562 S.W.3d 655
Tex. App.2018Background
- Acceptance Indemnity insured an apartment complex owned by SA Villas I, LP (RPI) and adjusted a wind/hail claim after May 2015. Parties disagreed on repair costs because RPI's contractor estimate included overhead, profit, and taxes; insurer's appraisals did not.
- Acceptance paid the undisputed amount minus deductibles; RPI later demanded additional payment for overhead, profit, and sales tax and sent a demand letter in April 2017 alleging underpayment and statutory/common-law violations.
- On August 1, 2017 Acceptance invoked the policy appraisal clause in writing and designated an appraiser; RPI responded that appraisal was inappropriate and filed suit on August 14, 2017 alleging breach and extra-contractual claims.
- Acceptance moved to compel appraisal and abate the litigation; the trial court denied the motion. Acceptance sought mandamus directing the trial court to compel appraisal and abate.
- The court majority held appraisal clauses are enforceable absent illegality or waiver, found RPI failed to prove waiver or prejudice, and conditionally granted mandamus ordering appraisal and abatement. A dissent argued the dispute concerned entitlement to overhead/profit/taxes (legal issue), not the amount of loss, so appraisal was outside the clause.
Issues
| Issue | Plaintiff's Argument (RPI) | Defendant's Argument (Acceptance Indemnity) | Held |
|---|---|---|---|
| Enforceability of appraisal clause | Clause inapplicable because dispute concerns entitlement to overhead/profit/taxes (a coverage/legal issue), not valuation | Appraisal clause applies when parties disagree on amount of loss; dispute is amount of overhead/profit/taxes tied to valuation | Appraisal must be compelled; clause enforceable absent illegality or proven waiver |
| Waiver by insurer | Insurer waited too long and engaged in conduct (negotiations, adjustment) that waived appraisal right; prejudice resulted | No impasse established; insurer invoked appraisal before any mutual impasse and thus no unreasonable delay or prejudice | RPI failed to prove waiver: no mutual impasse and no unreasonable delay or resulting prejudice |
| Scope: amount vs. entitlement | Dispute is whether overhead/profit/taxes are owed at all (legal/coverage), not their valuation | Overhead/profit/taxes disputed as amounts tethered to valuation; taxes depend on amount — thus subject to appraisal | Court: issue is valuation (amount) and thus within appraisal scope; appraisal appropriate |
| Mutuality / jury right / illusory clause | Clause is illusory because insurer can still deny claim and insurer’s invocation strips RPI of jury trial rights | Policy preserves insured's right to sue and insurer's right to deny; both parties are bound by appraisal valuation; parties can contractually waive jury issues | Mutuality upheld; parties bound by valuation while retaining other rights; contractual waiver of jury permissible when knowing/voluntary |
Key Cases Cited
- In re Universal Underwriters of Tex. Ins. Co., 345 S.W.3d 404 (Tex. 2011) (appraisal clauses generally enforceable absent illegality or waiver; impasse requires mutual awareness that negotiations are futile)
- State Farm Lloyds v. Johnson, 290 S.W.3d 886 (Tex. 2009) (trial court may not ignore a valid appraisal clause)
- In re Allstate County Mut. Ins. Co., 85 S.W.3d 193 (Tex. 2002) (mandamus available to enforce appraisal clause)
- In re Prudential Ins. Co. of Am., 148 S.W.3d 124 (Tex. 2004) (parties may contractually waive jury trial rights in certain future disputes)
- Pounds v. Liberty Lloyds of Tex. Ins. Co., 528 S.W.3d 222 (Tex. App.-Houston [14th Dist.] 2017) (insurer’s denial of claim is relevant to waiver analysis but not dispositive)
- In re State Farm Lloyds, 514 S.W.3d 789 (Tex. App.-Houston [1st Dist.] 2017) (distinguishing valuation from coverage and upholding enforcement of appraisal clause)