Texas Appellate Court Enforces Appraisal Provision

In a recent decision, the Court of Appeals of Texas for the Fourteenth District revisited the scope of the appraisal process in light of the prior holding in State Farm Lloyds v. Johnson, 290 S.W.3d 886 (Tex. 2009).

In In re Tex. Windstrom Ins. Ass’n, 2013 Tex App. LEXIS 11497, a homeowner, Joseph Hayden, sued Texas Windstorm Insurance Association (“TWIA”) to recover for property damage under an insurance policy it issued to him. Hayden alleged that his roof was damaged by hail and wind in April 2012. TWIA retained an independent adjuster to inspect Mr. Hayden’s roof, and the adjuster concluded that the damage was caused solely by wind.  TWIA subsequently advised Hayden that the damage did not exceed the deductible applicable to wind damage, and that as a consequence, Hayden would not receive policy benefits. Hayden’s insurance agent told TWIA in June 2012 that a contractor had inspected the roof and found more damage that would cost almost $15,000 to repair. TWIA retained an engineering firm in August 2012, and another inspection was conducted. Following this inspection TWIA advised Hayden that no policy benefits would be paid.  Hayden therefore advised of its intention to sue, and in response, TWIA demanded the roof first be appraised, relying on a policy provision which stated:

10.       Appraisal. If you and we fail to agree on the actual cash value, amount of loss, or cost of repair or replacement, either can make a written demand for appraisal.

Hayden refused TWIA’s appraisal demand and filed suit. TWIA filed a motion in the district court to compel appraisal, but the motion was denied. TWIA appealed the trial court’s denial of its motion to compel.

Hayden argued that appraisal was not appropriate because the dispute was over what caused the damage to the roof; a coverage issue for a court to determine. The Court disagreed, noting that TWIA also disputed the amount of loss. The court relied on State Farm Lloyds and concluded that the implication of a coverage issue pertaining to the claim did not automatically preclude appraisal. In its analysis the court explained that the appraisal provision could not be disregarded simply because coverage issues overlapped with the value of the loss.  The Court held that the trial court “clearly abused its discretion” when it denied TWIA’s motion to compel appraisal, and required the parties to appraise the loss.