Damages Determination

Grand Prairie lawyers and those in Dallas, Richardson, Mesquite, Garland, Irving, Carrollton, Farmers Branch, and other areas of Dallas County need to be able to evaluate the value of a claim when discussing the claim with a client. There is no certain way to guarantee an end result in insurance litigation but there are things to be knowledgeable about in order to give informed advice.
The United States District Court, Eastern District, Sherman Division issued an opinion in July 2012, that deals with claim value determination. This case centers around the appraisal process and determination and it’s effect on a case. The style of the case is, Amtrust Insurance Co. of Kansas, Inc. v. Starship League City, L.P. and USA Self Storage, Inc.
Procedurally, this case was heard by a United States Magistrate Judge. The Magistrate ruled in favor of Amtrust in an action seeking declaratory relief.
Amtrust filed the action to determine the rights of the parties related to:
(1) the liability, if any, and the amount, if any, for wind claims, and damage covered under the Amtrust policy, occurring between the dates of September 13, 2009, through September 13, 2010, and the liability for, if any, and the amount, if any, for damage resulting from the wind;
(2) whether defendants have complied with its conditions precedent to recovery;
(3) whether defendants have mitigated their loss;
(4) whether any asserted exclusions apply in the policy issued by Amtrust to defendants’ claimed damages, and
(5) whether the appraisal is binding on the parties.
Amtrust also filed a motion to dismiss the complaint asserting Starship is precluded from challenging the appraisal award issued by the umpire regarding the cost of replacing the roof. This court adopted the Magistrate’s findings.
Starship argued that the “appraisal does not supplant the judicial process, or the right of one party to an insurance contract to ask a court to interpret its rights and obligations.”
It was pointed out that the Texas Supreme Court has made it clear that the appraisal process is determinative, and the umpire’s award binds the parties and forecloses further litigation by the parties. Further, Starship argued that the umpire’s award only included those damages caused by wind, therefore, any argument by Amtrust that the umpire included other damages is incorrect.
It was noted by the Judges that the Texas Supreme Court had found appraisals are intended to take place prior to filing suit, and are a condition precedent to filing suit. This however, does not prevent an insurance company from denying a claim on the basis that a loss was not the result of a covered cause. What is required is that the appraisal occur first when the appraisal process is invoked.
This case may seem a little confusing. Here is what the reader needs to know:
When an insurance contract has within itself an appraisal clause and that appraisal clause is invoked, then the appraisal must be conducted before any or further litigation ensues. And, understand this distinction – the appraisal sets the amount of the loss and is determinative. However, that does not end the process as far as other parts of the claim are concerned. In other words, the insurance company can still deny the claim in whole or part. And, the insured can still pursue bad faith causes of action against the insurer and claims for breach of contract, negligence, DTPA, etc.
It may not be necessary for the average insurer to understand all of the above, but it is necessary for an experience Insurance Law Attorney to understand it.