{"id":896198,"date":"2019-07-25T17:23:45","date_gmt":"2019-07-25T23:23:45","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=896198"},"modified":"2019-07-18T17:31:26","modified_gmt":"2019-07-18T23:31:26","slug":"bad-faith-in-insurance-appraisal-process","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/bad-faith-in-insurance-appraisal-process\/","title":{"rendered":"Texas Supreme Court Clarifies Bad Faith in Appraisal Process"},"content":{"rendered":"\n

Jim Sams | Claims Journal<\/a> | July 2, 2019<\/p>\n\n\n\n

An insurer\u2019s payment of the appraisal value after disputing a claim does not establish that it was liable, nor does that payment prevent a policyholder from pursuing penalties under the Prompt Payment of Claims Act, a split Texas Supreme Court ruled in a pair of decisions released Friday.<\/p>\n\n\n\n

The rulings reverse previous Court of Appeals decisions that held plaintiffs cannot sustain prompt payment claims if the insurer paid the appraisal award. The court however, did not state in what circumstances insurers can be held liable after paying an appraised value.<\/p>\n\n\n\n

Of three attorneys who were asked to comment on the decision \u2014 one who represents insurers and two who represent policyholders \u2014 none were completely satisfied with the outcome.<\/p>\n\n\n\n

\u201cI feel that this was a very measured, very right down-the-middle decision,\u201d said attorney Jeffrey L. Raizner of Houston, who represented Barbara Technologies Corp. in its suit\u00a0against State Farm Lloyds.<\/p>\n\n\n\n

Both claims decided on Friday involved hail damage to properties insured by State Farm Lloyds.<\/p>\n\n\n\n

Barbara Tech\u2019s commercial property in San Antonio was damaged by wind and hail in 2013. The company filed a claim with State Farm Lloyds, but the carrier denied it. State Farm said the damage was only $3,153.57, less than Barbara Tech\u2019s $5,000 deductible.<\/p>\n\n\n\n

Barbara Tech filed suit. State Farm demanded an appraisal. The appraisers agreed that the property damage was valued at $195,345.63. State Farm paid that amount \u2014 less depreciation and the deductible \u2014 a week later.<\/p>\n\n\n\n

But Barbara Tech didn\u2019t drop its lawsuit. The company amended the complaint claiming that the carrier had violated the Prompt Payment and Claims by violating to comply with statutory deadlines for acknowledging receipt of the claim, commencing an investigation and paying the claim.<\/p>\n\n\n\n

Both State Farm and Barbara Tech filed motions for summary judgment. State Farm asserted that it did not violate the prompt payment statute as a matter of law because it paid the appraisal award.<\/p>\n\n\n\n

Barbara Technologies asserted that State Farm was liable for prompt payment damages because payment of the appraisal award was an acknowledgment that State Farm was liable for the claim, but it had not complied with the statutory payment deadlines.<\/p>\n\n\n\n

The trial court dismissed Beverly Tech\u2019s claim and the Fourth District Court of Appeals affirmed the decision, relying on previous rulings that insurers that paid appraisal values could not be held to be in violations of the prompt payment statute.<\/p>\n\n\n\n

The Supreme Court found that that decision was error. The Prompt Payment of Claims Act does not excuse an insurer from liability for damages if it delays payments beyond the statutory deadline regardless of whether it used the appraisal process, according to the majority opinion written by Justice Paul W. Green.<\/p>\n\n\n\n

But the court did not find that Beverly Tech had proven that State Farm had violated the statutory deadlines. It remanded the case back to the trial court to rule on that question according to the facts of the case.<\/p>\n\n\n\n

Raizner, a founding partner of the Raizner Slania law firm in Houston, said the ruling may dissuade insurers who otherwise would \u201cweaponize the appraisal\u201d process by using it to delay payments of reasonable claims. He said the decision also corrects a series of appellate court decisions that insurers were using to argue that they were immune from late-payment penalties because they paid the appraised value.<\/p>\n\n\n\n

On the other hand, Raizner said he would have preferred that the high court rule that State Farm Lloyds was liable for violating the statutory deadlines.<\/p>\n\n\n\n

San Antonio Attorney Brendan K. McBride, of counsel for the Gravely & Pearson law firm, filed an amicus curie brief on behalf of Beverly Tech. He said he would have liked to have seen a more comprehensive decision.<\/p>\n\n\n\n

\u201cI would have like for them to to more clearly stated that the appraisal process is not part of the claims adjusting process,\u201d he said.<\/p>\n\n\n\n

On the other hand, McBride said he was happy to see the Supreme Court correct a long line of cases that followed a 2004 ruling in Breshears v. State Farm Lloyds by the 13th District Court of Appeals in Corpus Christi. He said carriers have been using those ruling to delay payments by calling for appraisals when they don\u2019t want to pay claims.<\/p>\n\n\n\n

\u201cThey were so emboldened by this decision that some insurers put a unilateral appraisal process in their policies,\u201d McBride said.<\/p>\n\n\n\n

Steven J. Badger, an attorney with Zelle LLP in Dallas, said he thinks the Supreme Court\u2019s ruling invites more litigation because it doesn\u2019t answer essential questions.<\/p>\n\n\n\n

\u201cI think the court could have provided more description of the situations that would not subject the insurer to prompt-payment penalties,\u201d he said.<\/p>\n\n\n\n

Badger said the decision did not address whether an appraisal can be used to address what caused damage, such as a hail storm, or must stick to the narrower issue of the cost of the damage.<\/p>\n\n\n\n

\u201cThe decision leaves and much open questions as it resolves open issues,\u201d Badger said. \u201cThe court has essentially ensured that almost every appraisal is followed by litigation.\u201d<\/p>\n\n\n\n

The second hail damage suit\u00a0decided by the Supreme Court\u00a0on Friday involved a homeowner\u2019s insurance claimed filed by Oscar Ortiz. The carrier had denied Ortiz\u2019s claim, asserting that the damage was not caused by hail. Ortiz sued alleging breach of contract, bad faith and violations of the Prompt Payment of Claims Act.<\/p>\n\n\n\n

The Supreme Court ruled that the Fourth District Court of Appeals properly dismissed the breach of contract and bad faith claims, but erred in dismissing the claim for prompt payment act penalties.<\/p>\n","protected":false},"excerpt":{"rendered":"

Jim Sams | Claims Journal | July 2, 2019 An insurer\u2019s payment of the appraisal value after disputing a claim does not establish that it was liable, nor does that payment prevent a policyholder from pursuing penalties under the Prompt Payment of Claims Act, a split Texas Supreme Court ruled in a pair of decisions… Continue reading Texas Supreme Court Clarifies Bad Faith in Appraisal Process<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[10235],"tags":[9895,10878,351,155],"class_list":["post-896198","post","type-post","status-publish","format-standard","hentry","category-insurance-appraisal","tag-advise-consult","tag-insurance-appraisal-bad-faith","tag-insurance-appraisals","tag-texas","entry"],"jetpack_publicize_connections":[],"yoast_head":"\nTexas Supreme Court Clarifies Bad Faith in Appraisal Process - 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