Prompt Payment Of Claims And Appraisal

Does a violation of the Texas Prompt Payment of Claims Act survive an appraisal that is promptly paid?  This issue is addressed in an opinion from the San Antonio Court of Appeals.  The case is styled, Barbara Technologies Corporation v. State Farm Lloyds.

Barbara Technologies had a policy of insurance with State Farm insuring property that was damaged in a hail storm on March 31, 2013.  A claim was made on October 17, 2013 and on October 31, 2013, State Farm inspected the property.  On November 4, State Farm sent a letter stating the property sustained damage of $3,153.57, but did not issue payment because the amount was less that the $5,000.00 deductible.  On February 21, 2014, Barbara Technologies requested a re-inspection which was done and State Farm did not change it’s earlier statement.

Barbara Technologies filed suit for various violations of the Insurance Code including claims for violation of the Prompt Pay Act pursuant to Sections 542.058(a) and 542.060.

On January 9, 2015, State Farm invoked the appraisal provision in the policy and on August 18, 2015, the appraisal panel issued an award setting damages at $195,345.63, which was immediately paid by State Farm.

After payment of the appraisal, all claims were dropped but for the two sections above.

Both sides filed motions for summary judgment on the Prompt Pay claim with State Farm saying the claim was over since the payment was made immediately after the appraisal was completed and with Barbara Technologies saying the Prompt Pay violation was still live.

The Court ruled in favor of State Farm.

On appeal, Barbara Technologies does not argue that a material fact issue existed precluding the granting of summary judgment.  Instead, Barbara Technologies argues that the trial court erred in granting State Farm’s summary judgment motion because its TPPCA claim survived State Farm’s invocation of the appraisal process and its payment of the appraisal award. According to Barbara Technologies, “State Farm is strictly liable for interest and attorneys’ under Chapter 542 because it did not pay the claim within sixty days after it received notice of the loss.”  State Farm counters that the trial court correctly granted its summary judgment motion because, as a matter of law, a TPPCA claim cannot be sustained when the insurer has timely paid an appraisal award.
The undisputed evidence shows that State Farm invoked the appraisal provision in the policy and timely paid the appraisal award.  The Court, therefore, concludes the trial court did not err in granting State Farm’s summary judgment motion and rendering judgment that Barbara Technologies take nothing on its TPPCA claim.