Most insurance policies afford the parties the option of invoking, when
the parties cannot agree on the amount of the loss, a process called appraisal
where each party appoints an appraiser and the two appraisers determine
the amount of the loss or, if they cannot agree, a neutral umpire settles
the issue. In some cases, timely payment of an appraisal award under the
payment terms set forth in the policy may preclude the insured from pursuing
a breach of contract claim.
American Bankers Insurance Company of Florida invoked appraisal of a claim
after Daly & Black had filed suit on behalf of our client, Jerry Cody.
The appraisal award issued. ABIC notified Mr. Cody a couple of days later
that it would pay the award and then paid the award a few days after that.
The actual payment was made six business days after the award was issued
but within five days of ABIC’s letter notifying Mr. Cody that it
would pay. ABIC then filed a motion for summary judgment, arguing that
its timely payment of the award defeated Mr. Cody’s contract claim
and that lack of success on the contract claim must necessarily eliminate
Mr. Cody’s bad faith claims under the Insurance Code and DTPA.
ABIC had a problem. ABIC relied on a payment provision in the policy that
says the insurance company must pay a claim within five business days
of notifying the insured that it will pay the claim, and claimed that
because it paid within five days of when it “accepted” the
award and notified Mr. Cody of payment, it had complied with the policy.
We pointed out that appraisal is not for the insurance company to accept
or reject. Under ABIC’s construction of the policy, an insurance
company could avoid incurring a payment obligation with regard to an appraisal
award indefinitely so long as it never “accepted” it or notified
the insured it intended to pay it. We argued that this is an unreasonable
construction of the policy.
Another policy provision, which we argued was applicable, states that when
payment is conditioned on performance of some act by the insured, payment
must be made within five business days
of the date the act is performed. We argued – just like insurance companies frequently do –
that ABIC’s payment obligation was conditional on Mr. Cody’s
participation in appraisal, which was complete on issuance of the appraisal award.
Judge Mary Lou Robinson of the Northern District of Texas, Amarillo Divison,
denied the motion for summary judgment, holding that the policy is ambiguous
as to payment terms and a jury must decide which one applies. Because
the motion for summary judgment on Mr. Cody’s contract claim failed,
so did the motion for summary judgment on his bad faith claims.
As a result, Mr. Cody will get his day in court, and Daly & Black,
P.C., looks forward to continuing to represent him.
To read Judge Robinson’s opinion and order,