FEDERAL DISTRICT COURT REFUSES TO SET ASIDE APPRAISAL AWARD WHERE UMPIRE MADE DETERMINATIONS CONTAINING ELEMENTS OF CAUSATION AND FAILED TO ITEMIZE EACH ELEMENT OF DAMAGE

February 6, 2012

Magistrate Judge Stephen Smith of the Federal District Court for the Southern District of Texas recently denied an insurer’s motion to set aside an appraisal award, concluding that the appraiser performed the type of causation analysis as contemplated in State Farm Lloyds v. Johnson, 290 S.W.3d 886 (Tex. 2009).  Essex Insurance Co. v. Helton, Civil Action 4:10-cv-2229 (S.D.Tex., Jan. 24, 2012).  Essex Insurance Co. filed a declaratory judgment action to set aside an appraisal award of $417,000 and motion for summary judgment declaring the appraisal award void and abating the insureds’ claims for payment. The insureds, Jeffrey Helton and Deborah Helton, filed a counterclaim for breach of contract and bad faith and summary judgment affirming the appraisal award.

Essex argued that the umpire, March Stelly, should not have made determinations regarding causation and should have itemized each element of damages instead of making a lump sum award.  Relying on Johnson, the Court found that Stelly’s review of an engineering report to confirm that the damage claimed by Plaintiff’s appraiser was actually caused by the storm was permissible.  The Court also found that Essex had presented no authority requiring a detailed itemization of the elements of damage and that it was not called for by the appraisal provision in the policy.  Accordingly, the Court denied Essex’s motion for summary judgment and dismissed its claim for declaratory judgment. The Court further granted Heltons’ motion for summary judgment affirming the appraisal award.  Heltons’ counterclaims are set for trial on February 21, 2012.