Hail Claims And Appraisal = Bad Faith?

When an insurance company complies with an appraisal can there still be bad faith?  That question was answered with a “no” in a 1996, San Antonio Court of Appeals opinion.  The opinion is styled, Toonen v. United Services Automobile Association.

USAA insured Toonen’s home.  The policy contained an appraisal clause.  Toonen reported a claim for damage as a result of a hail storm.  USAA’s adjuster found no storm damage.  Toonen hired a private adjusting firm to represent her in handling her claim and to adjust her loss and deal with USAA.

USAA’s adjuster reported her findings to Toonen’s private adjuster.  USAA named an appraiser pursuant to the appraisal clause.  Toonen then retained an attorney who notified USAA that Toonen would file suit if Toonen had not received $4,914.00.  In the meantime, Toonen’s private adjuster reached an agreement and appointed an umpire under the appraisal clause who found that Toonen was entitled to an award of $1,266.35 which USAA tendered to Toonen.  Toonen sued USAA for breach of contract and violations of the Insurance Code, DTPA, negligence, intentional infliction of emotional distress, fraud, misrepresentation, and breach of duty of good faith and fair dealing.  USAA answered and filed a Motion for Summary Judgment.  USAA’s Motion for Summary Judgment was granted.  Toonen appealed.

The San Antonio Court of Appeals affirmed the Motion for Summary Judgment.

An appraisal award made pursuant to an insurance policy is binding and enforceable unless the insured proves that the award was unauthorized or the result of fraud, accident or mistake.  In this case, Toonen did not prove fraud, accident or mistake.  In addition, Toonen had authorized a private adjuster to negotiate for her.  USAA conclusively established that it complied with the policy and did not breach the policy.  As a general rule, an insured does not have a bad faith claim in the absence of a breach of contract by the insurance company.