Last night, I was at Steve Badger’s spacious home in Park City, Utah. I noticed a map of the area on his wall that also marked his home—“BadgerLand.” No joke, he marked his beautiful home on a map as “BadgerLand.”
Steve and I speak at the Insurance Appraisal and Umpire Association (IAUA) conference again today, where he will inevitably lose in his debate and logic. It is almost like a Roadrunner vs. Coyote type of deal. But like a broken clock that is correct twice a day, I have found that by carefully listening to Steve Badger, I can learn a lot of lessons worthy for others to learn from.
So, during dinner, I bluntly asked Steve Badger what was new in BadgerLand pertaining to appraisal. He spoke about a couple of cases and one developing case, which I suggest readers of this blog spend the time to read and contemplate.1
The insurance company’s 2023 Motion to Stay Appraisal stated in part:
A stay of the appraisal in this matter is warranted to ensure Plaintiff San Antonio Independent School District’s (‘SAISD’) compliance with its Policy to give Lexington notice of, and an opportunity to investigate, SAISD’s newly raised losses – which include 80 new properties and hundreds of millions of dollars in new damage, which is not and may never be part of SAISD’s claim for covered insurance losses from a 2016 hailstorm. In particular, Lexington respectfully requests that the Court enter a stay pending SAISD’s submission of the requisite notice and signed, sworn proof of loss and Lexington’s completion of the adjustment process to determine whether, as required by Texas law, there is an actual ‘disagreement’ as to the amount of any newly raised loss.
This litigation concerns a claim by SAISD for coverage for hail damage to 21 properties from an April 12, 2016 hailstorm (‘2016 claim’), under a commercial property insurance policy issued by Lexington (‘the Policy’). Lexington paid the undisputed amount of the claim on September 29, 2016, based on a claim measure of approximately $4.3 million on a replacement cost basis. SAISD disputed the amount of the loss and brought litigation contending it was owed more than Lexington paid. In the litigation, SAISD, its experts, and its attorneys all took the position that the 2016 hailstorm damaged 21 properties, resulting in a claim measure of approximately $14.3 million.
Now, let’s stop right here because this is where it gets funny—at least to me, but certainly not the insurance company. At dinner, Steve Badger asked me to guess what the appraiser for the policyholder has now valued the loss to be. I doubled the amount demanded in litigation and gave a little more, figuring they found some new damage. My guess was $37 million. What is yours? Think of an answer before you read the next portion of the motion.
Here is what the motion recited:
Guerra-Prats has submitted a damage estimate seeking an appraisal award of $357 million – a more than 23-fold increase over SAISD’s representations of the amount of its loss in this litigation – for over 100 locations – a five-fold increase in the number of locations identified by SAISD. SAISD still has not claimed the $357 million is owed under its Policy or that this amount has any relationship to the hail loss in dispute. Rather, Guerra-Prats has unilaterally expanded the appraisal to all loss of any kind occurring on any date at the properties, regardless of whether it had anything to do with the 2016 hailstorm and regardless of whether it had been previously noticed and became part of a dispute between the parties.
Guerra-Prats’ unilateral expansion of the appraisal process beyond the loss in dispute and the previously-identified loss locations is directly contrary to the Policy terms and Texas law. Under the Policy, the appraisal process can only be triggered if there is a disagreement between the parties about the amount of loss.4 Here, SAISD has not, to this day, claimed it is owed for losses to the 80 new properties or the new elements of damage reflected in Guerra-Prats’ $357 million appraisal estimate; therefore, there is no ‘disagreement’ – and can be no disagreement – between the parties about such losses. SAISD’s appraiser’s catalogue of all damage he sees at the property – regardless of whether it has anything to do with the loss in dispute – will not help the parties resolve their disagreement. After the appraisal concludes, the parties will simply be back before this Court, left to litigate which part of the appraisal award relates to the loss in dispute and which relates to other losses which may have occurred at other times, outside the policy period. The proper (and efficient) way to address this belated attempt to expand the appraisal process beyond amounts in dispute is to enter the stay requested by Lexington and require the SAISD to comply with the Policy terms to the extent it wants to add new claims.
I was not in the ballpark with my guess. Were you?
Steve Badger and I always debate whether the amounts previously adjusted have to be the high and low of what an appraisal award can be. I have always believed that the appraisal panel can come up with amounts far higher or lower, although such instances should be rare unless something was overlooked or not measured.
It is hard to believe that such a huge mistake in an estimate could occur after a case is so close to trial and years after litigation was filed with a competent law firm representing the policyholder. It almost suggests that if the appraiser is correct, the underlying law firm committed malpractice because they were far mistaken in their claim for damages compared to the newly appointed appraiser’s finding.
This litigated-turned-appraisal case is worthy of study. It is certainly on the BadgerLand map and will be discussed in the future at conferences involving appraisal.
What did the trial court do with the motion to stay? The Order granted the stay and is giving the insurance company 180 days to adjust the new damages before coming up with a coverage determination. This means that a 2016 hail damage loss is dragging out at least until 2024.
If you are not showing up for the debates and lessons where Badger and I poke fun and provide real-life learning scenarios regarding appraisal issues, you are missing out. Indeed, I am providing, for those that attend events where I am personally speaking, three free learning tools for their adjustment and appraisal toolkit. You only have to show up, learn to be the type of appraiser or umpire one would want to hire, and make more money by having better credentials.
Bob Norton’s classes have been tweaked and improvised to be the best of the breed. The IAUA provides an excellent instruction in the appraisal process. I encourage those involved in appraisal to obtain the certifications from the IAUA. I get paid nothing to say that but feel that Bob’s lessons are excellent.
The IAUA’s next event that I speak at will be in Houston on August 16 and 17. Here is the link.
Thought For The Day
The Smurfs – and they’re this way in Peyo’s comics as well – do have a rubbery indestructibility about them. They can get bruised & battered. But they then just sort of bounce back very quickly, like those classic cartoon characters Wiley Coyote and Tom & Jerry.
1 San Antonio Independent School District v. Lexington Ins. Co., No. 2017CI15803 (Tex. – Bexar Co. Dist. Ct.).