Homeowners Insurance Policies

People who own homes in Weatherford, Aledo, Azle, Poolville, Brock, Hudson Oaks, Willow Park, Peaster, Mineral Wells, Cool, Millsap, and other areas of Parker and Palo Pinto counties might want to pay attention this story.
The Court of Appeals, Beaumont, issued an opinion on March 10, 2011, that gives some insight into how the courts will look at appraisal clauses in homeowners insurance policies. The style of the case is, In Re Southern Insurance Company.
In this case the homeowner, Michelle Neisen, suffered a loss that she alleges was the result of hurricane damage. Southern sought to have an appraisal process to determine the amount of the disputed loss. Neison claimed that Southern waived its right to appraisal because Southern claimed it was not responsible for the loss. The trial court refused to order participation in the appraisal process which Southern was requesting and Southern appealed that decision.
Under the insurance contract, if the parties “fail to agree on the actual cash value, amount of loss, or the cost of repair,” either party may make a written demand for appraisal. The appraisal clause did not provide for a forfeiture of that right, and the policy states that “no provision of this policy may be waived unless the terms of this policy allow the provision to be waived.”
Neisen’s arguement was that Southern must agree that the loss is covered by the policy before it may “fail to agree” on the amount of the loss. As the court pointed out, nothing in the plain language of the policy requires Southern to acknowledge liability before it may demand an appraisal. In fact the policy refers to a failure to agree on the amount of the loss. Neisen contended that Texas case law provides that when an insurer completely and unconditionally denies coverage, there is no dispute over the amount of the loss and the insurer waives its right to demand an appraisal. This court pointed out that recent case law clarifies that a dispute over the extent of the loss is a dispute over the amount of the loss. The court pointed out that in one recent decision the parties disagreed over whether hail damaged only the ridgeline or the entire roof. The homeowner sought declaratory relief compelling an appraisal. The Texas Supreme Court ultimately upheld the appraisal provision.
The court then cited other cases saying, “When different causes are alleged for a single injury to property, causation is a liability question for the courts. By contrast, when different types of damage occur to items of property, appraisers may have to decide the damage caused by each before the courts can decide liability.”
This court also talked about that in this case, Southern contended that the damage to Neisen’s home is the result of long term repeated leakage while Neisen contends it is hurricane damage. That appraisal should be determined as an initial matter and the parties may then litigate causation questions. They said that when an indivisible injury to property may have several causes, appraisers can assess the amount of damage and leave causation to the courts. When divisible losses are involved, appraisers can decide the cost to repair each without deciding who must pay for it. That when an insurance company denies coverage, appraisers can still set the amount of loss in case the insurer turns out to be wrong. The appraisal clause “binds parties to have the extent or amount of the loss determined in a particular way, leaving the question of liability for such loss to be determined, if necessary, by the courts.
In discussing the waiver issue, the court pointed out that waiver may arise by agreement or estoppel. The insurance policy in this case allowed either party to invoke the appraisal clause. Under the policy at issue here, no provision of the policy was waived unless the terms of the policy allowed it. The policy did not require an admission of liability to invoke the appraisal clause. The record in this case did not establish that Southern induced Neisen to believe compliance with the terms of the policy was not desired and would be of no effect if performed. Even though Southern denied the claim based on its determination that the damage to the covered property was not caused by a covered peril, the appraisers “can still set the amount of loss in case the insurer turns out to be wrong.”
This case serves as yet another example of why an experienced Insurance Law Attorney needs to be consulted when dealing with an insurance company.