459 F. App'x 366
5th Cir.2012Background
- Lloyds London insured Blum's Furniture for property damage from Hurricane Ike (2008).
- Lloyds’ adjuster inspected Sept. 26, 2008; Lloyds issued estimates and sought a proof of loss in Oct. 2008.
- Lloyds paid approximately $300,000 after BelforUSA’s report and later Blum's invoked the appraisal provision (Aug. 10, 2009).
- Appraisal process each side selected appraisers; upon disagreement, an umpire was chosen; the award exceeded $1,000,000.
- Lloyds paid the appraisal amount after the award; Blum's accepted but pursued breach of contract and bad faith claims.
- District court granted summary judgment estopping Blum's breach claim by appraisal and Blum's appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does appraisal estoppel bar breach claim? | Blum's argues the final payment after appraisal was not timely or proper. | Lloyds contends estoppel applies once the appraisal award is timely paid and accepted. | Yes; estoppel applies to bar breach claim when award timely paid and accepted. |
| Can Blum's salvage bad-faith claims if breach claim fails? | Blum's asserts independent bad faith harms despite breach findings. | Blum's must show breach absent exceptions to recover bad faith. | No; bad faith claims fail absent extreme act or failure to investigate (exceptions not met). |
| Did Lloyds’ initial underpayment trigger independent bad faith? | Blum's claims Lloyds’ initial payment was so insufficient as to cause independent injury. | Under Texas law, bad faith requires breach with exceptions; initial payment alone insufficient. | Not enough to constitute independent injury; no bad faith established. |
Key Cases Cited
- Liberty Nat'l Fire Ins. Co. v. Akin, 927 S.W.2d 627 (Tex. 1996) (insured may not prevail on bad-faith claim without breach, with limited exceptions)
- Republic Ins. Co. v. Stoker, 903 S.W.2d 338 (Tex. 1995) (exceptions to breach requirement for bad faith)
- Franco v. Slavonic Mut. Fire Ins. Ass'n, 154 S.W.3d 777 (Tex. App. 2004) (estoppel by appraisal when payment timely and accepted)
- Breshears v. State Farm Lloyds, 155 S.W.3d 340 (Tex. App. 2004) (may not use appraisal discrepancy to prove breach of contract under appraisal provision)
- In re Universal Underwriters of Tex. Ins. Co., 345 S.W.3d 404 (Tex. 2011) (appraisal determines damages, liability remains to court)