INSURER SEEKS AND WINS MANDAMUS TO PROTECT $0 APPRAISAL AWARD

An insurer recently filed a petition for writ of mandamus after a favorable appraisal award was set aside with no explanation, and the appellate court stepped in to reinstate the award.  In re Auto Club Indem. Co., 14-19-00490-CV, 2019 WL 3432144 (Tex. App.—Houston [14th Dist.] July 30, 2019, no pet. h.) (orig. proc.) involved a residential wind/hail dispute.  The insurer participated in an appraisal invoked by the insured.  The appraisal panel issued an award of $0, documented by 84 photos showing no storm damage was present. The homeowners moved to set aside the award, arguing the appraiser and umpire had improperly gone beyond determining the amount of loss and attempted make coverage decisions.  Without explanation, the trial court set aside the appraisal award, over the insurer’s objection.

On mandamus, the court of appeals relied directly on State Farm Lloyds v. Johnson, 290 S.W.3d 886 (Tex. 2009), in which the Supreme Court of Texas held that while the scope of appraisal is damages, not liability, an appraisal nevertheless typically involves determining causation at some level.  The scope of the appraisal is the damage caused by a specific occurrence, not every repair a home might need, and therefore the appraisal panel must have some latitude to determine what the scope of the loss is. If appraisers and umpires have no discretion to separate storm damage from the pre-existing condition of the roof, then no roof claim can ever be appraised unless the roof is brand new. The court of appeals noted that the mandamus record showed no evidence the appraisal award was the result of fraud made without authority, and therefore, the trial court’s order was an abuse of discretion.

Editor’s note: The flip side of this outcome, of course, is the appraisal panel that awards the cost to replace the entire roof. If the appraisal panel has discretion to determine there is no storm damage, does it also have discretion to determine that everything wrong with a given 15-year-old roof is storm damage? Arguably, at some level the answer must be no, because most policies expressly reserve the right to deny all or part of a claim after appraisal.