FIFTH CIRCUIT CONFIRMS LEGAL STATUTE OF LIMITATIONS TOLLING RULE FOR LEGAL MALPRACTICE DOES NOT APPLY TO PUBLIC ADJUSTERS

This week, the United States Court of Appeals for the Fifth Circuit addressed the issue of whether the special tolling rule articulated in Hughes v. Mahaney applied to public adjusters. In Bloom v. Aftermath Public Adjusters, Inc., 2018 WL 4203601, No. 17-41087 (5th Cir. Sep 4, 2018), Gracie Reese’s Galveston, Texas property was damaged by Hurricane Ike. Unsatisfied with Fidelity National Property and Casualty Company’s damage assessment, Reese hired Aftermath Public Adjusters, Inc. to assist them with the claim. Aftermath inspected the property and prepared both a proof of loss and repair estimate with higher calculations than Fidelity. Thereafter, Reese’s claim was denied by Fidelity who claimed no proof of loss was submitted. Reese sued Fidelity who filed summary judgment on the basis Reese failed to submit any documentation. Reese failed to respond and Fidelity’s summary judgment was granted. Two years later, Reese filed the underlying suit against Aftermath and its adjuster alleging negligence and breach of contract. Aftermath moved for summary judgment based on the relevant two and four years statute of limitations since seven years had passed since Fidelity’s denial of Reese’s claim. Reese responded that, under the Texas rule articulated in Hughes v. Mahaney, the statute of limitations was tolled until the conclusion of her suit against Fidelity. The court rejected the claim and Reese’s representatives appealed.

The Court recited the Hughes rule from the Texas Supreme Court which states that when an attorney commits malpractice in the prosecution or defense of a claim resulting in litigation, the statute of limitations on the malpractice action is tolled until all appeals for the underling suit are exhausted. Although the Fifth Circuit has previously clarified this rule is exclusive to attorney malpractice actions, Reese’s representatives argued the rule’s applicability as there was a time when Texas prohibited non-lawyers from engaging in public adjusting and therefore—although defendants are technically non-lawyers—they are “lawyers in disguise.” The Fifth Circuit swiftly rejected the expansion of the rule and reaffirmed clear Texas law that the rule is exclusive to attorney malpractice. Accordingly, the Fifth Circuit affirmed the lower court.