TMM Investments, Limited v. Ohio Casualty Insuranc
2013 U.S. App. LEXIS 19192
| 5th Cir. | 2013Background
- TMM owned Liberty Square shopping center insured by OCIC; alleged hailstorm damage from June 2005 and submitted a $679,725.68 proof of loss.
- OCIC estimated minimal damage (~$17,949) and tendered payment; TMM invoked the policy appraisal clause due to the large valuation disparity.
- Party appraisers (Crites for TMM; Butler for OCIC) and umpire (Boyd) conducted appraisal; Boyd’s award listed Replacement Cost $73,014.83 and Actual Cash Value $49,632.63.
- Boyd’s award omitted HVAC damage (though both appraisers had included $2,794.80) and excluded certain roof/skylight items based on causation findings; OCIC tendered the award plus HVAC amount, which TMM refused.
- TMM sued in state court (removed to federal court), seeking to set aside the appraisal award and alleging breach of contract; the district court set aside the award, tried the case, and awarded damages, fees, and prejudgment interest to TMM.
- Fifth Circuit reversed: upheld most of the appraisal award, concluded only the HVAC omission was unauthorized, and held OCIC satisfied the policy by tendering the award plus HVAC amount; reversed breach, fee, and interest awards.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity of appraisal award | Appraisal panel exceeded authority by (a) umpire excluding HVAC damage and (b) panel deciding causation/coverage—award should be set aside | Appraisers properly resolved damages (including causation issues necessary to quantify loss); award binding | Umpire lacked authority to exclude HVAC; but majority of award was valid—only HVAC omission required correction; award should stand otherwise |
| Umpire authority to remove agreed items | Boyd improperly struck HVAC because appraisers agreed on that item; umpire acts only on disagreements | OCIC maintained appraisal process/control and tender cured any defect | Court agreed umpire had no authority to omit HVAC; award severable—reinstated with HVAC added |
| Appraisers addressing causation | TMM: appraisers overstepped by deciding causation (a liability issue), invalidating award | OCIC: Johnson permits appraisers to apportion damages between covered perils and preexisting conditions; appraisal may include causation necessary to quantify loss | Fifth Circuit: Johnson controls—appraisers may decide causation to the extent needed to allocate damages between different items or preexisting conditions; appraisal did not exceed authority |
| Breach of contract / attorney’s fees | TMM: OCIC breached by failing timely to pay and thus TMM entitled to fees and interest | OCIC: tender of appraisal award plus HVAC fulfilled contractual obligations; no valid breach | Held: No breach—OCIC fulfilled policy by tendering award + HVAC; fee and prejudgment interest awards reversed |
Key Cases Cited
- Fisch v. Transcontinental Insurance Co., 356 S.W.2d 186 (Tex. Civ. App.—Houston 1962) (umpire has authority only to decide matters submitted by disagreement between appraisers)
- Providence Lloyds Ins. Co. v. Crystal City Independent School Dist., 877 S.W.2d 872 (Tex. App.—San Antonio 1994) (appraisal award final if any two panel members agree; courts should sustain awards where possible)
- Wells v. American States Preferred Insurance Co., 919 S.W.2d 679 (Tex. App.—Dallas 1996) (appraisers may not make legal determinations of causation that eliminate court’s role on liability)
- Lundstrom v. United Services Automobile Ass'n, 192 S.W.3d 78 (Tex. App.—Houston [14th Dist.] 2006) (appraisers decide damages; may separate initial damage from subsequent damage such as mold)
- State Farm Lloyds v. Johnson, 290 S.W.3d 886 (Tex. 2009) (Texas Supreme Court: appraisal panels may consider causation to the extent necessary to allocate damages between covered perils and preexisting conditions)