The majority of insurance policyholders do not realize that their property insurance policy may contain an appraisal provision. Insurance companies attempt to use appraisal provisions to impose unnecessary burdens on insureds and to eliminate the insureds potential to file a lawsuit against the insurance company and its adjusters for violations of the Texas Insurance Code, among other causes of action.

The other day I received a call by the Superintendent of a school district in Texas that sustained Hurricane Harvey damages. The insurance company responsible for handling their Hurricane Harvey claim said it intended to invoke the appraisal provision of the insurance policy. The Superintendent was confused. He thought that the insurance company had already sent a person to appraise the property damages, he wanted to know what he needed to do, and if I could help him.

As with every call like this for a potential new client, I told him I need to review various documents, including his insurance policy, his correspondence with the insurance carrier and its adjusters, among other necessary items. Upon review of the school district’s insurance policy, I noticed it contained an appraisal provision.

Appraisal is a process for resolving property insurance claim disputes about the cost of repairing or replacing the damaged property.

Appraisal provisions in property insurance policies have become more of a commonality in Texas over the past few years. Back when I handled cases related to Hurricanes Ike & Dolly that occurred in 2008, and even those related to the Hidalgo County Hail Storms in 2012, we rarely if ever saw appraisal provisions in insurance policies, and if the policy included such a provision they were rarely enforced.

Today, insurance carriers across the board are moving to add appraisal provisions into property insurance policies in Texas. A standard appraisal provision includes language along these lines:

If you and we fail to agree on the amount of loss, either can make a written demand for appraisal. Each party will then select a competent, disinterested appraiser…The two appraisers will choose an umpire…Each party will pay its own appraiser and bear the other expenses of the appraisal and umpire equally….

The insurance companies use these appraisal provisions as both a sword and a shield – basically this discourages insurance companies from conducting a reasonable investigation of claims at the outset at the risk that most policyholders do not understand the appraisal provision and will not invoke it, or alternatively, that policyholders will not have the resources or the desire to pay their own appraiser and the fee of the umpire.

Some insurance policies require appraisal before a policyholder can file a lawsuit against the insurance company and its adjusters. This means that if the insurance company wholly fails to investigate the claim, commits bad acts in claims handling including misrepresentations, underpaying the claim, etc., that the insured – who has already likely gone through the traumatic event and incurred damage to its property that may not be covered by the insurance policy – is forced to spend its own funds on appraisal when the claim should have just been handled right the first time.

To add insult to injury, insurance companies repeatedly argue in courts throughout Texas that once appraisal has occurred, the damaged policyholder property owner cannot bring claims against the insurance company and its adjuster for their bad acts that legally constitute violations of the law!1 Essentially, this means that once the insurance company pays the appraisal award (which may not be the policyholders actual claimed amount) that the insured is precluded from recovering penalties under the Texas Insurance Code.2

This is a hot topic under review by Texas Courts, the Texas Department of Insurance, and the Texas House of Representative’s Insurance Committee. Just last week the Texas House of Representative’s Insurance Committee held a hearing where various industry professionals testified and made presentations on the pitfalls of appraisal under insurance policies.3 The Texas Department of Insurance prepared a presentation for the hearing that stated among other items, that:

Appraisal is intended to take place before suit is filed. However, if a lawsuit is filed, and one party properly demands appraisal, the lawsuit may be abated. Whether it is abated depends if the policy provision requires it.

Appraisal only determines the amount of the loss; it does not affect other causes of action under Insurance Code Chapter 541 (Unfair Methods of Competition and Unfair or Deceptive Acts or Practices) of the Deceptive Trade Practice Act. For example, a policyholder may still bring suit for other issues including:



•Unfair deceptive acts or practices;

•Unfair competition; or


In a rare departure from the norm, the Texas Department of Insurance appears to be attempting to implement law favorable to injured, mistreated, and aggrieved policyholders. The lobbyists that push the insurance company agendas will have something to say about this, but I hope in the aftermath of Hurricane Harvey voting Texans will realize these companies are not there to protect you; they do not act like good neighbors; and they are not on your side. Their goal is to make money, and the less money they pay out on claims means the more money they make at the end of each year.

As always, it is imperative for Texas Policyholders to know their rights under their insurance policy. If you believe that the insurance company has failed to comply with the law or the insurance policy, there are steps a policyholder can take to hold the insurance company accountable.

For example, a policyholder can file a complaint with the Texas Department of Insurance at, and as always, policyholders can and should contact an experienced insurance attorney for guidance.
1 See also Anderson v. Am. Risk Ins. Co., Inc., 01-15-00257-CV, 2016 WL 3438243, at *5 (Tex.App.–Houston [1st Dist.] June 21, 2016, no pet.) (“The fact that State Farm did not pay the amount of the award earlier, alone, does not raise a fact issue on Anderson’s claim for breach of contract.”); Graber v. State Farm Lloyds, No. 3:13-CV-2671-B, 2015 WL 3755030, at *4 (N.D. Tex. June 15, 2015) (concluding insured “estopped from relying on the appraisal award to demonstrate that [insurer] breached the Policy when it initially issued payment to [insured] for an amount less than the appraisal”); Scalise, 2013 WL 6835248, at *5 (“[W]here the parties disagree on the amount of loss and submit to the contractual appraisal process to resolve that dispute, and the insurer pays all covered damages determined by the award, the insured may not then argue that the initial failure to pay those damages equates to a breach of contract.”).
2 In re Slavonic Mut. Fire Ins. Ass’n, 308 S.W.3d 556, 563-64 (Tex.App.–Houston [14th Dist.] 2010, orig. proceeding) (citing Texas cases) (noting Insurance Code does not expressly provide deadline for completion of appraisal process and that “Texas courts considering the issue have concluded that full and timely payment of an appraisal award under the policy precludes an award of penalties under the Insurance Code’s prompt payment provisions as a matter of law.”); see also Waterhill Cos. Ltd. v. Great Am. Assur. Co., No. Civ. A. H-05-4080, 2006 WL 696577, at *3 (S.D. Tex. Mar.16, 2006); Breshears v. State Farm Lloyds, 155 S.W.3d 340 (Tex.App. 2004); Anderson, 2016 WL 3438243, at *5; Bernstien v. Safeco Ins. Co. of Illinois, 05-13-01533-CV, 2015 WL 3958282, at *1 (Tex.App.–Dallas June 30, 2015, no pet.); Amine, 2007 WL 2264477, at *4-5.

  • shirley heflin

    Dear Ms. Marlowe:

    First, some (Insured) Appraisers work on a percentage basis. Second, often the Insured’s Attorney will help with the costs of this proceeding. Third, it’s great that Texas is (finally) coming around to allowing Insureds to sue for bad faith – no matter if the appraisal clause was invoked or not. In Florida, this has been a “given” for decades.

    It’s my opinion that insurance companies are behaving worse than usual because Insureds have become more aware of their rights under their respective insurance policies and they certainly should get what they pay for!

    Tampa, FL

  • Norman Jones

    I am an attorney practicing in the U.S. Virgin Islands (also licensed in TX & CO) and have settled 21 Irma claims for clients, most of whom were given the “run-around” by their insurers. In some of the 18 claims that have not yet settled, my clients are threatening to file suit. In all of these claims, there is disagreement over the scope of damages, and some involve issues of under-insurance. The independent adjusters argue that my clients may NOT sue the insurance company without first invoking the appraisal process. Normally, I would agree, but as best I can determine, the appraisal process resolves only disputes regarding the cost to repair/rebuild the scope of damages that are undisputed, and the insurers are NOT bound by any decision of the umpire (plus at least 1 other appraiser) regarding scope, and such issues as under-insurance. I would like to see comments of others regarding what is, and what is not, determinable in the appraisal process other than the cost to repair.
    Norm Jones

    • Emily Marlowe

      Mr. Jones – I would love to speak with you more about these matters, but generally, the policy language largely determines what is subject to appraisal, and case law can provide guidance as well. Appraisal clauses say different things, which largely guides the parameters. Some policies contain appraisal clauses that say appraisal is only appropriate “if you and we agree on the scope of the loss,” which basically means if the areas of damage and necessary repairs are fully agreed, and it is just a matter of valuation (i.e., $.50 for R/R of 50 sq. ft. tile flooring vs. $1.25 for R/R of 50 sq. ft. tile flooring) then either party can invoke appraisal. Other policies require appraisal as a precondition to suit. It just depends.

      Please feel free to reach out with any questions. Best of luck to you.

      Emily Marlowe

  • Edward Fako

    Mr. Jones,

    Firstly, change your focal point from defining the Appraisal Clause as to only determining; “The Cost To Repair”

    Depending on the State precedents, Scope, Causation an Amount Of Loss, all can be Appraisable issues.

    As the MLG Attorney Emily Marlowe stated, a diligent 1st step is to review all of the pertinent documents, including the actual Policy for the precise language used in that Policy’s Appraisal Provision. Additionally, with further research, you will discover that case law can also allow Scope to be included in Appraisal. See State Farm v. Johnson and also The Law And Procedure Of The Appraisal Process by Jonathan Wilkofsky 3rd edition and

    See pages 600 and 601 from the Scholarship.Law.Missouri Link for Causation citations.

    Amount of loss” becomes “extent of the damage” and “how much the roof was damaged by the wind.” According to Webster’s New World College Dictionary, 4th edition, 2005, “amount” is a measure of quantity, “the sum of two or more quantities; total.” “Extent” refers to the “size, length, breadth” of a thing, and “how much” incorporates the same concepts. Example: “How much do we owe you?” These concepts incorporate the very reasons for appraisal clauses in the first place: to make use of outside parties to assist the insurer and insured working together to arrive at a settlement regarding amount of loss using dollars as the unit of measurement. It bears repeating that in Lam, there was no issue of coverage or cause of loss; only the amount was in dispute.

    The court then added, “Appraisers must always consider causation, at least as an initial matter.”

    In; State Farm Lloyd’s v. Johnson, 290 S.W.3d 886 (Tex. 2009), the Texas Supreme Court determined that this is “surely a question for the appraisers.” Continuing, “If the parties must agree on precisely which shingles have been damaged before there can be an appraisal, appraisals would hardly be necessary. What’s more, either party could avoid appraisal by simply picking a few extras.” Therefore, “The cost of replacing shingles (or anything else) is a function of both price and number; appraisers must factor in both shingle prices and shingle numbers to decide the ‘amount of loss.'”

    The Appraisal Clause Is Not Limited to Determining Amount of Loss. Applying the analysis to the Johnson claim, the court noted that wear and tear was excluded in State Farm’s policy; however, “If State Farm is correct that appraisers can never allocate damages between covered and excluded perils, then appraisers can never assess hail damage unless the roof is brand new….”

    In Cigna, The Iowa court also could have found support in a 2000 US District Court of Delaware case upholding Cigna Insurance Company’s argument that extent of damage is a question concerning the amount of loss and, therefore, represents a proper subject for appraisers. See Cigna Ins. Co. v. Didimoi Prop. Holdings, N.V., 110 F. Supp. 2d 259 (D. Del. 2000).5

    Additionally, other courts in reviewing the language have noted that if the appraisal clause intends to place limits on the appraisers’ work, the actual wording “makes no mention of any exception for ‘causation’ issues.” In short, if limits are intended, the language should state what limitations are intended, but it doesn’t. See Philadelphia Indem. Ins. Co. v. W.E. Pebble Point, 2014 U.S. Dist. LEXIS 123713 (S.D. Ind. Sept. 3, 2014).

    A Colorado District Court, in agreeing with Didimoi, decided, “Although undefined in the policy, the term amount of loss must mean something different than merely how much it will cost to replace damaged property.” In rejecting the assertion by Auto Owners that amount of loss meant valuation of the property damage that both Auto Owners and the insured agreed was damaged by a hailstorm, the district court held that such an interpretation would render appraisal language “useless surplusage.” See Cochran v. Auto-Owners Ins. Co., District Court, City and County of Denver, Colo., 2nd No. 11CV8434 (Oct. 22, 2012).

    Citations from MLG Posts and IRMI article; Just What Does “Amount of Loss” Amount to in Appraisal Clauses? (Part 3).

    As far as I am able to determine, courts have remained oblivious to one of the possible side effects of the restrictive school of thought about appraisal provisions; namely, allowing insurers to define amount of loss disputes as coverage issues is a court-sanctioned license to engage in lowballing. Lowballing is the practice whereby an insurance adjuster intentionally arrives at an estimate below what he or she knows is a fair estimate of loss in order to gain advantage over a policyholder in negotiating the insurer’s liability. From a bad faith perspective, permissible lowballing is tantamount to placing the insurer’s economic interest above the insured’s. For some courts, though, that seems to be okay.

    1. For a discussion of the traditional, restrictive view of appraisal clauses, see Rogers v. State Farm Fire & Cas. Co., 984 So. 2d 382 (Ala. 2007).

    2McGowan v. Progressive Preferred Ins. Co., 281 Ga. 169, 637 S.E.2d 27 (2006), is an automobile case involving multiple issues. Georgia bans arbitration “in any contract of insurance” at O.C.G.A. 992 (c) (3).

    3See also Johnson v. Nationwide Mut. Ins. Co., 828 So. 2d 1021 (Fla. 2002). Florida has probably had more experience construing the appraisal clause than any other state. One might infer that the Johnson family has made a name for itself in insurance appraisal litigation.

    4In another Georgia case, State Farm won this argument in a federal district court ruling by Judge William Duffey, in Javits v. State Farm Fire & Cas. Co., 2014 U.S. Dist. LEXIS 119085 (N.D. Ga. Aug. 26, 2014). Javits came 5 months after Lam.

    5In Didimoi, the Federal District Court ordered appraisers to make determinations of the following: (1) the replacement cost of the fire-damaged building on date of loss; (2) the actual cash value of the building; (3) the cost to repair and/or replace the fire damage to the building; (4) the amount of the loss caused by the enforcement of any ordinance or law; (5) cleanup costs to remove asbestos; (6) the period of time required to repair the building to its pre-loss condition without regard to when construction begins; and (7) the length of time required to complete the work required by enforcement of any law or ordinance.

    6For a discussion of the distinctions between arbitration and appraisal, see especially Citizens Prop. Ins. Co. v. Mango Hill #6 Condo. Ass’n, Inc., 117 So. 3d 1226 (Fla. Dist. Ct. App. 3d Dist. 2013).

    I am always available for discussion about Appraisal and can be reached at:


    Edward Fako

  • Mark Earle

    Can an appraiser in Texas charge an hourly fee not to exceed a certain percentage ?