Insurance Policy And Appraisals

If you live in Grand Prairie, Arlington, Irving, Dallas, Fort Worth, Burleson, Keller, or anywhere else in the state of Texas and you have a homeowners insurance policy the policy is likely to contain an “appraisal” provision. So what does that mean?
The Texas Court of Appeals, Houston 14th District, issued an opinion on a case
September, 23, 2010, wherein the main issue dealt with an appraisal clause in an insurance policy. The policy at issue was a commercial policy but is essentially the same as those found in homeowners policies. The style of the case is, In re Continental Casualty Company.
Here is some background.
This was a legal proceeding against Judge Thomas R. Culver, presiding Judge of the 249th District Court in Fort Bend County. The proceeding was brought in a successful attempt to force the Judge to abate the underlying lawsuit against Continental Casualty Company, until such time as the appraisal process had been completed.
Continental’s insured was a company called Zoya Enterprises, Ltd., who owned several properties that were damaged after Hurricane Ike struck the area.
Here is the relevant clause:
“If we and you disagree on the amount of loss, either may make written demand for an appraisal of the loss. In this event, each party will select a competent and impartial appraiser and notify the other of the appraiser selected within 20 days of such demand. The two appraiers select an umpire. If they cannot agree within 15 days upon such umpire, either may request that selection be made by a judge of a court having jurisdiction: Each appraiser will state the amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will be binding. Each party will:
a. Pay its chosen appraiser; and b. Bear the other expenses of the appraisal and umpire equally.
If there is an appraisal,
a. You will still retain your right to bring a legal action against us, subject to the provisions of the Legal Action Against Us Commercial Property Condition; and b. We will still retain our right to deny the claim.”
As stated by the Texas Supreme Court in 2009, in the case, State Farm Lloyds v Johnson, “Almost all insurance policies contain provisions specifying appraisal as a means of resolving disputes regarding the ‘amount of loss’ for a covered claim.”
Appraisal provisions generally provide that either the insured or the insurer may demand an appraisal pursuant to the terms of the policy. As stated in other cases: Where an insurance contract mandates appraisal to resolve the parties disputes regarding the value of a loss, and the appraisal provision has not been waived, it must be enforced. Further, the Texas Supreme Court has expressed strong policy in enforcing appraisal clauses in insurance contracts.
The Texas Insurance Code, Sections 542.051 – .061, mandates prompt payment of claims. An insurer is required to acknowledge receipt of the claim, begin an investigation, and request documentation from the insured within 15 days of notification of the claim. The insurance company is to notify the claimant in writing of the acceptance or rejection of the claim within 15 days after its receives the required documentation for proof of loss. If the insurance company notifies the claimant it requires more time, the acceptance or rejection must be made within 45 days of the notice.
The above paragraph is law the court noted and then took this law into consideration as it discussed the facts in the case and some relevant timelines about the numerous claims Zoya was making. Some of these claims had been approved and some had not been paid. The exact facts in this case make for some interesting reading in trying to understand how the court looked at whether or not the appraisal clause had been timely and properly invoked.
One thing for sure – it can get complicated and confusing. The result of which is an experienced Insurance Law Attorney must be consulted to protect rights under an insurance policy.