Fort Worth insurance lawyers who handle hail damage claims need to be know how courts interpret appraisal clauses in insurance policies. A 2009, Texas Supreme Court case is a must read for helping to understand the appraisal process. The style of the case is, State Farm Lloyds v. Johnson. Here is some of the relevant facts and information to be taken from the case.
A hailstorm moved through Plano, Texas in April of 2003, damaging the roof of Johnson’s home. She filed a claim under her homeowners insurance policy with State Farm Lloyds. State Farm’s inspector concluded that hail had damaged only the ridgeline of her roof, and estimated repair costs at $499.50 (less than the policy’s $1,477 deductible). By contrast, Johnson’s roofing contractor concluded the entire roof needed to be replaced at a cost of more than $13,000.
To settle this difference, Johnson demanded appraisal of the ” amount of loss” under the following provision in her standard-form policy:
Appraisal. If you and we fail to agree on the amount of loss, either one can demand that the amount of the loss be set by appraisal. If either makes a written demand for appraisal, each shall select a competent, disinterested appraiser. Each shall notify the other of the appraiser’s identity within 20 days of receipt of the written demand. The two appraisers shall then select a competent, impartial umpire…. The appraisers shall then set the amount of the loss. If the appraisers submit a written report of an agreement to us, the amount agreed upon shall be the amount of the loss. If the appraisers fail to agree within a reasonable time, they shall submit their differences to the umpire. Written agreement signed by any two of these three shall set the amount of the loss.
State Farm refused to participate in an appraisal, asserting that the parties’ dispute concerned causation and not ” amount of loss.” Johnson filed suit seeking only a declaratory judgment compelling appraisal. On cross-motions for summary judgment, the trial court agreed with State Farm that no appraisal was warranted. The court of appeals reversed, holding that appraisal was required.
This court studied the law and facts related to the case and stated that causation usually falls into one category or the other. Thus, when different causes are alleged for a single injury to property, causation is a liability question for the courts. Appraisers can decide the cost of repairs, but they cannot decide causation.
The Court made relevant holdings.
Indivisible injury – When different causes are alleged for a single injury, causation is a liability question for the courts.
Divisible injury – When different types of damage occur to different items of property, appraisers may have to decide damage caused by each before courts decide liability.
Appraisers must always consider causation, at least as an initial matter. An appraisal is for damages caused by a specific occurrence, not every repair a home might need.
The scope of appraisal should be:
1. Is there hail damage to the roof? Or is there other causes of damage to the roof?
2. If so, when did the hail damage occur?
3. If hail damage occurred within the policy period, what is the necessary scope of repairs for that damage?
4. What is the cost of that scope of repair?
5. What additional cost to repair is there due to current code issues?
The court went on to say, “This of course does not mean appraisers can rewrite the policy. No matter what the appraisers say, State Farm does not have to pay for reparis due to wear and tear or any other excluded peril because those perils are excluded. But whether the appraisers have gone beyond the damage questions entrusted to them will depend on the nature of the damage, the possible causes, the parties dispute, and the structure of the appraisal award. … As already noted, when indivisible injury to property may have several causes, appraisers can assess the amount of damage and leave causation up to the courts.
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