544 F. App'x 535
5th Cir.2013Background
- The Michelses' home suffered smoke damage in the 2011 Bastrop wildfires; they filed an insurance claim with Safeco (Indiana citizen).
- Safeco paid $12,005.19 for cleaning and insulation replacement, investigated the loss, and engaged third-party consultants (including Jason Womack, a Texas engineer employed by Rimkus).
- The Michelses demanded appraisal, later rescinded; Safeco then demanded appraisal and sought court appointment of an umpire after appraisers could not agree. An umpire awarded $17,500 (ACV), and Safeco paid the balance after accounting for prior payments and deductible.
- The Michelses sued Safeco and Womack in state court seeking > $72,700; Safeco and Womack removed to federal court, which consolidated Safeco’s federal action to appoint an umpire and dismissed Womack as improperly joined (Michelses and Womack are Texas citizens).
- The district court compelled appraisal, denied the Michelses’ motion to vacate the appraisal award, granted Safeco summary judgment after payment of the award, and entered a take-nothing judgment; the Michelses appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Womack was improperly joined | Michels: pleadings sufficed to show Womack acted as an adjuster and is liable under the Texas Insurance Code | Safeco: Womack was an independent engineer (Rimkus), not an adjuster or a “person” engaged in the business of insurance | Court: Womack was improperly joined; district court permissibly pierced pleadings and found no reasonable basis of recovery against him |
| Whether district court abused discretion by compelling appraisal | Michels: Safeco anticipatorily breached the contract by its adjusting conduct and should be barred from enforcing appraisal | Safeco: Appraisal is a mandatory, enforceable contractual remedy under Texas law | Court: Denial of stay/compel appraisal was proper; appraisal must proceed despite alleged breach |
| Whether umpire appraisal award should be vacated | Michels: Award process flawed; award not properly itemized and did not follow policy procedures | Safeco: Appraisal substantially complied with policy; Michels’ appraiser requested lump-sum form; minor defects do not void award | Court: Denial of vacatur affirmed — award substantially complied with policy and is presumptively valid |
| Whether summary judgment for Safeco was proper | Michels: Remand/joinder error and appraisal defects tainted subsequent rulings; claims should continue | Safeco: Payment of appraisal award and valid appraisal foreclose recovery; no genuine issue of material fact | Court: Summary judgment affirmed after rejecting Michels’ challenges to joinder, appraisal process, and jurisdiction |
Key Cases Cited
- Smallwood v. Illinois Cent. R.R. Co., 385 F.3d 568 (5th Cir.) (en banc) (procedure for assessing improper joinder and when courts may pierce the pleadings)
- Manguno v. Prudential Prop. & Cas. Ins. Co., 276 F.3d 720 (5th Cir. 2002) (removal burden on removing party to establish federal jurisdiction)
- Guillory v. PPG Indus., Inc., 434 F.3d 303 (5th Cir. 2005) (standard for reviewing denial of motion to remand)
- In re Universal Underwriters of Tex. Ins. Co., 345 S.W.3d 404 (Tex. 2011) (Texas law recognizing appraisal as an enforceable contractual remedy)
- Franco v. Slavonic Mut. Fire Ins. Ass'n, 154 S.W.3d 777 (Tex. App.—Houston [14th Dist.]) (appraisal awards are binding and presumed valid; burden on party seeking to avoid award)
- Celotex Corp. v. Catrett, 477 U.S. 317 (U.S. 1986) (summary judgment standard)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (U.S. 1986) (definition of genuine dispute for summary judgment)
- Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (U.S. 1986) (view evidence in light most favorable to nonmoving party on summary judgment)