In re State Farm Lloyds
2017 Tex. App. LEXIS 173
Tex. App.2017Background
- State Farm Lloyds insured the Trans' home for policy period Nov 5, 2014–Nov 5, 2015; Trans reported storm damage.
- State Farm inspected and estimated covered storm damage at $432, below the $8,174 deductible; it denied coverage for other alleged damage and for replacing undamaged shingles.
- The Trans retained a public adjuster who estimated storm damage at $73,000 and sued State Farm for breach of contract and related claims.
- State Farm answered, demanded a jury trial, then invoked the policy’s appraisal clause and moved to compel appraisal; the insureds refused and the trial court denied the motion.
- State Farm petitioned for mandamus, arguing the trial court abused its discretion by refusing to enforce the policy’s appraisal provision.
Issues
| Issue | Plaintiff's Argument (Trans) | Defendant's Argument (State Farm) | Held |
|---|---|---|---|
| Did State Farm waive appraisal by denying coverage? | Denial of coverage (and disputing much of the damage) constitutes waiver of appraisal. | Denial of coverage for some items and nonpayment due to deductible did not intentionally relinquish appraisal rights; waiver must be intentional or written. | Trial court abused discretion in finding waiver; no fact issue showing intentional relinquishment. |
| Did State Farm waive appraisal by filing a jury demand? | Filing a jury demand before demanding appraisal waived appraisal rights. | Jury demand alone is not an intentional relinquishment of appraisal rights; no evidence it waived appraisal in writing. | Jury demand did not show waiver; appraisal right preserved. |
| Is the appraisal clause illusory or lacking mutuality because State Farm reserved right to contest coverage? | State Farm’s reservation to contest liability makes appraisal one-sided and unenforceable. | The policy expressly allows either party to demand appraisal; reservation in demand letter cannot alter policy terms. | Appraisal clause is mutual and not illusory; enforceable. |
| Should mandamus issue to compel appraisal? | (Implicit) Denial should stand; appraisal inappropriate. | Appraisal clause is valid and trial court must compel appraisal; denial is an abuse of discretion and not reviewable on appeal. | Mandamus conditionally granted: trial court ordered to vacate denial and compel appraisal. |
Key Cases Cited
- State Farm Lloyds v. Johnson, 290 S.W.3d 886 (Tex. 2009) (appraisal may be appropriate even when insurer denies coverage)
- In re Universal Underwriters of Texas Ins. Co., 345 S.W.3d 404 (Tex. 2011) (waiver requires intentional relinquishment or conduct inconsistent with claiming the right)
- In re Allstate Cnty. Mut. Ins. Co., 85 S.W.3d 193 (Tex. 2002) (trial court cannot ignore valid appraisal clause; mandamus appropriate)
- In re Prudential Ins. Co., 148 S.W.3d 124 (Tex. 2004) (mandamus standards: clear abuse and no adequate appellate remedy)
- Walker v. Packer, 827 S.W.2d 833 (Tex. 1992) (de novo review of trial court’s application of law in mandamus)
- In re MR, Inc., 324 S.W.3d 564 (Tex. 2010) (appraisal clauses that permit either party to demand appraisal are not illusory)
- In re Cerberus Capital Mgmt. L.P., 164 S.W.3d 379 (Tex. 2005) (definition of clear abuse of discretion for mandamus)
- In re Liberty Ins. Corp., 496 S.W.3d 229 (Tex. App.-Houston [1st Dist.] 2016) (denial of coverage is relevant but not dispositive on waiver of appraisal)