The answer to the above question came, in part, on June 28, 2019, with the issuance of twin Texas Supreme Court opinions: Barbara Technologies Corporation v. State Farm Lloyds,1 and Ortiz v. State Farm Lloyds.2 The specific issue in these two decisions was what effect did an insurer’s full and timely payment of an appraisal award have on the insured’s various causes of actions and damages?

The answer to that issue was found to depend on the particular cause of action analyzed. In Barbara Technologies, the Texas high court held that following an insurer’s payment of an appraisal award, an insured can still pursue a violation for delay in payment under Chapter 542 of the Texas Prompt Payment of Claims Act (“TPPCA”).3 In Ortiz, the court held that an insurance company’s payment of an appraisal award bars the insured’s breach of contract claim and the insured’s common law and statutory bad faith claims to the extent that the only actual damages sought are lost policy benefits.4

Recently, in light of Barbara Technologies, a Federal Southern District trial court granted a reconsideration in Shin v. Allstate Texas Lloyds.5 There, the trial court had granted summary judgment on plaintiff’s Prompt Payment Act claim on the ground that under Texas law, “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.”6 That ruling in Shin preceded Barbara Technologies by just a couple of days which again, as noted above, held that an insurer’s payment of the appraisal award did not foreclose TPPCA damages.7 In granting the reconsideration, the court requested supplemental briefing on two issues: whether the “reasonableness” exception in Mainali Corp. v. Covington Specialty Insurance Company,8 survived Barbara Technologies; and, in particular to the Shin case, whether the initial payment before appraisal — pre-appraisal payment — was “reasonable.”

In Mainali, the Fifth Circuit Court of Appeals held that there is no statutory violation of the Prompt Payment Act if the insurer’s pre-appraisal payment was “reasonable.” The pre-appraisal amount in Mainali was found to be undeniable reasonable because it exceeded the appraisal award amount found by the appraisal panel. Finding that Barbara Technologies actually cited Mainali with approval, and therefore, Mainali had not been overruled, the court in reconsideration in Shin held; reading the two cases in conjunction with each other, they stand for the proposition of law that to avoid a Prompt Payment Act violation, an insurer must have made a “reasonable” pre-appraisal payment within the statutorily-provided period.9

Applying the above, the court in Shin looked at the appraisal award amount of $25,944.94 which was 5.6 times greater than the initial pre-appraisal payment of $4,616.63, but nonetheless, found that the pre-appraisal payment was “reasonable” for two reasons.10 First, Allstate had complied with the Prompt Payment Act requirements of responding to the claim and requesting additional information, evaluating and investigating the claim. Second, the difference between Allstate’s pre-appraisal and appraisal payments was no larger than the difference in other cases in which courts had made a similar “reasonableness” finding.11 Based on this analysis, the court in Shin affirmed its prior ruling of granting summary judgment for Allstate on Plaintiff’s Prompt Payment Act claim.

After Shin, the answer to the title question of “After Payment of an Appraisal Award: Is there More?” is a “maybe” under the Prompt Payment Act depending on how each individual court determines or finds “reasonableness” of the pre-appraisal payment.

A new question, however, that may follow this holding is: Will insurers outright deny claims for a zero-pre-appraisal payment which under Shin, no doubt, would be found to be “unreasonable” when compared to any amount of an appraisal award and thereby subject insurers to possible violations under the Prompt Payment Act or will insurers low-ball pre-appraisal payments, move for appraisal, and roll-the-dice on “reasonableness”? Time will tell.
1 Barbara Technologies Corp. v. State Farm Lloyds, No. 17-0640, 2019 WL 2710089 (Tex. June 28, 2019).
2 Ortiz v. State Farm Lloyds, No. 17-1048, 2019 WL 2710032 (Tex. June 28, 2019).
3 Barbara Technologies, 2019 WL 2710089, * 12.
4 Ortiz, 2019 WL 2710032, *8.
5 Shin v. Allstate Texas Lloyds, No. 4:18-cv-01784, 2019 WL 4170259 (S.D. Tex. Sept. 3, 2019).
6 Nat’l Sec. Fire & Cas Co. v. Hurst, 523 S.W.3d 840, 847 (Tex. App.—Houston [14th Dist.] 2017) (emphasis in original).
7 Barbara Technologies, 2019 WL 2710089, *12.
8 Mainali Corp. v. Covington Specialty Ins. Co., 872 F.3d 255, 259 (5th Cir. 2017).
9 Mainali, 872 F.3d at 259.
10 Id.
11 Id.