Why would the following reaction not proceed through SN2 reaction? I made a guess that the OH- group cannot do a backside attack on the carbon because the C double bond with O and the 5 carbon ring may act as steric hindrance and prevent it from forming a bond but I'm not really sure.
The substrate in this reaction is an Acyl Chloride, which is highly susceptible to nucleophilic acyl substitution, more so than other carboxylic acid derivatives, so SN2 attack (as mentioned in the comments) is highly improbable. The mechanism for this nucleophilic acyl substitution is as follows:

With equilibrium constant $K_c &gt;&gt; 1$ favouring the products on the right.