Professional Negligence Law Reporter

Bloom v. Aftermath Public Adjusters, Inc., 902 F.3d 516 (5th Cir. 2018).

The Fifth Circuit Court of Appeals held that Texas’s special tolling rule for legal malpractice claims, which suspends the applicable limitations period until the underlying proceedings are completed, does not apply to claims against public adjusters.

Gracie Reese suffered property damage during Hurricane Ike. An adjuster sent by her flood insurer prepared an estimate and authorized damages for her property and its contents. Unhappy with the authorized amounts, Reese contacted Aftermath Public Adjusters, Inc., a licensed public adjusting firm. Aftermath assigned public adjuster Michael Bacigalupo to Reese’s case. He examined her house and prepared a proof of loss and repair estimate that was greater than the previous estimate.

Subsequently, the insurer notified Reese that her claim was denied, telling her that no proof of loss had been submitted. Reese sued the insurer, alleging wrongful denial of her claim. Four years later, the insurer moved for summary judgment, and the trial court granted the motion. Reese then sued Aftermath and Bacigalupo, alleging negligence and breach of contract based on the defendants’ failure to submit proof of loss to the flood insurer. The defendants moved for summary judgment on limitations grounds, arguing that seven years had elapsed since the insurer denied the original claim. The plaintiff argued that the limitations period was tolled under the special tolling rule outlined in Hughes v. Mahaney & Higgins, 821 S.W.2d 154 (Tex. 1991). The trial court granted summary judgment for the defense. Reese later died, and her grandson was substituted as plaintiff.

On appeal, the Fifth Circuit noted that the Texas Supreme Court has confirmed that the Hughes rule applies only to attorney malpractice cases and not to suits against other entities, such as accounting firms. The court rejected the plaintiff’s argument that in general, public adjusters are essentially practicing law. The defendants here were non-lawyers who were not engaged in the practice of law, the court said. Consequently, the court held that the plaintiff cannot implicate the bright-line rule in Hughes, adding that Texas courts have the sole power to determine the boundaries of where lawyering ends and adjusting begins. Thus, the trial court’s decision was proper.