Insurance Claims – Commercial Policies

Every business owner in Grand Prairie, Fort Worth, Arlington, Irving, Dallas, Mansfield, or any other DFW city would need to have a basic understanding how their commercial insurance policies are interpreted. Especially the policies that have arbitration clauses in them. When there is a question, the first thing to do is to consult with an experienced Insurance Law Attorney. A second thing to do would be to read the following case for some guidance.
The Texas Supreme Court issed an opinion this month in the case, In Re Universal Underwriters of Texas Insurance Company. This case dealt with the interpretation of an appraisal clause in an insurance contract and the standard for judging whether or not that appraisal clause has been waived by either party.
Here is some background. Grubbs Infiniti, a car dealership, suffered hail damage to buildings on its property. Grubbs filed a claim with its insurer, Universal, and a claims representative inspected the property and subsequently paid Grubbs $4,081.95 for the damage. Grubbs asked for a reinspection and as a result, Universal reinspected and issued a $3,000 supplemental payment. At the time of this second payment Universal sent a letter to Grubbs inviting them to discuss the issue further and reminding them that under the policy they had a certain amount of time to file suit and that the file would remain open.
Four months later, Grubbs sued Universal for underpayment of its claim alleging violations of the DTPA, violations of the Insurance Code, and breach of contract. In response to the lawsuit, Universal invoked the appraisal clause which said that if the parties disagreed with the value of the property loss, then either of them could demand in writing, an appraisal. Grubbs position with the court was that Universal had waived its right to invoke an appraisal.
The courts in Texas have stated that appraisal clauses provide an inexpense and quick means to resolve disputes about the amount of loss for a covered claim. That these clauses are generally enforceable, absent illegality or waiver.
This Supreme Court has stated, … to constitute waiver the acts relied on must be reasonably calculated to induce the assured to believe that a compliance by him with the terms and requirements of the policy is not desired, or would be of no effect if performed. The acts relied on must amount to a denial of liability, or a refusal to pay the loss.
Grubbs asserted that from the time the claim was made until the time Universal asked for appraisal, eight months had passed, and that this passage of time was a waiver of the appraisal process by Universal. Grubbs cited numerous cases dealing with waiver and the passage of time.
In response the court stated that, while an unreasonable delay is a factor in finding waiver, reasonableness must be measured from the point of impasse. That the date of disagreement, or impasse, is the point of reference to determine whether a demand for an appraisal is made within a reasonable time.
The court stated that a mere disagreement between the parties does not indicate an impasse. The court stated there are factors to consider in whether or not an impasse has arisen and cited a Federal case that said:
“In deciding whether a demand for appraisal was made within a reasonable time, and consequently has not been waived even if suit was filed before the demand was made, courts have considered the timeliness of the demand in light of the circumstances as they existed at the time the demand was made. Pertinent circumstances include (1) the time between the breakdown of good faith negotiations concerning the amount of the loss suffered by the insured and the appraisal demand: and (2) whether there would be any prejudice to the other party resulting from the delay in demanding an appraisal.”
Using the point of “impasse,” rather than the first sign of disagreement, corresponds with the court’s definition of waiver as an “intentional relinquishment of a known right or intentional conduct inconsistent with claiming that right.” In other words, both parties must be aware that further negotiations would be futile, “or would be of no effect if performed.”
In this case, the policy contained no time limits for the appraisal request, and Universal never denied liability for the loss. At no point did Grubbs notify Universal that it refused to discuss the matter further, despite Universal’s statement that it would leave its file open for further discussions should Grubbs care to do so. Whether Universal was aware of Grubbs’ disagreement as to the estimate of damages is also irrelevant, since mere disagreement does not in itself signal an unwillingness to negotiate further. Here Universal sought appraisal approximately one month after Grubbs sued. The court concluded that Universal demanded appraisal within a reasonable time after the parties reached an impasse.

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