It happens frequently: The insurance company admits the policy covered part of the loss but refuses payment at the time because the amount of the loss falls below the deductible. The insurer then admits the insured also suffered other damages to the property, but denies coverage for this damage for a variety of exclusions or limitations. The insured then files suit. But what happens when the insurer, after it has answered the suit and made a jury demand, invokes the appraisal provision?
This issue was recently addressed by the Texas Court of Appeals.1 There, the insureds brought suit against their homeowner insurer to recover payment for damages sustained as a result of a wind loss. After inspecting the property, State Farm concluded that the damages did not exceed the insureds’ deductible and that the homes had sustained additional uncovered damages. Only after answering the suit, did State Farm demand appraisal and seek to compel the same.
On appeal, State Farm sought a writ of mandamus commanding the trial judge to vacate her order denying the insurer’s motion to compel appraisal. Agreeing with State Farm, the appellate court rejected the insured’s arguments that State Farm had waived the appraisal provision by partially denying coverage of the claim or by demanding a jury trial.
The court found that State Farm’s partial denial letter, where it admitted the policy covered part of the loss but that the amount of the loss fell below the deductible, was not the relinquishment of a known right. While noting that denial of an insured’s claim can constitute an “intentional relinquishment” of the insurer’s rights under the policy’s appraisal provision, the court stated that it must also look at the policy language in its entirety and the surrounding circumstances to determine if such a relinquishment occurred. Ultimately, since the policy contained a provision which required a waiver of any provision to be writing to be valid, the court concluded that a waiver of the appraisal provision must be in writing and since no such writing existed, State Farm had not waived its right to appraisal.
1 In Re State Farm Lloyds, No. 14-16-00696, 2017 WL 123275 (Tex. App. Jan. 10, 2017).