589 S.W.3d 806
Tex.2019Background
- Barbara Technologies (insured) filed a wind/hail claim after a 2013 storm; State Farm inspected, denied the claim as below the $5,000 deductible, and Barbara Tech sued.
- After litigation began, State Farm invoked the policy appraisal clause; the appraisers fixed the loss at $195,345.63 and State Farm paid the appraisal amount (less depreciation and deductible) four business days after receiving the award.
- Barbara Tech amended to pursue only Texas Prompt Payment of Claims Act (TPPCA, Tex. Ins. Code ch. 542) damages for alleged late payment and moved for summary judgment.
- State Farm moved cross-summary judgment, arguing timely payment of the appraisal award precludes TPPCA damages and that payment pursuant to appraisal is not an admission of policy liability.
- Trial court entered judgment for State Farm; the court of appeals affirmed based on precedent holding timely payment of an appraisal award bars TPPCA recovery. The Supreme Court granted review.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether payment of an appraisal award bars TPPCA damages as a matter of law | Barbara Tech: payment after appraisal cannot defeat TPPCA because insurer delayed payment beyond statutory period and the appraisal established the claim was due | State Farm: timely payment of the appraisal award satisfies TPPCA and precludes statutory damages | The Court: payment of an appraisal award neither establishes liability nor automatically bars TPPCA damages; neither party established entitlement to summary judgment |
| Whether invoking appraisal restarts or suspends TPPCA deadlines | Barbara Tech: appraisal cannot be used to evade TPPCA deadlines | State Farm: appraisal is an information or evaluation process that tolled/reset deadlines and payment was timely | The Court: appraisal invoked after rejection is a contractual valuation mechanism, not a §542.055 information request; appraisal does not restart TPPCA investigatory deadlines |
| Whether payment pursuant to appraisal constitutes acceptance/admission of liability under §542.060 | Barbara Tech: appraisal payment shows insurer owed benefits and thus is liable for prompt-pay penalties | State Farm: paying appraisal is not an admission of liability; payment resolves amount only | The Court: appraisal payment resolves amount only and is not an acknowledgment of liability for §542.060 purposes; liability requires acceptance or adjudication |
| Whether an appraisal award constitutes "actual damages" under Insurance Code analysis | Barbara Tech: appraisal award is actual damages demonstrating entitlement to benefits and statutory remedies | State Farm: appraisal fixes amount but not liability or "actual damages" absent adjudication | The Court: appraisal award is not "actual damages" for TPPCA claims absent a finding or acceptance of liability |
Key Cases Cited
- State Farm Lloyds v. Johnson, 290 S.W.3d 886 (Tex. 2009) (appraisal clauses enforceable to determine amount of loss, not liability)
- Lamar Homes, Inc. v. Mid-Continent Cas. Co., 242 S.W.3d 1 (Tex. 2007) (TPPCA deadlines tied to receipt of items and final proof of loss)
- Higginbotham v. State Farm Mut. Auto. Ins. Co., 103 F.3d 456 (5th Cir. 1997) (wrongful rejection can constitute delay for TPPCA damages where liability is adjudicated)
- Breshears v. State Farm Lloyds, 155 S.W.3d 340 (Tex. App.—Corpus Christi–Edinburg 2004) (appraisal payment after initial payment did not alter TPPCA compliance in that case)
- Garcia v. State Farm Lloyds, 514 S.W.3d 257 (Tex. App.—San Antonio 2016) (held timely payment of appraisal award precluded TPPCA recovery)
- In re Universal Underwriters of Tex. Ins., 345 S.W.3d 404 (Tex. 2011) (appraisals provide an alternative dispute resolution and may be waived if delay prejudices the insured)
- USAA Tex. Lloyds Co. v. Menchaca, 545 S.W.3d 479 (Tex. 2018) (clarified when policy benefits may be recoverable as "actual damages")
- In re Allstate Cty. Mut. Ins., 85 S.W.3d 193 (Tex. 2002) (appraisal determines amount, not liability)