WACO COURT OF APPEALS ORDERS APPRAISAL IN IKE CASE BUT REFUSES TO OVERTURN ORAL DISCOVERY RULING

October 17, 2011

Last Wednesday the Waco Court of Appeals, applying the Texas Supreme Court’s May 2011 opinion In re Universal Underwriters, issued an opinion directing a trial court to order appraisal in a Hurricane Ike case, but rejected the insurer’s arguments relating to the plaintiff’s broad discovery requests.  In re Certain Underwriters at Lloyds, No. 10-11-00263-CV, 2011 WL 4837869 (Tex. App.—Waco Oct. 12,2011), followed the trial court’s repeated denial of the insurer’s motion to compel appraisal, including one denial prior to the Supreme Court’s decision in Universal Underwriters and a second denial afterward.  In addition to challenging the appraisal rulings, the insurer contended that the trial court had improperly ordered compliance with discovery from the plaintiff that the insurer argued was grossly overbroad.  The court sided with the insurer on the first issue, and against the insurer on the second.

In analyzing the appraisal issue, the court of appeals first had to determine when the parties reached a point of impasse.  The Waco court cited the Universal Underwriters definition of impasse “as the point when both parties are ‘aware that further negotiations would be futile, or would be of no effect if performed.’”   The insureds argued that impasse occurred in December 2008 after the insurer sent a letter stating that the claim was closed; consequently, the insureds contended, the insurer had waived its right to appraisal by its allegedly unreasonable delay in requesting it.  The court first held that impasse had not clearly occurred until the insureds filed suit without providing the notice required by the Texas Insurance Code and, because the insurer invoked its right to appraisal two weeks later, there was no waiver by delay.  Next, the court held waiver could not be found at all because the policy by its own terms did not permit a waiver of the appraisal clause.

Regarding the discovery dispute, the court concluded the issue was not subject to appellate review at this time.  The insurer had provided the entire claim file to the insureds and argued the additional discovery sought by the insureds was grossly overbroad.  The court held the trial court had neither overruled the insurer’s objections to discovery nor ordered production of the disputed material.  Instead, the trial court had made a vague oral statement that the court of appeals declined to characterize as an appealable order; at most, the trial judge appeared to have ordered the court to provide specific objections to each discovery request rather than relying on “generic, global objections.”  The court of appeals had no clear and specific ruling to review, and so it rejected the insured’s challenge.

Finally, in a footnote, the court of appeals considered whether the case should be abated during the appraisal process.  The court noted that the insurer had not requested abatement, but stated that under Universal Underwriters, the insurer was not entitled to abatement even if one had been requested.