What Is The Value Of A Claim

There probably is not any insurance lawyer that can specifically tell a client exactly what the value of a claim is.  But there are issues, legal and otherwise, to consider when trying to determine the value of a claim.  A 14th Court of Appeals opinion offers so guidance.  The opinion is a 2017, opinion and is styled, In Re State Farm Lloyds.

This case is a dispute between insureds and their insurer under an appraisal clause in the insurance contract.  It is a mandamus proceeding seeking to have the trial judge enforce the appraisal clause.

After a claimed loss sustained under the policy, State Farm’s adjuster agreed that there was a loss but valued the loss at $432 which was less than the $8,000 deductible.  The insured had hired a public adjuster who valued the loss at $73,000.  The insured’s sued State Farm for breach of contract and various violations of the Texas Insurance Code.

State Farm answered the lawsuit and made a jury demand.  Thirty days after this, State Farm invoked the appraisal clause in the insurance contract and filed a motion with the court that the clause be enforced after the insured argued that the clause had been waived.  The insured argued the clause had been waived by State Farm when it refused to pay the claim and when it demanded a jury trial.

The law in Texas is clear.  The party challenging the right to appraisal shoulders the burden of showing waiver.  To constitute waiver, the insurer’s acts must be reasonably calculated to induce the insured to believe that their compliance with the policy’s terms is not desired or would be of no effect if performed.  The acts must amount to a denial of liability, or a refusal to pay the loss.

The Texas Supreme Court in the 2009 opinion, State Farm Lloyds v. Johnson, recognized that appraisal still may be appropriate after the insurer has denied the claim.  By doing this, if the denial was wrong, the amount of the loss has been set by appraisal.  The Johnson court indicated that unless the amount of loss will never be needed, appraisals should generally go forward without preemptive intervention by the courts.

In this case, State Farm mailed the insureds a letter stating that State Farm agreed there was coverage but that the loss amounted to $432.

State Farm thus admitted that the policy covered part of the loss, though it refused payment at the time of the letter based on State Farm’s determination that the amount of the loss fell below the policy’s stated deductible.  Under the policy, a waiver of the appraisal provision must be in writing, yet the record contains no evidence that State Farm waived the appraisal in writing.

This appeals court concluded the evidence did not raise a fact issue as to whether State Farm intentionally relinquished its appraisal rights or engaged in intentional conduct inconsistent with claiming those rights.  The court determined the trial court abused its discretion to the extent it determined that State Farm waived its right to appraisal.