Demand For Appraisal in Texas Homeowner’s Insurance Policy Lawsuit–Ft Worth, Texas Insurance Defense Attorneys

REVERSE and REMAND; Opinion issued July 11, 2007

In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-06-00100-CV
On Appeal from the 160th Judicial District Court
Dallas County, Texas
Trial Court Cause No. 02-01779-H
Before Justices Moseley, O’Neill, and Lagarde
Opinion By Justice Lagarde   See Footnote 1

Appellant Linda Richardson sued Allstate Texas Lloyd’s (Allstate), seeking to overturn an appraisal award entered on her insurance claim for sewer damage to her home. After originally denying Allstate’s successive motions for summary judgment, upon reconsideration, the trial court granted Allstate’s second motion and dismissed Richardson’s claims with prejudice.
Richardson appeals the summary judgment order and the trial court’s denial of her motion to designate experts. For reasons that follow, we conclude the summary judgment was improperly granted and we remand this case to the trial court for further proceedings. Because all dispositive issues are settled in law, we issue this memorandum opinion. Tex. R. App. P. 47.2(a), 47.4.

Factual and Procedural Background
In December 2001, “a catastrophic pressurized infusion of raw sewage spewed through every plumbing opening” in Richardson’s home in Lancaster, Texas. Richardson’s home was insured by Allstate. Immediately after her home was flooded with sewage, Richardson contacted Allstate to make a claim under her insurance policy. Shortly thereafter, a dispute arose between Richardson and Allstate concerning the amount of Richardson’s insured loss. Accordingly, Allstate sent Richardson a written notice informing her that Allstate was invoking the appraisal provision of her insurance policy. The terms of that provision read, in pertinent part, as follows:

Appraisal. If you and we fail to agree on the actual cash value, amount of loss, or cost of repair or replacement, either can make a written demand for appraisal. Each will then select a competent, independent appraiser and notify the other of the appraiser’s identity within 20 days of receipt of the written demand. The two appraisers will choose an umpire. If they cannot agree upon an umpire within 15 days, you or we may request that the choice be made by a judge of a district court of a judicial district where the loss occurred. The two appraisers will than [sic] set the amount of loss, stating separately the actual cash value and loss to each item.
. . .

If the appraisers fail to agree, they will submit their differences to the umpire. An itemized decision agreed to by any two of these three and filed with us will set the amount of such loss. Such award shall be binding on you and us.

Allstate selected Jim Greenhaw as its independent appraiser. Richardson selected C.R. Johnson as her independent appraiser. The parties then agreed to use Sally Montgomery as the umpire, and she was appointed by the trial court in March 2002. On March 25, 2002, Johnson and Greenhaw signed their names on a blank form “Appraisal Award.” The top of that one-page form contains general information about the claim, including the names of the parties, the appraisers, and the umpire. The appraiser’s signatures are in the middle of the page beneath that general information. Directly underneath the appraisers’ signatures on the form award is a chart with three columns. The first column is titled “ITEM,” and the phrase “to be determined by hygienist” is hand- written beneath that title on the first numbered line. The next two columns, titled “LOSS REPLACEMENT COST” and “LOSS ACTUAL CASH VALUE,” are blank.
According to the record, after they signed the blank form, Greenhaw and Johnson each conferred separately with the umpire during the next few months. It appears, however, that neither appraiser prepared an itemized list of the cash value and loss to each item in Richardson’s house. According to Richardson, sometime prior to June 21, 2002, Johnson sent Montgomery a written estimate totaling approximately $141,000. The written estimate itself is not in the record. On June 21, 2002, Montgomery met with Greenhaw at Greenhaw’s office. During that meeting, Montgomery or Greenhaw wrote “$39,650.75” on the form appraisal award under the column “LOSS REPLACEMENT COST,” next to the phrase “to be determined by hygienist” previously written on the form award. Montgomery and Greenhaw then dated the award June 21, 2002 and both signed it. There is no evidence in the record that Montgomery or Greenhaw discussed this award with Johnson either before or after it was entered.
On July 16, 2002, Allstate sent Richardson a check for $27,813.95, the net amount of the award after deducting the amounts already paid to Richardson and half of the umpire’s fee. The next day, Johnson and Richardson wrote to the trial court complaining about the impropriety of the appraisal award and requested a meeting with the trial judge. There is no evidence in the record about whether such meeting occurred. On October 2, 2002, Richardson cashed Allstate’s check.         Thereafter, Richardson filed a petition seeking to set aside the appraisal award. In her suit against Allstate, Richardson asserted claims against Allstate for breach of contract, breach of the duty of good faith and fair dealing, negligence, negligence per se, and violation of articles 21.21 and 21.55 of the Texas Insurance Code.         Allstate moved for summary judgment twice. In its second motion for summary judgment, Allstate asserted it was entitled to summary judgment because (i) Richardson could not establish any grounds for setting aside the appraisal award, (ii) Richardson’s claims were barred by the affirmative defense of accord and satisfaction, (iii) Richardson was estopped to assert a breach-of-contract claim, and (iv) Richardson’s extra-contractual claims were “unsupportable, as a matter of law.” The trial court denied Allstate’s first and second motions; but upon Allstate’s one-page motion to reconsider, the trial court granted Allstate’s second motion and dismissed Richardson’s claims with prejudice.
In this appeal, Richardson asserts five main points of error, each with multiple subpoints. In her first point, Richardson argues the summary judgment order is improper because the appraisal award is “void as a matter of law,” based, inter alia, on her contention that the appraisal procedure was not followed. In her second point, Richardson argues she is entitled to summary judgment on Allstate’s affirmative defense of accord and satisfaction. In her third issue, Richardson argues she is not estopped to assert her breach of contract claim. In her fourth issue, Richardson argues genuine issues of material fact preclude summary judgment dismissing her extra-contractual claims. Finally, in her fifth point, Richardson argues the trial erred in denying her motion to designate experts.

The Appraisal Procedure


  1. Applicable Law

Because courts “seek to implement the intention of the parties as expressed in the language of a contract,” it has long been the rule in Texas that “[a]ppraisal awards made pursuant to the provisions of an insurance contract are binding and enforceable.” Providence Lloyds Ins. Co. v. Crystal City Ind. Sch. Dist., 877 S.W.2d 872, 875 (Tex. App.-San Antonio 1994, no writ) (citing Scottish Union and Nat’l Ins. Co. v. Clancy, 8 S.W. 630 (Tex. 1888)). “Although every reasonable presumption will typically be made in favor of an appraisal award, when reviewing a summary judgment proceeding, that rule must yield to the degree its application conflicts with the presumptions required to be made in favor of the nonmovant.” Wells v. Am. States Preferred Ins. Co., 919 S.W.2d 679, 683 (Tex. App.-Dallas 1996, writ denied) (citing Hennessey v. Vanguard Ins. Co., 895 S.W.2d 794, 797-98 (Tex. App.-Amarillo 1995, writ denied)). There are three circumstances in which an appraisal award may be set aside on appeal: (1) the award was made without authority, (2) the award was made as a result of fraud or accident, or (3) the award was not make in substantial compliance with the terms of the insurance policy. Crystal City, 877 S.W.2d at 875-76.

  1. Analysis

In her first issue, Richardson argues the award in this case should be set aside because it was not made in substantial compliance with the policy. We agree. The policy expressly requires that the appraisers each make an itemized list, “stating separately the actual cash value and loss to each item.” It also requires the appraisers to submit to the umpire only the items on which the two appraisers fail to agree. The policy then requires at least two of these individuals must agree on the final appraisal award, and the final award must be “itemized.”
The record in this case does not reflect substantial compliance with this required procedure. There is no evidence in the record the appraisers made the requisite itemized lists or that they submitted only disputed items to the umpire for a decision. Instead, the record contains testimony that, prior to Montgomery and Greenhaw signing the award, Johnson never saw any written estimate from Greenhaw and did not meet with Greenhaw or Montgomery to discuss the appraisers’ disputed items. The record contains no itemized list prepared by either appraiser. There is testimony in the record that Johnson prepared a written estimate and forwarded it to the umpire, but that estimate is not in the record. There is no evidence that Johnson ever met with Greenhaw to discuss their itemized estimates so the appraisers could determine their differences. Moreover, the appraisal award signed by Montgomery and Greenhaw is not an “itemized decision” as required by the terms of the insurance policy. Instead, it merely reflects a lump-sum award written next to the phrase “to be determined by hygienist.”
Allstate argues that a document prepared by Greenhaw several days after Greenhaw and Montgomery signed the award “comprises the itemized decision upon which the appraisal award was based.” We reject this argument. A document prepared after the appraisal award was issued cannot, as a matter of common sense and law, constitute the itemized list Greenhaw was supposed to prepare before any award was issued. Allstate also argues the award is proper because “nothing in the policy requires that the two individuals agreeing on the award delineate every item to be replaced.” We agree that in a situation like this, in which raw sewage may have contaminated the entire contents of a home, it would not be necessary to list and separately appraise, for example, every item of clothing and kitchen utensil in the home. Nevertheless, we reject Allstate’s contention that the appraisers were entirely relieved of their obligation to make an itemized list that at least categorized the contents of the home in a manner customary in the insurance industry.
Under these facts, we conclude the appraisal award should be set aside because the award was not made in substantial compliance with the terms of the insurance policy. E.g., Fisch v. Transcon. Ins. Co., 356 S.W.2d 186, 189-90 (Tex. Civ. App.-Houston 1962, writ ref’d n.r.e.) (setting aside appraisal award because record contained no evidence appraisers failed to agree and only submitted disagreements to umpire, as required by policy) .

We reverse the trial court’s summary judgment and remand this case for further proceedings consistent with this opinion. Tex. R. App. P. 43.2(d). The ultimate disposition of this case, including Richardson’s extra-contractual claims and Allstate’s affirmative defenses, will depend on the facts developed and decisions made during the further proceedings in the trial court. Accordingly , we need not address Richardson’s remaining issues at this time. Tex. R. App. P. 47.1.



Footnote 1 The Honorable Sue Lagarde, Justice, Court of Appeals, Fifth District of Texas at Dallas, Retired, sitting by assignment.

Williams, McClure & Parmelee is dedicated to high quality legal representation of businesses and insurance companies in a variety of matters. We are experienced Fort Worth, Texas insurance defense lawyers in Tarrant County who know Texas courts and Texas law. For more information, please contact the law firm at 817-335-8800. The firm’s office location is 5601 Bridge Street, Suite 300, Fort Worth, Texas 76112.

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