In the latest salvo in the Texas appraisal wars, a federal judge in Sherman held that an insurer who pays an appraisal award of a weather claim and all interest which may be due under Texas Insurance Code Chapter 542A (a/k/a the Texas Prompt Payment of Claims Act) defeats any remaining claim for 542A interest and attorney fees as a matter of law. 

Morakabian v. Allstate Vehicle And Property Ins. Co., No. 4:21-CV-100-SDJ, 2023 WL 2712481 (E.D. Tex. Mar. 30, 2023) (slip op.) involved a property claim for storm damage. After the parties disagreed on the value of the claim, the policyholder filed suit, and also demanded appraisal.  When appraisal was complete, the insurer promptly paid the resulting award and an added amount of $4,699 which was intended to cover all Chapter 542A interest that could potentially be due.  The payment did not include any amount of attorney fees. 

The insurer moved for summary judgment on all claims, and the policyholder agreed to nonsuit all claims except the Chapter 542A claim.  The policyholder did not argue that the $4,699 was insufficient to cover the statutory interest due, but instead argued more generally that the insurer could not nullify his right to litigate the 542A claim and recover attorney fees by pre-emptively paying the interest due.

The court carefully parsed the wording of Chapter 542A, examined several other recent opinions on the matter, and openly disagreed with the 2020 opinion out of Houston, Martinez v. Allstate Vehicle & Property Insurance Co., No. 4:19-CV-2975, 2020 WL 6887753 (S.D. Tex. Nov. 20, 2020).  The court reasoned that because the claim had been entirely satisfied by payment of the appraisal award, the amount of the remaining claim was $0 and therefore could not support an award of attorney fees.  The court relied on Ortiz v. State Farm Lloyds, 589 S.W.3d 127, 134 (Tex. 2019) for this conclusion.

Editor’s Note:  Texas Insurance Code Chapter 542A is an extension of Chapter 542 that specifically applies to weather claims.  Because Chapter 542 and 542A provide for awards of attorney fees as well as statutory interest on claims not paid in compliance with their terms, they have become ground zero for an ongoing legal battle over the potentially large attorney fee claims being asserted by policyholder attorneys in conjunction with appraisals.  An increasing number of court opinions have weighed in on this issue, and a split is developing both between the interpretation of 542 and 542A, which contain slightly different provisions, and between courts.  We will continue to watch this developing issue.

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