SOUTHERN DISTRICT OF TEXAS COURT HOLDS THAT APPRAISAL PROVISION OF THE STANDARD FLOOD INSURANCE POLICY IS LIMITED TO MATTERS WHERE COVERAGE IS NOT AT ISSUE

On October 13, 2011, Judge Nancy Atlas in the federal District Court for the Southern District of Texas (Houston  Division)  denied  Plaintiffs’  motion  to  compel  appraisal  under  the  appraisal  clause  of  the Standard Flood Insurance Policy (“SFIP”) holding that the appraisal provision is limited to matters where coverage is not contested.  In Sam, et al v. National Lloyds Insurance Company, cause No. 4:10-cv-02521, Plaintiffs submitted a claim for flood damages following Hurricane Ike to their apartment building under the SFIP - the insurance policy issued to Plaintiffs by National Lloyds pursuant to the National Flood Insurance Program. National issued payment to plaintiffs for repairs to the damaged property. Plaintiffs subsequently submitted a request for supplemental payment beyond the amount offered by National, including costs for hiring a commercial superintendent for three months.   Plaintiffs then moved for appraisal under the policy as to the supplemental claim.  According to the SFIP policy terms and case law interpreting the scope of the appraisal clause, the SFIP appraisal provision may only be invoked to resolve disagreements between the parties regarding the actual cash value or replacement cost of the damaged property to which coverage is not disputed.  The Court held that because the parties disputed whether the expense was covered (not whether the cost for the superintendent was reasonable), the dispute did not implicate the appraisal clause. Accordingly, Plaintiffs’ motion was denied.