HOUSTON COURT OF APPEALS HOLDS APPRAISAL AWARD, BY ITSELF, DOES NOT PROVE BREACH OF CONTRACT IN HURRICANE IKE CASE

Newsbrief

In a commercial Hurricane Ike lawsuit, the Texas Fourteenth Court of Appeals held last Tuesday that because an appraisal award determined only the amount of damages and not coverage, it could not, standing alone, support judgment against an insurer on an insured’s breach of contract claim.  In Security National Insurance Co. v. Waloon Investment, Inc., No. 14-11-00130-CV, 2012 WL 4788114 (Tex. App.—Houston [14th Dist.] Oct. 9, 2012), the owner of a Houston hotel sued over its claim for storm damages, invoked appraisal, and once the appraisal was complete, moved the trial court to order the insurer to pay the appraisal award.  The only exhibit to the motion was the appraisal award itself.  The court granted the motion, and later converted the order into an appealable judgment.

The appellate court reversed.  First, the court observed that the court could not have rendered judgment at all “without a summary-judgment proceeding, trial, or agreed judgment.”  The court stated that the insured’s motion, and the court’s ruling, essentially converted an appraisal award into an arbitration award, and that such a move would be contrary to 120 years of Texas law distinguishing the two.  Arbitration, the court said, “may encompass the entire controversy between the parties,” but an appraisal only determines the amount of the loss.  An appraisal award does not on its own entitle an insured to judgment.  To turn an appraisal award into a judgment, the insured would be required to pursue a summary judgment motion, and not simply a motion to enforce the appraisal award.

The appellate court next considered whether, assuming that the insured was correct that its motions were effectively summary judgment motions, summary judgment was appropriate given the substance of the motions.  The court held that the motions were insufficient.  The appraisal award by itself did not determine the merits of the insured’s breach of contract claim.  Moreover, the insured did not even provide the trial court with a copy of the insurance policy to prove the contract existed in the first place.  Neither the grounds nor the evidence presented in the insured’s motions supported summary judgment.  The court of appeals therefore reversed and remanded to the trial court for further proceedings.

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