Insurance Appraisal Clauses In Texas

Lightning strikes a home in Grand Prairie, or Arlington, Fort Worth, Dallas, or out in Weatherford. The lightning damages electronic equipment. The homeowner calls his insurance company to make a claim. Then the insurance company invokes an appraisal clause in the insurance contract. What does this mean?
This is what happened in the case, Steven Woodward, et al, v. Liberty Mutual Insurance Company. This case was decided by the United States District Court, N.D. Texas, Dallas Division on March 26, 2010. The Judge was the Honorable, A. Joe Fish. In this lawsuit, Liberty Mutual Insurance Company (Liberty) filed papers with the Court for an order to be issued to compel appraisal and to stay the Court actions in this matter pending the completion of appraisal. Judge Fish granted the motion and ordered the parties to complete the appraisal process.
In this case, the appraisal clause required each side to select a competent, independent appraiser, notify the other side who had been chosen and if the appraisers did not agree to choose an umpire to settle the matter.
The time sequence here was that Liberty notified the Woodwards that they were invoking the appraisal process and named an appraiser. The Woodwards then asked for the appraisers qualifications. Liberty then named a different appraiser and sent his resume. The Woodwards told Liberty that they did not believe that Liberty’s appraiser was qualified and the Woodwards named their own appraiser. Liberty then withdrew the named second appraiser and attempted to name a third.
The Woodwards then had their own appraiser estimate the loss and submitted the estimate to Liberty, along with a demand for payment. Liberty refused payment and the Woodwards filed the lawsuit.
The Woodwards arguement was that Liberty had waived their right to appraisal when they withdrew the names of the appraisers they had originally named. Liberty said they had good reasons for their actions and that the appraisal process had not been completed and also pointed out that the process had not been completed yet because they had not been to the umpire.
In ruling for Liberty the Court pointed out that the Texas Supreme Court had as recently as last year, enunciated a strong policy in favor of enforcing appraisal clauses in insurance contracts. This was stated in the case, State Farm Lloyd’s v. Johnson. They also stated law that said, “A completed appraisal that complies with the terms of an appraisal clause in an insurance contract is a condition precedent to bringing a suit on that contract.” Citing the ruling in another case the Court said, “Indeed, if an appraisal clause is properly invoked and one party to the contract refuses to participate in the appraisal process, a court lacks discretion not to issue an order compelling that party to participate.”
The Court went on to discuss issues concerning “waiver” and another legal pleading of “estoppel” and why these theories did not apply in this case. An experienced Insurance Law Attorney knows about these appaisal clauses in insurance contracts and where applicable, knows ways of defeating them. For the most part these appraisal clauses are more favorable to insurance companies and have lots more legal advantages for the insurance company than the persons insured, which is why the insurance companies put them in the insurance contracts and why they try to invoke these clauses.