Interpreting Appraisal Clause

Mineral Wells insurance lawyers are aware of appraisal clauses in insurance contracts. Interpreting them is not always easy. The Amarillo Court of Appeals issued an opinion in a 2015 case that needs to be read. It is styled, In Re Century Surety Company.
This is a mandamus proceeding that arises from a lawsuit by an insured, Jefferson, against Century.
The lawsuit filed on December 16, 2013, arises out of a claim submitted for hail damage which occurred on May 28, 2013, alleging breach of contract and extra-contractual claims. A lawsuit was filed suing Century, an adjusting company, and two individuals.
Jefferson made a settlement demand on December 17 and allowed Century to reinspect the property. Jefferson and Century joined in a Rule 11 agreement on February 5, 2014, concerning the dismissal of the other three defendants.
Century filed its original answer on May 20, 2014. In it’s answer, Century stated it “reserves its right to invoke the policy’s appraisal provision to resolve issues regarding the amount of loss and denies any intent to waive this right.”
The parties then conducted discovery and on March 27, 2015, Jefferson designated five testifying expert witnesses. Century designated four on April 25, 2015. A mediation was held on April 27, 2015, but no settlement was reached.
On May 1, 2015, Century demanded an appraisal. Jefferson refused to participate, claiming Century had waived its right to appraisal by waiting too long after suit was filed to make the demand.
Century moved to compel appraisal and to abate the case pending the appraisal. The District Court denied the motion.
Century argued the denial was an abuse of discretion.
Appraisal clauses are commonly found in homeowners, automobile, and property policies and provide a means to resolve disputes about the amount of a covered loss. These clause are usually enforceable, absent illegality or waiver.
Waiver requires intent, either the intentional relinquishment of a known right or intentional conduct inconsistent with claiming that right.
To establish waiver, the party challenging appraisal must show that the parties reached an impasse; that is, a mutual understanding that neither will negotiate further. And it must show that any failure to demand appraisal within a reasonable time prejudiced the opposing party.
An impasse is not the same as a disagreement about the amount of the loss. Ongoing negotiations, even when the parties disagree, do not trigger a party’s obligation to demand appraisal. Both parties must believe that additional negotiation would be futile; if either party genuinely believes negotiations are ongoing, that party cannot have intended to relinquish its right to appraisal.
Further, even after an impasse and the passage of an unreasonable amount of time, the party resisting appraisal must still show it was prejudiced. Prejudice is the harm caused by the insure’s unreasonable delay in invoking the process following an impasse. This court said it is difficult to see how prejudice could ever be shown when the policy, like the one here, gives both sides the same opportunity to demand appraisal. If a party senses that an impasse has been reached, it can avoid prejudice by demanding an appraisal itself.
Jefferson argued that when Century did not invoke appraisal it began preparing for trial and spent significant sums in that pursuit. But Jefferson initiated the litigation rather than first pursuing appraisal, participated in discovery, and other wise prepared for trial. Jefferson made no showing it was prejudiced by Century’s demand for appraisal. Thus, this Court ordered that the trial Court abused its discretion by failing to compel appraisal according to the terms of the policy.

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