Chip Merlin | Property Insurance Coverage Law Blog
Texas has a lot of insurance claims decided by appraisal. Maybe the appraiser for one insured should have gone to Steve Patrick’s appraisal class because the umpire and insurer’s appraiser came to a zero award, which was upheld on appeal.
The court quoted from,1 stated the following as Texas appraisal law:
(1) appraisals necessarily include a causation element because setting the amount of loss requires appraisers to decide between damages for which coverage is claimed from damages caused by everything else, and (2) appraisers may separate loss due to a covered event from a property’s pre-existing condition….
Federal courts have likewise interpreted Johnson as holding that appraisers act within their authority when they distinguish damage caused by pre-existing conditions from damage caused by the storm. See TMM Investments, Ltd. v. Ohio Cas. Ins. Co., 730 F.3d 466, 474–75 (5th Cir. 2013) (reversing an order setting aside the appraisal award because, under Johnson, it was entirely appropriate for the appraisers to consider whether damage was caused by pre-existing conditions, as they did); MLCSV10 v. Stateside Enterprises, Inc., 866 F. Supp. 2d 691, 705 (S.D. Tex. 2012) (The appraiser’s causation evaluation of the damage to the roof ‘involved no more than ‘separating loss due to a covered event from a property’s pre-existing condition.’ Under Texas law, such a causation determination relates to damages and is properly addressed by the appraisers.’)
Regarding the facts underlying the causation, the court noted that the Umpire and insurer’s appraiser found the following:
AllStar [LeBlanc] met with the Appraisers and inspected the roof and exterior of risk. AllStar found NSR [no storm-related] damages to the risk due to hail or wind that would warrant replacement. Note that the area damaged by water intrusion is due to the flashing that has been improperly installed. The flashing is loose and not caulked properly, allowing water intrusion when it rains. We also documented the rear slope on garage, showing damages due to tree rub. AllStar documented the interior of the risk and found damage due to water intrusion around chimney crown cap (mortar cracked due to age) and improper flashing. We also noted settlement issues within the home.
The lesson from this case is that with Texas hailstorm cases, the appraisal panel can consider what damages are from the hailstorm and what have nothing to do with the windstorm. I would strongly suggest that policyholders help their appraisers by getting experts to help clarify and explain what is hailstorm related damage so the entire panel can be educated on the causation issue.