Appraisals serve as a valuable mechanism for resolving disagreements over the amount of loss. However, as recently illustrated in the Texas case of Rocha v. State Farm Lloyds, 1 appraisals do not resolve all questions. Specifically, they do not determine whether a particular category of damage is covered under the policy. This distinction between the amount of loss and coverage can significantly impact the outcome even after an appraisal award is issued.
State Farm’s argument in this case centered on the Additional Living Expenses (ALE) portion of the appraisal award, which amounted to $1,650. While State Farm paid the remainder of the appraisal award and even issued a payment for potential statutory interest under the Texas Prompt Payment of Claims Act (TPPCA), it refused to pay the ALE amount. In its Motion for Summary Judgment, State Farm argued that the ALE claim was procedurally deficient because Rocha failed to submit itemized documentation as required by the policy before invoking the appraisal process. State Farm contended that this was not a delay in payment but rather a legitimate denial of coverage based on noncompliance with a policy condition. Citing Texas law, the insurer emphasized that appraisal determines the amount of loss, not the existence of coverage, and that courts retain the authority to decide whether a given loss is compensable under the policy.
Rocha opposed the motion for summary judgment, arguing that State Farm had failed to pay the full appraisal award. He maintained that full and timely payment is a prerequisite to summary judgment under controlling Texas precedent. Rocha further asserted that State Farm had waived any procedural objection to the ALE claim by proceeding with the appraisal without timely contesting the scope. In his view, State Farm’s refusal to pay the ALE portion amounted to a self-help tactic not allowed under Texas law. He also argued that State Farm owed interest on the unpaid ALE under the TPPCA and that his claims for breach of contract and attorney’s fees remained viable because the insurer had not fulfilled its obligations under the appraisal award.
The court, however, sided with State Farm and granted summary judgment. In its opinion, the court clearly distinguished between disputes over the amount of loss, which can be determined by appraisal, and coverage disputes, which are reserved for court determination. The court found that State Farm had not accepted the ALE claim and had consistently objected to it on policy grounds, requiring that documents supporting the ALE had to be produced before payment of the ALE was due. As such, the failure to pay the ALE was not a delay in payment but rather a coverage dispute. Under Texas law, courts are permitted to resolve such issues even after an appraisal.
The court held that the policy language and applicable precedent supported State Farm’s position, and that it was entitled to assert a coverage defense regarding the ALE portion of the claim. Because the insurer raised a legitimate, policy-based objection to the ALE and did not waive that objection during the appraisal process, the court concluded that the TPPCA was not triggered and that no genuine issue of material fact remained. In short, State Farm had paid all that was due, and nothing was left to determine from further judicial proceedings.
This case underscores the important but limited role of appraisal in insurance claims. While appraisal can efficiently resolve disagreements about the value of a loss, it cannot answer all questions. Those questions that go to the heart of whether the policy provides coverage in the first place are reserved for the courts. Courts remain the ultimate arbiters of coverage disputes, and policyholders and insurers alike must ensure that all policy conditions are met and all legal channels are properly followed.
Texas claims practitioners may also note that State Farm paid interest on amounts owed after the appraisal award. Indeed, State Farm’s motion presented how it made the calculation that showed it may have paid more interest than required, so there was no question that all monies that could be recovered were owed. Had Rocha produced receipts and proof of expenses before the motion for summary judgment, Rocha may have been able to collect on those items as well but simply failed to produce those as required by the policy.
For a related topic reserved for my nerdy insurance coverage friends about whether coverage is determined before appraisal or after, I suggest reading “What Comes First—The Appraisal or The Coverage Determination?”
Thought For The Day
“Documentation is the cast-iron skillet of truth.”
—Tom Peters
1 Rocha v. State Farm Lloyds, No. 4:23-cv.-01900 (S.D. Tex. May 21, 2025).
