Insurance Claim Denial Lawyer – Reading The Policy

Insurance Policy interpretation is something the Courts are often called upon to do.  Here is a twist to that.  A 2020, case from the Southern District of Texas, Houston Division, was asked to require appraisers to use a specific format for an appraisal.  The Court refused this request.

The case is styled, Mt. Hawley Insurance Company, et al. v. Harrod’s Eastbelt, Ltd.

Harrod’s had invoked the appraisal provision in the policy issued by the insurer.  Mt. Hawley, requested the Court to require the appraisers to use a specific format for the appraisal and to select an umpire.

Harrod’s had suffered a loss to their insured property and made a claim to Mt. Hawley.  The adjuster determined the loss was not covered and that the damages were due to long term weathering and deterioration of the roofing membrane, wear and tear, age related deterioration, ponding, and long-term leaks, all of which were excluded by the Policy.

The appraisal provision states, in relevant part, that each party selects an appraiser, and the “two appraisers will select an umpire.  If they cannot agree, either may request that selection be made by a judge of a court having jurisdiction.”  The appraisal provision states further that the “appraisers will state separately the value of the property and amount of loss.  If they fail to agree, they will submit their differences to the umpire.”  Not withstanding any appraisal, Insurer retains the right to deny Insured’s claim.

Mt. Hawley asks the Court to require the appraisers to “state the amount of loss separately for each portion of the property in dispute and for each major building component (for example, roofs, exterior walls and windows, interior water damage, etc.).”  This is beyond the Policy requirement that the appraisers “state separately the value of the property and amount of loss.”

In case law, the Texas Supreme Court has held that a person is required to participate in the appraisal process, with any issues being resolved after the process is complete.

Most importantly, the Texas Supreme Court has emphasized the propriety of avoiding judicial involvement pre-appraisal.  The Texas Court has noted that it had never resolved a dispute about the scope of appraisal, or the meaning of amount of loss.   Therefore, the Texas court stated, “in addressing this issue for the first time we keep in mind that appraisals have apparently resolved such matters for many years without our aid.”  “Allowing litigation about the scope of appraisal before the appraisal takes place would mark a dramatic change in Texas insurance practice, and surely encourage much more of the same.”  Where the insurer “denies coverage, appraisers can still set the amount of loss in case the insurer turns out to be wrong.”  “Litigating the scope of appraisal is wasteful and unnecessary if the appraisal itself can settle this controversy.”  Indeed, “even if an appraisal award is flawed, that can be easily remedied by disregarding it later.”  Unless the “amount of loss” will never be in issue, “appraisals should generally go forward without preemptive intervention by the courts.”

The Policy requires the appraisers to “state separately the value of the property and the amount of loss.”  The Court declines to require the appraisers to use any specific form or software not required by the Policy.  Clearly, the appraisers may decide to use a form that enables them to “state separately the value of the property and the amount of loss” in a more useful manner.  The Court does not, however, require them to do so.

The Policy states unequivocally that if the two appraisers cannot agree, “either may request that [the selection of an umpire] be made by a judge of a court having jurisdiction.”  In this case, it remains unclear that the two appraisers have declared that they cannot agree on the selection of an umpire.  Moreover, neither appraiser has requested that this Court select the umpire.  As a result, Insurer’s request for the Court to select an umpire is premature.

Contact Information