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An appellate court in Texas has affirmed a trial court's decision dismissing an insured's contractual and extra-contractual claims against its insurer after the insurer paid an appraisal award – even though the insurer had refused to proceed with appraisal until it was sued.

The Case

In August 2013, after wind and hail damaged property owned by Steven Biasatti and Paul Gross, d/b/a TopDog Properties, TopDog notified its insurer, GuideOne National Insurance Company.

GuideOne assigned the claim to an adjuster to investigate. On September 24, 2013, GuideOne advised TopDog that the estimated cost to repair the damage was $1,896.88. Because this amount was less than the policy deductible of $5,000, GuideOne informed TopDog that no payment would be made on the claim.

TopDog requested an additional inspection. GuideOne retained an engineer, who confirmed the adjuster's findings of “minor wind damage and no hail damage to the roofs.”

Believing that the damage had been underestimated, TopDog told its insurance agent in March 2014 that it wished to proceed with an appraisal of the claim as provided in the policy.

GuideOne responded that only GuideOne could invoke the appraisal process under the policy and, based on its conclusion that it had sufficiently investigated the claim, GuideOne declined to do so.

TopDog sued GuideOne on August 22, 2014.

The following April, GuideOne sought to initiate the appraisal process, which TopDog resisted.

The trial court denied GuideOne's motion to compel appraisal, but in September 2015 an appellate court directed the trial court to grant GuideOne's motion to compel appraisal.

The trial court ordered appraisal, the parties designated appraisers, and the trial court appointed an umpire. On September 16, 2016, the umpire filed the appraisal award, in which the parties' appraisers and the umpire unanimously set the amount of loss at $168,808.

On October 6, 2016, GuideOne issued a check to TopDog for $146,927.20, which was the amount of the award less the $5,000 deductible and 10 percent depreciation ($16,880.80). The check was mailed to TopDog's counsel on October 12, 2016.

TopDog moved for partial summary judgment against GuideOne, asserting that GuideOne had breached its contract and had failed to timely pay TopDog's claim as required by the Prompt Payment of Claims Act under Chapter 542 of the Texas Insurance Code (“PPCA”).

GuideOne moved for summary judgment, arguing that, because GuideOne had paid the appraisal award, TopDog could no longer maintain any of its claims against GuideOne.

The trial court granted GuideOne's motion and denied TopDog's partial motion.

TopDog appealed. It argued that GuideOne had breached the insurance contract when it refused to pay any amount for the loss in September 2013, since the appraisal later determined that the amount of TopDog's loss was $168,808. Moreover, TopDog contended, the appraisal award established that it was entitled to delay penalties under the PPCA and GuideOne's payment of the award did not preclude its bad faith causes of action.

The Appellate Court's Decision

The appellate court affirmed.

In its decision, the appellate court explained that (1) the parties contractually agreed that, in the event of a disagreement as to the amount of the loss, GuideOne could invoke the appraisal process to set that amount; (2) the process was invoked; and (3) GuideOne then tendered payment to TopDog in the amount of the appraisal award, less the deductible and depreciation. Therefore, the appellate court continued, although there was a substantial difference between the appraisal award and the amount of damage GuideOne initially found, GuideOne paid that difference following appraisal. “Because the benefits available to TopDog under the policy have already been paid,” the appellate court said, TopDog did not offer evidence sufficient to create a material issue of fact on the element of damages and its breach of contract claim failed.

The appellate court added that the appraisal clause in the GuideOne policy did “not purport to determine whether a breach” had occurred.

The appellate court also ruled that TopDog's extra-contractual claims had been properly rejected by the trial court.

It reasoned that the GuideOne policy provided coverage and GuideOne had made payment once the parties had completed the appraisal process established by the policy. “TopDog received the benefits it was entitled to under the policy,” the appellate court concluded, and it had “not demonstrated that any policy benefits were withheld” or that it had any damages from any injury independent of its policy claim.

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Steven A. Meyerowitz, Esq., is the Director of FC&S Legal, the Editor-in-Chief of the Insurance Coverage Law Report, and the Founder and President of Meyerowitz Communications Inc. As FC&S Legal Director, Mr. Meyerowitz, a member of the team that conceptualized FC&S Legal, provides daily analysis and commentary on the most significant insurance coverage law decisions from courts across the country and news regarding legislative and regulatory developments. A graduate of Harvard Law School, Mr. Meyerowitz was an attorney at a prominent Wall Street law firm before founding Meyerowitz Communications Inc., a law firm marketing communications consulting company.