An $8 million loan, a missing regulatory sign-off, and a clock that had already run out
Cadence Bank waited too long to sue the law firm it hired for an $8 million loan closing, and Alabama’s highest court shut the door.
The Alabama Supreme Court held on November 6 that Cadence’s malpractice claims against Maynard Nexsen, PC are time-barred under the Alabama Legal Services Liability Act. The ruling, on a certified interlocutory appeal from the Jefferson Circuit Court, reversed the lower court and directed it to enter judgment for the firm. The court also settled a long-running split in Alabama law by adopting the “occurrence rule” - the two-year limitations clock starts when the alleged error happens, not when the client first suffers damage.
That distinction ended the case.
In October 2020, Cadence hired Maynard Nexsen to advise on an $8 million loan to Assure Holding Company. One of AHC’s subsidiaries, American Insurance Company, was a property and casualty insurer in several states including Louisiana. AHC and its subsidiaries granted Cadence a security interest in bank accounts and other assets.
A legal opinion addressing Alabama law was provided to Cadence in November 2020 - drafted by AHC’s counsel Adams and Reese, LLP, with what Cadence described as “Maynard’s review and approval.” It did not advise seeking regulatory approval. The closing went ahead on November 18, 2020.
From there, things unraveled. A hurricane in August 2021 left AIC unable to cover Louisiana property claims. The Louisiana Insurance Commissioner placed AIC in receivership in January 2022, enjoining creditors from enforcing liens on AIC’s assets. By March 2022, the Commissioner challenged Cadence’s security interest, arguing regulators had never approved the loan. A June 2022 consent decree set aside approximately $6.2 million of AIC’s assets while the dispute played out.
Cadence filed its malpractice suit on July 16, 2024 - more than three and a half years after closing. Under the occurrence rule, that was too late. Cadence tried two escape routes: a statutory six-month grace period for claims not reasonably discoverable, and a fraud-tolling provision. Both failed. March 2022 emails showed Cadence already knew about the regulatory deficiency, and its fraud claim offered only “generalized allegations” of concealment.
The ruling overruled conflicting Alabama precedent on the limitations question - a move two justices, concurring in the result, called unnecessary given neither party had asked to revisit prior decisions.
For lenders, the practical takeaway is plain: in Alabama, the malpractice clock starts at the loan closing, not when you discover something went wrong.
