Insurance Policy Appraisal Clause

If you have an insurance policy in Dallas, Fort Worth, Grand Prairie, Arlington, Mansfield, or anywhere else in Texas, you should look at it closely. It probably has an “appraisal clause” in it.
The United States Western District of Texas, Austin Division, decided a case on October 27, 2010. The style of the case is Orleans Harbor Homeowners Association, Inc. v. Public Service Mutual Insurance Company. The main issue in the case dealt with the appraisal clause in the insurance policy between Orleans Harbor Homeowners Association, Inc. (Orleans) and Public Service Mutual Insurance Company (Public).
Here is some background:
This is an insurance dispute based on a May, 2008 hailstorm that allegedly damaged condominiums owned by Orleans. Public was the insurer at that time. Public agreed they owned for damages and made settlement offers that were refused by Orleans and a lawsuit was filed. Public then asked the court to order Orleans to participate in the appraisal process described in the insurance policy. Orleans argued that the appraisal clause was illegal.
The court analysis was as follows:
Insurance appraisal clauses have been judicially enforced in Texas since 1888. Although a court has some discretion regarding the timing of an appraisal, a court may not simply ignore a valid appraisal clause. The Texas Supreme Court said as early as the 1888 case that “In the absence of fraud, accident, or mistake, the parties having agreed that the amount of loss shall be determined in a particular way, we are constrained to hold that such stipulation is valid …” The same court as recently as 2009, in the case State Farm Lloyds v Johnson, stated, “Like any other contractual provision, appraisal clauses should be enforced.”
The court next discussed whether or not the clause could be “waived” and said:
“Also like other contractual provisions, appraisal clauses may be waived.” Waiver in Texas is the “intentional relinquishment of a known right or intentional conduct inconsistent with claiming it. Waiver is largely a matter of intent, and for implied waiver to be bound through a party’s actions, intent much be clearly demonstrated by the surrounding facts and circumstances. A right cannot be waived if the person holding the right does not say or do something inconsistent with an intent to assert or rely upon the right. Although waiver is typically a question of fact, where, as here, the surrounding facts are undisputed, it is a question of law for the court to decide.
Next, the court, having decided the clause could be waived, got into an analysis of whether or not it had been waived in this case.
One way of waiver is delay. However, in this case, because the policy did not specify a time by which the appraisal clause must be asserted, Public could assert it within any reasonable time.
The court then analyzed what is reasonable time and analyzed whether or not the rights of the parties are affected by any delay.
A reading of this case should make it clear that an experienced Insurance Law Attorney should be involved early in one of these types of cases. The case analysed the existing law and then applied the law to the facts of this case. The court ultimately upheld the validity of the appraisal clause in the insurance policy and ruled that the appriasal clause had not been waived by delay or any other reason.