Insurer’s Payment of Appraisal Award Not Complete Bar to Extra-Contractual Claims

Alvarez v. State Farm Lloyds, ___S.W.3d___, No. 18-0127, 2020 WL 1898528 (Tex. Apr. 17, 2020) (per curiam); Lazos v. State Farm Lloyds, ___S.W.3d___, No. 18-0205, 2020 WL 1898534 (Tex. Apr. 17, 2020) (per curiam); Biasatti v. GuideOne Nat’l Ins. Co., ___S.W.3d___, No. 18-0911, 2020 WL 1898538 (Tex. Apr. 17, 2020) (per curiam)

By Rachelle (Shelley) H. Glazer and Brandon L. King, Thompson & Knight LLP

The Supreme Court recently issued three per curiam opinions clarifying the effect of an insurer’s payment of an appraisal award,  applying its previous holdings in Barbara Technologies Corp. v. State Farm Lloyds, 589 S.W.3d 806, 823 (Tex. 2019), and Ortiz v. State Farm Lloyds, 589 S.W.3d 127 (Tex. 2019). In Barbara Technologies, the Court held that an insurer’s payment of an appraisal award “is neither an acknowledgment of liability nor a determination of liability under the policy for purposes of TPPCA damages under section 542.060.”[1] In Ortiz, the court held that payment of an appraisal award doesn’t bar as a matter of law an insured’s claims under the TPPCA.[2] Applying these decisions, the Court reversed and remanded in all three cases.

In Alvarez v. State Farm Lloyds, ___S.W.3d___, No. 18-0127, 2020 WL 1898528 (Tex. Apr. 17, 2020) (per curiam), a homeowner sustained wind and hail damage. State Farm concluded the damage didn’t exceed the policy’s deductible but later revised its estimate and issued payment to the homeowner. Believing State Farm undervalued his property damage, the homeowner sued. State Farm successfully moved to compel appraisal, and the resulting award exceeded State Farm’s previous estimates. The trial court and court of appeals both held that the insurer’s payment of the appraisal award entitled it to summary judgment on all of the homeowner’s contractual and extra-contractual claims.

Lazos v. State Farm Lloyds, ___S.W.3d___, No. 18-0205, 2020 WL 1898534 (Tex. Apr. 17, 2020) (per curiam) is virtually identical to Alvarez: the trial court and court of appeals both held that the insurer’s payment of an appraisal award that exceeded prior damages estimates entitled it to summary judgment on all of the insured’s claims.

In Biasatti v. GuideOne Nat’l Ins. Co., ___S.W.3d___, No. 18-0911, 2020 WL 1898538 (Tex. Apr. 17, 2020) (per curiam), the insured submitted claims for wind and hail damage. The insurer declined to pay the claims after two inspections. The insured sued for breach of contract, common-law and statutory bad faith, and violations of the TPPCA. Later the insurer—invoking a unilateral appraisal clause[3]—obtained an order compelling appraisal and paid the award; the trial court granted summary judgment for the insurer based its payment of the appraisal award. The court of appeals affirmed, holding that the insured’s breach-of-contract claim failed due to payment of the appraisal award, and that the TPPCA claims failed “because it did not allege an injury independent from the policy benefits and did not demonstrate policy benefits were withheld after the appraisal award was paid.” Id.

The Texas Supreme Court reversed and remanded all three cases to the trial courts, holding that payment of an appraisal award does not bar a claim for damages under the TPPCA. The Court held the same in Biasatti, but it also remanded the insured’s breach of contract and statutory bad faith claims due to the presence of a unilateral appraisal clause, something absent from Ortiz. See Biasatti, 2020 WL 1898538, at *2 (“Ortiz did not involve a unilateral appraisal clause. Thus, we did not consider whether payment of an appraisal award under a unilateral clause would have the same effect as to these claims. The trial court may consider that question on remand.” (citations omitted)).

These three decisions confirm that payment of an appraisal award does not bar TPPCA claims; more interesting, however, is the possibility that the presence of unilateral appraisal clauses might allow contractual and bad-faith claims to survive, too.

[1] Barbara Techs., 589 S.W.3d at 820.

[2] Ortiz, 589 S.W.3d at 135.

[3] Unilateral appraisal clauses allow insurers “to ignore disagreements about the amount of the loss and force the insured to file suit to resolve the dispute.” Ortiz, 589 S.W.3d at 131 n.6. In this case, Top Dog argued that unilateral appraisal clauses are illusory in nature and thus unenforceable; the Court, however, held that Top Dog waived this argument and thus did not address it. Biasatti, 2020 WL 1898538, at *2 n.3.