October 24, 2016

Last Monday, a federal district court in the Sherman Division of the Eastern District of Texas granted summary judgment in favor of an insurer after finding that timely payment of an appraisal award precludes breach of contract and extra-contractual claims against the insurer.  In McEntyre v. State Farm Lloyds, Inc., 2016 WL 6071598 (E.D. Tex. October 17, 2016), the insurer initially found no wind or hail damage and advised the insured they would be unable to issue payment on the claim.  After receiving a letter of representation, the insurer re-inspected the property and issued payment in the amount of $5,065.80 based on the re-inspection.  The insured filed suit and invoked appraisal.  And based on the appraisal award, State Farm tendered payment in the amount of $326.26 but inadvertently failed to enclose the check.  The check was received two weeks later by overnight mail.  State Farm then moved for summary judgment on all contractual and extra-contractual claims.

Judge Amos Mazzant examined Texas law analyzing the impact of payment of appraisal awards noting that the effect is to estop a party from contesting damages “leaving only the question of liability for the court.”  The court disagreed with the insured’s ambiguity arguments and also found that the inadvertent two-week delay in delivering payment was a simple clerical error that did not create a fact issue on timely payment. Addressing the allegation that the appraisal process did not bar claims that the insurer unreasonably investigated and denied the claim initially, the court found having submitted their claim to appraisal, and with the insurer’s payment of the award, the insured may no longer argue breach of contract.  And, because the breach of contract claims fail, the extra-contractual claims under the common law, Texas Insurance Code and DTPA also fail.  Summary judgment was granted in favor of State Farm on all claims.

[Editor’s Note: We wish to congratulate Rhonda Thompson of the Thompson Coe firm in Dallas as well as the State Farm team for this great win on an increasingly important topic given the proliferation of appraisal awards over the last few years in the voluminous wind-hail litigation which continues in jurisdictions across Texas.]