” Exxon Corp. v. Emerald Oil & Gas Co., L.C., 348 S.W.3d 194, 202 

(Tex. 2011). “[A] cause of action generally accrues when a wrongful act causes 

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some legal injury, even if the fact of injury is not discovered until later, and 

even if all resulting damages have not yet occurred.” Valdez v. Hollenbeck, 465 

S.W.3d 217, 229 (Tex. 2015). This is often called the “legal injury rule.” See, 

e.g., Schlumberger Tech. Corp. v. Pasko, 544 S.W.3d 830, 834 (Tex. 2018).

Generally, in first-party insurance cases such as this one, “limitations 

begin to run on the date coverage is denied.” Citigroup Inc. v. Fed. Ins. Co., 649 

F.3d 367, 373 (5th Cir. 2011) (citing Murray v. San Jacinto Agency, Inc., 800 

S.W.2d 826, 828–29 (Tex. 1990)). Although the denial-accrual date is usually 

“a question of law,” the Texas Supreme Court has acknowledged that it “may 

present questions of fact to be determined on a case-by-case basis.” Provident 

Life & Acc. Ins. Co. v. Knott, 128 S.W.3d 211, 222 (Tex. 2003).

Texas has carved out “a very limited exception” to the legal injury rule 

called the “discovery rule.” Wagner & Brown, Ltd. v. Horwood, 58 S.W.3d 732, 

734 (Tex. 2001). “The discovery rule exception operates to defer accrual of a 

cause of action until the plaintiff knows or, by exercising reasonable diligence, 

should know of the facts giving rise to the claim.” Id. Texas condones its use 

“only when the nature of the plaintiff’s injury is both inherently undiscoverable 

and objectively verifiable.” Id.

Travelers argues that Smith’s claims accrued on November 13, 2013, 

when Travelers sent the denial letter. Smith refutes that accrual date on the 

ground that Travelers effectively withdrew its denial by later agreeing to reinvestigate her claim. She contends that the statute of limitations “was tolled 

because of the continuous back-and-forth correspondence between the parties 

and did not begin to toll until April 9, 2015.” 

Ordinarily, the word “toll” means “to stop the running of; to abate (‘toll 

the limitations period’).” Toll, BLACK’S LAW DICTIONARY (10th ed. 2014). 

Tolling has been described as “analogous to a clock stopping and then 

restarting.” 51 Am. Jur. 2d Limitation of Actions § 148. By contrast, the word 

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“accrue” is usually defined as “[t]o come into existence as an enforceable claim 

or right.” Accrue, BLACK’S LAW DICTIONARY (10th ed. 2014); Seureau v. 

ExxonMobil Corp., 274 S.W.3d 206, 226 (Tex. App. 2008) (“‘Accrual’ refers to 

the date when a limitations period begins to run.”).

Texas’s “discovery rule” technically extends the limitations period by 

postponing the accrual date—not by recognizing accrual and then applying 

what the sources above define as tolling. See Apex Towing Co. v. Tolin, 41 

S.W.3d 118, 122 (Tex. 2001) (noting that “tolling limitations is conceptually 

distinct from applying the discovery rule to delay commencement of 

limitations”). In other words, the “discovery rule” starts the limitations clock 

at a later time than it would otherwise start; it does not pause a clock that 

started as usual. See S.V. v. R.V., 933 S.W.2d 1, 4 (Tex. 1996) (“Deferring 

accrual and thus delaying the commencement of the limitations period is 

distinct from suspending or tolling the running of limitations once the period 

has begun.”).

We interpret Smith’s argument to be that the discovery rule delayed the 

accrual date. Smith does not press any timeliness argument other than this 

one. She never argues, for example, that Travelers fraudulently concealed its 

wrongdoing, which “tolls limitations ‘because a person cannot be permitted to 

avoid liability for his actions by deceitfully concealing wrongdoing until 

limitations has run.’” Gonzales v. Sw. Olshan Found. Repair Co., LLC, 400 

S.W.3d 52, 58 (Tex. 2013) (quoting S.V., 933 S.W.3d at 6). Nor does she flesh 

out an argument for equitable tolling, which can apply “in situations where a 

claimant actively pursued his judicial remedies but filed a defective pleading 

during the statutory period, or where a complainant was induced or tricked by 

his adversary’s misconduct into allowing filing deadlines to pass.” Bailey v. 

Gardner, 154 S.W.3d 917, 920 (Tex. App. 2005). Her only argument for 

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timeliness is that the discovery rule delayed the accrual date to April 9, 2015 

(the date Travelers sent her the later engineer’s report).

We first address whether the discovery rule applies here. 

2. Discovery Rule

“The discovery rule is the legal principle which, when applicable, 

provides that limitations run from the date the plaintiff discovers or should 

have discovered, in the exercise of reasonable care and diligence, the nature of 

the injury.” Willis v. Maverick, 760 S.W.2d 642, 644 (Tex. 1988). The Texas 

Supreme Court has “restricted the discovery rule to exceptional cases to avoid 

defeating the purposes behind the limitations statutes.” Via Net v. TIG Ins. 

Co., 211 S.W.3d 310, 313 (Tex. 2006); see also S.V., 933 S.W.2d at 25 (noting 

that applications of the discovery rule “should be few and narrowly drawn”).

Motivated by a goal of “bring[ing] predictability and consistency to the 

jurisprudence,” Texas takes a “categorical approach when determining 

whether the discovery rule applies to certain types of claims.” Apex Towing, 41 

S.W.3d at 122. “Using such an approach means [that courts] do not determine 

when a particular injury was actually discovered in any particular case, but 

rather whether that case is of the type to which the discovery rule applies, 

based on whether the policy reasons behind the rule are served by applying the 

rule in that type of case.” Id. Applicability of the discovery rule boils down to a 

two-pronged inquiry: “(1) whether the injury is inherently undiscoverable; and 

(2) whether evidence of the injury is objectively verifiable.” Computer Assocs. 

Int’l, Inc. v. Altai, Inc., 918 S.W.2d 453, 456 (Tex. 1996). 

“A wrong or injury is inherently undiscoverable if it is by nature unlikely 

to be discovered within the prescribed limitations period despite due diligence.” 

Poth v. Small, Craig & Werkenthin, L.L.P., 967 S.W.2d 511, 515 (Tex. App. 

1998). In S.V., the Texas Supreme Court cited various examples of cases where 

the “inherently undiscoverable” element was satisfied, including:

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Willis, 760 S.W.2d at 645 (lawyer’s error could not be discovered 

by client who was ignorant of the law); Nelson [v. Krusen, 678 

S.W.2d 918, 923 (Tex. 1984)] (malpractice in muscular dystrophy 

gene screening could not be discovered by parents until child 

showed symptoms); Kelley [v. Rinkle, 532 S.W.2d 947, 949 (Tex. 

1986)] (false credit report could not be discovered until credit 

denied); Hays [v. Hall, 488 S.W.2d 412, 414 (Tex. 1972)] (“One who 

undergoes a vasectomy . . . and then after tests is told that he is 

sterile, cannot know that he is still fertile . . . until either his wife 

becomes pregnant or he is shown to be fertile by further testing.”); 

Gaddis [v. Smith, 417 S.W.2d 577, 578 (Tex. 1967)] (“it is often 

difficult, if not impossible, to discover that a foreign object has been 

left within the body within the statutory period of limitation”) . . . 

Houston Waterworks [v. Kennedy, 8 S.W. 36, 37 (Tex. 1888)] (cut 

into plaintiff's building not discoverable until walls cracked).

933 S.W.2d at 6–7. The Court explained, “The common thread in these cases is 

that . . . the wrong and injury were unknown to the plaintiff because of their 

very nature . . . .” Id. at 7.

Smith’s alleged injury is different in kind. Her property damage was 

obvious, she promptly filed a claim, an investigation followed, and then she 

received an unambiguous denial letter.5 In Davis v. Aetna Casualty & Surety

Co., a Texas appellate court confronted a similar situation and found the 

discovery rule inapplicable. 843 S.W.2d 777 (Tex. App. 1992). The court 

explained, “Application of the discovery rule is limited to those cases where 

there has been no outright denial of the plaintiff’s claim.” Id. at 778.6

We conclude that Smith’s injury was inherently discoverable and 

therefore need not reach the question of whether it was objectively verifiable. 

The discovery rule is unavailable in this case. 

 

5 We do not have occasion to address whether an insurer’s purported denial, if 

ambiguously communicated, would trigger the discovery rule. In this case, Smith 

acknowledges that Travelers outright denied her claim on November 13, 2013. 

6 Cf. Howe ex rel. Howe v. Scottsdale Ins. Co., 204 F.3d 624, 627 (5th Cir. 2000) (“In 

making an Erie guess in the absence of a ruling from the state’s highest court, this Court 

may look to the decisions of intermediate appellate state courts for guidance.”).

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3. Accrual

Having rejected the applicability of the discovery rule, we analyze 

limitations under the default framework. “A claim for breach of an insurance 

contract accrues and limitations begin to run on the date coverage is denied.” 

Citigroup, 649 F.3d at 373 (citing Murray, 800 S.W.2d. at 828–29). “A plaintiff’s 

cause of action under the Texas Insurance Code for unfair claims settlement 

practices or under the DTPA based on denial of insurance coverage accrues on 

the date that the insurer denies coverage.” Knott, 128 S.W.3d at 221. Therefore, 

all causes of action in this case accrued on the date that coverage was denied. 

The question is whether the district court properly concluded that there is no 

genuine dispute of fact that Travelers denied Smith’s claim on November 13, 

2013. 

Smith has acknowledged that an unambiguous denial letter was sent on 

November 13, 2013. But, Smith argues, Travelers’s subsequent 

communications “would leave a reasonable person . . . to conclude that the 

denial had been rescinded, revoked, or withdrawn pending additional 

investigation.” We now address whether an insurer’s post-denial willingness 

to re-investigate the claim, and actual re-investigation, operates to nullify the 

prior denial-accrual date.

On this issue, Pace v. Travelers Lloyds of Texas Insurance Co. is 

instructive. 162 S.W.3d 632, 634 (Tex. App. 2005). In Pace, after the 

homeowner submitted an insurance claim, the insurer sent back a letter 

stating:

After careful consideration of all information available to us, we 

have determined that the damage to your property is not afforded 

coverage under the insurance policy.

Our investigation indicates that the damage has resulted from 

settlement and/or movement of the structure due to causes which 

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are not attributable to accidental leakage from the plumbing 

system.

Based on the results of our investigation and the Exclusions 

referenced above, we regret that we will be unable to make any 

payment for the cost to repair damages that are attributable to 

foundation movement.

If you have additional information that you feel may have an impact 

on this coverage decision or should you have any questions 

concerning this claim please forward same to me....

Id.at 633–34. The claimant reacted to that letter by hiring an engineer who 

investigated the damage and determined that it resulted from a covered cause. 

Id.at 634. After the claimant forwarded the retained engineer’s report to the 

insurer, the insurer wrote to the claimant:

In a continued effort to determine if there is coverage for the 

damage being claimed in the above mentioned loss we requested 

[that a consultant] inspect and reevaluate the information you 

submitted and the original [report].

Enclosed for your review is a copy of [our consultant’s] response to 

the additional information. [The original] findings remain 

unchanged.

Based on our review of your claim file[,] we regret our position 

remains the same. 

Id. The claimant argued that the italicized portions of these communications 

revealed that the insurer “had been continuing to evaluate the claim.” Id. at 635. 

According to the claimant, that created a fact issue over when the claim was 

denied. The court disagreed, reasoning:

[I]t does not necessarily follow that: (1) because a decision has been 

made, it cannot be subsequently changed; or (2) because a decision 

can later be changed, it has not been made. Therefore, . . . the fact 

that the [letter] left open the possibility that new information could 

potentially cause a different decision to be reached [did not create] 

uncertainty whether a decision had been made.

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Id. Pace focuses the accrual inquiry on whether an unambiguous denial has 

been communicated and then asks whether there is “evidence that that 

decision was ever expressly or impliedly withdrawn or changed, such as by 

making payment or otherwise taking action inconsistent with that decision.” 

Id. at 635. By concluding that its facts did not present such evidence, Pace 

clarifies that an insurer’s post-denial re-investigation of property damage 

alone is not “taking action inconsistent with [the denial] decision.” Id. 

Similarly, here, Smith hired an engineer after receiving a denial letter, 

the engineer investigated the property and concluded that the damage resulted 

from a covered cause, and Smith forwarded the retained engineer’s findings to 

the insurer. Then Smith received the following response from Travelers which, 

according to her, creates a fact issue as to when the claim was denied: 

While your 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 as to the cause of claimed damage at the property in 

an attempt to resolve this matter amicable [sic].

We disagree with Smith’s assertion that this communication “would leave a 

reasonable person . . . to conclude that the denial had been rescinded, revoked, 

or withdrawn pending additional investigation.” The plain language of 

Travelers’s letter cannot support that interpretation. 

Importantly, in this case, although Smith may have hoped the reinvestigation would lead to a different coverage outcome, Travelers never 

signaled any retreat from its denial decision. To the contrary, Travelers 

explicitly warned that Smith’s retained engineer had not presented “any 

additional or different information which would cause Travelers to change its 

position in this matter.” By Travelers’s express characterization, the reinvestigation was designed as an “attempt to resolve this matter amicabl[y]”—

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not an acknowledgment of any doubt or defect concerning the prior 

determination.7 

Such facts are crucially distinguishable from the case on which Smith 

relies, Pena v. State Farm Lloyds, 980 S.W.2d 949 (Tex. App. 1998). In Pena, 

the insured filed a claim for damages related to slab foundation movement and 

then later filed an additional claim for new damages related to that same slab 

movement. Id. at 954. The insurance company denied the first claim but then 

investigated the later claim and made a payment on it. Id. During litigation, 

the insurer argued that the plaintiff’s cause of action accrued from the denial 

of the first claim. Id. at 953–54. The court disagreed, explaining, “Because the 

slab foundation problems were essentially on-going, and its subsequent 

reinvestigation of and partial payment for the same reported problems, it 

appears the denial of the [first] claim was effectively reconsidered and 

withdrawn by [the insurer], thus resetting the starting date for limitations.” 

Id. at 954. 

Many cases have distinguished Pena including, notably, Pace. Pace 

explained, “Without evidence of either a claim for additional damages or a

withdrawing or changing of the [original] decision, as in Pena, [the claimant] 

has provided us no basis to conclude that the rationale of that case has any 

application here.” 162 S.W.3d at 635. See also Watson v. Allstate Texas Lloyd’s, 

224 F. App’x 335, 340 (5th Cir. 2007) (analogizing to Pace while distinguishing 

 

7 Smith points out that on April 9, 2015, Travelers sent an email confirming denial of 

the claim and promising that a “more formal response letter” would follow. According to 

Smith, Travelers’s “use of the phrase ‘more formal response’ implies that a ‘more formal’ 

denial or acceptance of coverage letter from Travelers may be forthcoming . . . .” That 

suggestion is not well-taken. When Smith’s counsel received the April 9 email and engineer’s 

report, he forwarded it to Smith along with the remark, “[I]t looks like we are worlds apart.”

Thus, there was no ambiguity in Travelers’s communicated position that the insurer 

remained committed to denying the claim. Moreover, if Smith was truly under the impression 

that Travelers might be accepting coverage, it is unlikely that she would not follow up about 

forthcoming payments or indeed communicate with Travelers at all until filing suit more 

than nine months later. 

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Pena) (internal citations omitted); Sheppard v. Travelers Lloyds of Tex. Ins. 

Co., 2009 WL 3294997, at *6–7 (Tex. App. 2009); Mangine v. State Farm 

Lloyds, 73 S.W.3d 467, 471 (Tex. App. 2002); Ocotillo Real Estate Investments 

I LLC v. Lexington Ins. Co., 2015 WL 11120866, at *3 (N.D. Tex. Jan. 9, 2015); 

Browne v. Clarendon Nat’l Ins. Co., 2010 WL 11425553, at *5 (N.D. Tex. Aug. 

30, 2010).

Here, as in Pace, there is no evidence that Travelers’s decision “was ever 

expressly or impliedly withdrawn or changed.” 162 S.W.3d at 635. The caselaw 

establishes that re-investigation alone is not an action that is “inconsistent” 

with the denial decision, id., and it is not for us to “second-guess a State’s 

application of its own law.” Nat’l Ed. Ass’n, Inc. v. Lee Cty. Bd. of Pub. 

Instruction, 467 F.2d 447, 450 n.6 (5th Cir. 1972).

We are not unmindful of the predicament facing insurance claimants 

whose unsuccessful attempts to resolve disputes without litigation run them 

past the limitations period. To the extent the limitations period is too short to 

accommodate such circumstances, that concern lies with the legislature. 

Furthermore, Texas caselaw does not condone the practice of “string[ing] an 

insured along without denying or paying a claim.” Murray, 800 S.W.2d at 828 

n.2. That issue is not presented here, however; in this case, an unequivocal 

denial was followed only by a re-investigation along with a warning that the 

denial decision remained in place. No payments were made during this period. 

Therefore, accrual occurred on the date of unambiguous claim denial.

Because Smith’s causes of action accrued on November 13, 2013, her 

January 25, 2016 suit was untimely, as the district court concluded.

AFFIRMED.

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