The appraisal process has been around for a long time, and it is not going anywhere anytime soon. In fact, records indicate that the Texas Supreme Court has enforced appraisal clauses in insurance policies as far back as 1888. Typically, appraisal clauses do not specify a time frame for when a party can invoke the appraisal process. Many of you out there might think that this means that a carrier can invoke the appraisal process whenever it wants. However, that is not necessarily the case.
In Sanchez v. Prop. and Cas. Ins. Co. of Hartford, No. 09-1736, 2010 WL 413687 (S.D. Tex. Jan 27, 2010), the United States District Court for the Southern District of Texas recently found that Hartford Insurance Company waived its right to appraisal by taking too long to invoke the process. In Sanchez, Hartford’s appraisal clause did not specify a time frame for when a party could invoke the appraisal process. The Court noted that:
[w]hen a policy is silent as to time, the law will require that the demand for appraisal be made within a reasonable amount of time.
Some of you may now be wondering how a court calculates a “reasonable amount of time.” Fortunately, the Court shed some light on this question in Sanchez:
The proper point of reference for determining whether an insurer waived the right to invoke appraisal by delay is the point at which the insurer knew the appraisal clause could be invoked because of a disagreement over the amount of damages, that is, the point of impasse with the insured.
In Sanchez, the insured first informed Hartford of his claim for damages to his house from Hurricane Ike on October 26, 2008. Following inspection, Hartford sent a letter to the insured denying any payment on October 31, 2008. On November 1, 2008, the insured called Hartford to dispute the repair estimate. Hartford’s representative informed the insured that because Hartford’s final position was that the amount of covered damages did not exceed the deductible, no payment would be issued. The Court stated that:
[t]he parties’ diametrically opposed positions on the amount of damages suffered from the Hurricane, clearly articulated in the phone call, establish[ed] that an impasse had been reached.
Hartford was then on notice that it had the right to invoke the appraisal clause, and the Court used November 1, 2008, as the date from which to determine whether Hartford waived appraisal by failing to timely invoke its right. The Court found that because Hartford invoked the appraisal clause on October 15, 2009, and because Hartford produced no evidence that its delay in requesting an appraisal was due to a good faith attempt to ascertain the amount of damages, Hartford had waived its right to appraisal.
I hope none of you take this to mean that Texas courts will find waiver in all cases where the insurer takes a long time to invoke its right to appraisal. Every case is different – with each having its own unique set of facts – and a court will determine waiver if and when the issue arises. However, this is definitely something to keep in the back of your mind for those instances when a carrier is seemingly dragging its feet with respect to appraisal. If the facts are right in your particular case, a carrier could find itself out of luck and unable to invoke its appraisal clause.
Given the age of the case precedent in Texas regarding appraisal disputes, it seems appropriate to remember some other “oldies but goodies.”