Insurers in Texas Cannot Lay Behind the Log and Invoke Appraisal Whenever They Want

On August 27, 2015, the Fifth Court of Appeals, Dallas, Texas denied GuideOne National Insurance Company’s petition for writ of mandamus in a case alleging bad faith and breach of contract. The petition stems from an action in the trial court where the insurance company asked the judge to compel an appraisal, as they frequently do. The problem here was with the insurer’s timing in seeking to compel appraisal.

By way of background, the plaintiff’s property sustained both fire damage and wind and hail damage. GuideOne paid part of the fire damage claim but refused to pay the wind and hail claims. In an attempt to resolve their dispute over the wind and hail damage claims, the parties mediated; however, mediation proved unsuccessful.

Subsequent to the failed mediation, the insurer sought to invoke a portion of its commercial insurance policy provision that provides, “If the Named Insured and the Company fail to agree on the amount of the loss, the Company can demand that the amount of loss be set by appraisal.” The insurer wanted an independent appraisal undertaken to determine the amount of property damage. However, the court found that appraisals of this kind are intended as a pre-suit remedy and must be timely invoked, and that by waiting until after litigation had proceeded through a mediation, GuideOne invoked appraisal too late.

Hoping the Court of Appeals would let it get away with this behavior, GuideOne sought interlocutory relief in the form of a petition for mandamus. But the request rightfully fell on unsympathetic ears. The Dallas Court of Appeals found that the insurance company had waived its right to seek appraisal when it waited until after the mediation to invoke this policy provision.

This is a meaningful win for insureds because it means there is more precedent regarding the timeframe within which an insurer will be reasonably allowed to request an appraisal. This ruling further protects a consumer’s right against insurance company bad faith practices, and makes it less likely other insurance companies will wait until after mediation before deciding to invoke appraisal.

Read the Court’s opinion here.

Categories: Insurance Claims