In a significant decision entered last Thursday, an appellate court in Houston reversed and remanded a trial court’s judgment and jury findings based on an appraisal award under an insurance policy, finding that the appraisal award and evidence offered did not conclusively prove “whether and how much alleged loss was caused by a covered peril.” In Texas Windstorm Insurance Association v. Dickinson Independent School District, 2018 WL 2436924 (Tex.App. – Houston [14th Dist.] May 31, 2018), TWIA invoked the appraisal provision to address the amount of property damage claimed by the District following Hurricane Ike and a $10.8 million damages award was issued. The District then sought partial summary judgments on causation and damages. TWIA opposed the motions asserting that the School District had not conclusively proved that the damages, or any portion of them, were caused by a covered peril under the named peril policy. The trial court ruled in the District’s favor and the only issue submitted to the jury was whether TWIA breached the policy by not paying the appraisal award. The jury answered “yes” and the trial court entered a final judgment against TWIA for $9,602,542.82. This appeal followed.

TWIA challenged the judgment based on four issues, the first of which was determined to be dispositive. In its first issue, TWIA argued that the District failed to conclusively prove damages caused by a covered peril under the policy. Or, that TWIA raised genuine issues of material fact of whether the damages were caused by a named peril under the policy. In its analysis, the court examined arguments asserted by both sides based on the Texas Supreme Court’s decision in State Farm Lloyds v. Johnson, 290 S.W.3d 886 (Tex. 2009).  The court also examined the doctrine of concurrent causes, noting the insured’s duty to segregate damages arising from covered and non-covered causes of loss. Here, the policy provided in part, coverage for “direct physical loss to the covered property caused by windstorm” unless excluded. In a detailed analysis of the impact of the appraisal award, the court determined that “[s]tanding alone, the Appraisal Award simply does not provide sufficient evidence from which a court may determine as a matter of law which Appraisal Award damages, if any, were caused by a covered peril.” Accordingly, the judgment was reversed and the case remanded for further proceedings.

Editor’s Note: This case is significant in its effort to clarify the Texas Supreme Court’s State Farm Lloyds v. Johnson decision and, an insurer’s ability to challenge causation following a damage determination through appraisal. We will continue to monitor this significant decision.

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