Farmers Group Insurance, Inc., D/B/A Farmers Group Insurance, Farmers Insurance Exchange, and Fire Insurance Exchange v. Tammy Poteet
434 S.W.3d 316
Tex. App.2014Background
- In Nov. 2002 Poteet’s newly purchased home was contaminated by black smoke/soot; Farmers-insurance paid remediation and some replacement but dispute arose over additional remediation, living expenses, contents, and loss in home value.
- Farmers invoked the policy’s appraisal clause; Poteet designated an appraiser (Robert Miller). Farmers’ appraiser did not meaningfully participate, an agreed umpire refused to serve, Farmers filed suit in Taylor County to appoint an umpire, but no party sought appointment and the suit was dismissed for want of prosecution.
- Poteet sued Farmers in Denton County seeking additional covered damages and extra-contractual relief. On first appeal this court affirmed summary judgment for Farmers on all claims except it found a fact issue that Farmers may have breached the appraisal provision and remanded that claim for trial.
- At the remand trial (2011) the jury found Farmers breached the appraisal provision and awarded $31,300 for soot-related property/fair-market-value losses, $8,000 in litigation expenses, and $200,000 in attorney’s fees. Poteet’s expert did not segregate soot damage caused solely by the covered event from damage caused by other sources.
- On appeal, the court held (1) the $31,300 award for unsegregated soot-related losses was improper under the concurrent-causation rule and the law-of-the-case from the prior appeal, (2) the awards of $6,500 in attorney fees (trial) and $1,500 (litigation expenses) for harms tied to the appraisal breach were affirmed, (3) the $200,000 attorney-fee award was reversed and remanded for reconsideration because fees were not properly segregated.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope of remand damages for breach of the appraisal provision | Poteet: breach of appraisal entitled her to the full amount her appraisal would have awarded (including covered and non-covered losses) and consequential damages (rental, maintenance, loss in value). | Farmers: remand was limited by prior appellate ruling; Poteet already failed to prove covered damages — appraisal-breach relief should be limited to costs and fees tied to the appraisal process. | Held: Jury award of unsegregated soot-related losses ($31,300) was beyond remand scope and improper; affirmed only appraisal-related attorney/litigation expense awards. |
| Application of concurrent-causation to soot damages | Poteet: appraisal would have produced a binding loss amount; that should allow recovery of soot-related losses. | Farmers: soot damage had multiple possible sources; under concurrent-causation Poteet bore burden to segregate losses caused solely by covered peril and failed to do so. | Held: Poteet failed to segregate; law-of-the-case from prior appeal bars recovery of covered damages absent segregation. |
| Whether breach of appraisal can create coverage or substitute for proof of causation | Poteet: appraisal clause is binding and would have resulted in compensation; breach should make insurer liable for those losses. | Farmers: appraisal determines amount of loss but not coverage/causation; breach of appraisal cannot create coverage where none exists. | Held: Appraisal does not decide causation/coverage for indivisible injury; breach cannot create coverage. |
| Recoverable attorney’s fees and segregation | Poteet: requested fees for the entire litigation; testified to total fees and estimated 70% related to appraisal claim. | Farmers: fee award must exclude fees on nonrecoverable claims; plaintiff must segregate fee proof for claims on which fees are recoverable. | Held: Some appraisal-related fees are recoverable (trial $6,500 and $1,500 exp. affirmed), but the $200,000 jury fee award was reversed and remanded because fees were not properly segregated and must be recalculated consistent with plaintiff's limited success. |
Key Cases Cited
- State Farm Lloyds v. Johnson, 290 S.W.3d 886 (Tex. 2009) (appraisal clauses decide amount of loss, not liability; appraisal generally enforceable and should proceed absent waiver/illegality)
- In re Universal Underwriters of Texas Ins. Co., 345 S.W.3d 404 (Tex. 2011) (appraisals are an efficient means to resolve amount disputes and may be compelled; parties can avoid prejudice by demanding appraisal when impasse is reached)
- Standard Fire Ins. Co. v. Fraiman, 588 S.W.2d 681 (Tex. Civ. App.—Houston [14th Dist.] 1979) (insurer’s breach of an appraisal clause can give rise to damages for consequential harms from that procedural breach)
- Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299 (Tex. 2006) (plaintiffs must segregate attorney’s fees between recoverable and nonrecoverable claims)
- Travelers Indem. Co. v. McKillip, 469 S.W.2d 160 (Tex. 1971) (concurrent-causation doctrine — when covered and non-covered perils combine, insured must segregate portion caused solely by covered peril)