Insurance attorneys in Grand Prairie, Fort Worth, Dallas, and other areas in Texas will have clients who need advice regarding the appraisal process when homeowners make insurance claims.
Generally speaking, an appraisal is appropriate in cases where the insurance company acknowledges that a loss has occurred, but there is a dispute as to the value or extent of the loss. The easiest example to understand is a situation where someone has a valuable antique stolen. The insured makes a claim and the insurance company investigates, the thief is caught, but he has destroyed the antique. So, there is no suspicion regarding the insured and the insured claims the antique is worth $10,000. But, the insurance company says it is only worth $4,000.
To settle the dispute, either side, the insurance company or the insured, can invoke the appraisal clause in the insurance contract.
An issue arises regarding whether one or the other has done something or failed to do something that in essence, waives their right to invoke the appraisal provision in the insurance contract / policy.
The Beaumont Court of Appeals issued an opinion in an appraisal dispute in April of 2012. The style of the case is, In Re Cypress Texas Lloyds.
Here is some background.
Cypress sought mandamus relief from an order denying a motion to compel appraisal. Kevin Newman and Chantel Newman had a homeowners policy with Cypress which included an appraisal clause. The Newmans sued Cypress based on Cypress’s failure to promptly pay a claim. Litigation began with both sides going through the typical activities of a lawsuit. Cypress later in the lawsuit sought the court’s assistance in enforcing the appraisal clause.
The Newmans argued that Cypress had waived the appraisal clause by Cypress’s failure to invoke the appraisal provision within a reasonable time after an impasse was reached and that this delay caused prejudice to the Newmans.
In response to the lawsuit filed by the Newmans, Cypress had filed an answer with the court stating the Newmans had failed to submit to the appraisal process and asking for an abatement to the proceedings until the condition was satisfied. The Newmans ignored this request and proceeded with discovery in the lawsuit.
The Newmans argued that Cypress employed a deliberate strategy to not compel an appraisal while discovery proceeded. Once the motion to abate was finally filed and a hearing was had, the Newmans informed the court that they had hired an engineer and an estimator for the purpose of litigation.
The trial court considered “the lapse of time, the significant procedural and substantive matters developed for litigation” and concluded “it is clear that the parties have incurred significant legal expenses which would, undoubtedly, damage their financial position.” In its order the trial court mentioned discovery hearings, a discovery related mandamus proceeding, docket control orders, status conferences, retention and designation of experts, trial settings, and an agreed motion for continuance. The record supported a conclusion that Cypress employed a deliberate strategy to not obtain an appraisal and that the Newmans incurred some costs before Cypress filed the motion to compel arbitration.
The test for whether the appraisal process has been waived is whether or not the resisting party can show prejudice per the Texas Supreme Court in the case, In Re Universal Underwriters of Texas Insurance Company. In the Universal case, the Texas Supreme Court said “it is difficult to see how prejudice could ever be shown when the policy, like the one here, gives both sides the same opportunity to demand appraisal.” There is no evidence that the Newmans requested an appraisal before incurring the expenses they now complain about. The Beaumont court said that when a party knows of its right to request an appraisal and does not make that request, it it difficult to attribute the costs incurred to the opponent.
The court went on to say that the Newmans could have avoided the costs by requesting the appraisal themselves.
In the end, this court granted the writ of mandamus, thus compelling the appraisal process.
These appraisal clauses need to be discussed with an experienced Insurance Law Attorney before legal action is commenced. It is important to understand that the appraisal clause does not put an end to other legal recourses that are available in almost all of these cases.
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