I have previously written about how an insurance company can waive its right to appraisal by taking too long to invoke it, but are there other ways an insurance company can waive its right to an appraisal? For example, does an insurance company waive its right to appraisal when it recognizes some but not all of the damages claimed by the insured? What if the insurer anticipatorily breaches the insurance contract? The United States District Court for the Southern District of Texas recently weighed in on this issue in Boone v. Safeco Ins. Co. of Indiana, No. H-09-1613, 2010 WL 2303311 (S.D. Tex. June 7, 2010).
In Boone, the Boones alleged that because Safeco unconditionally denied some of their claims, the denial waived Safeco’s right to seek appraisal. In its analysis, the Court referenced a recent Texas Supreme Court decision, State Farm Lloyds v. Johnson, 290 S.W. 3d 886 (Tex. 2009), which held that an insurer may dispute the extent of coverage and deny certain claims without waiving the right to appraisal. The Court followed the Texas Supreme Court’s ruling in State Farm Lloyds, and ruled in favor of Safeco on this issue.
The Boones also argued that Safeco waived appraisal by anticipatorily breaching the contract by failing to comply with another policy provision, however, the Court also found that argument unpersuasive. The Court noted that at least one Texas court had explicitly rejected breach of contract as grounds for finding that an insurance company had waived its right to seek appraisal. The Court quoted the recent decision in Sanchez v. Prop. & Cas., Ins. Co. of Hartford, No. H-09-1736, 2010 WL 413687 (S.D. Tex. January 27, 2010):
If insureds could escape appraisal by merely alleging an anticipatory breach (or repudiation) whenever there is a dispute over coverage or claims handling, appraisal clauses would be virtually a nullity. Such a result is in direct contravention of the strong public policy in favor of enforcing such clauses.
The Court noted that for the Boones’ argument to be successful, they would have to show that the insurance company’s failures with respect to complying with other policy provisions constituted an “intentional relinquishment of the right to seek an appraisal by evidencing an intent to dispense with the policy’s requirements that enable the insurer to arrive at the amount of the loss.” The Court concluded that the alleged breaches by Safeco did not show waiver and, therefore, did not preclude its invocation of appraisal.
As you can tell from Boone v. Safeco Ins. Co. of Indiana, Texas maintains a strong public policy in favor of appraisal. In Boone, the Plaintiff’s lawyers presented these two interesting arguments in favor of waiver, but the Court shot both of them down. Policyholder lawyers will continue to pursue innovative arguments to persuade Texas courts to find waiver of appraisal by the insurer.