In MLCSV10 v. Hartford Stream Boiler Inspection and Insurance Company,1 current and former owners of insured commercial property brought state-court actions against insurers to recover cost of repairing hurricane damage and vandalism, asserting causes of action for breach of an insurance contract, breach of the duty of good faith and fair dealing, violations of the Texas Insurance Code (TIC), and violations of the Texas Deceptive Trade Practices Act (DTPA). Insurers moved for dismissal based on their full payment of the appraisal award.
In his ruling, Judge Lee Rosenthal made the following determinations:
- Under Texas law, undisclosed business-referral relationship between companies that employed umpire and insurer's appraiser, without more, did not render umpire and insurer's appraiser partial or create an appearance of partiality, as would provide sufficient basis for disregarding appraisal award;
- appraisal award was not the result of fraud, mistake, or accident, as would provide sufficient basis for disregarding award;
- umpire and insurer's appraiser did not impermissibly decide causation in portion of appraisal award pertaining to damaged roof of insured commercial property;
- genuine issues of material fact precluded summary judgment on claims against insurer that issued policy covering the damaged property;
- umpire and insurer's appraiser did not exceed their authority by determining causation in portion of appraisal award pertaining to damaged roof; and
- insurers that were not parties to policy covering the damaged property had no breach-of-contract liability.
Appraisal allows disputes to be resolved, but after an award is paid, property owners can be left with a feeling that they still want their day in court. Texas courts continue to support the longstanding rules on setting aside an appraisal award, and it is unlikely that the laws will change any time soon.