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In re State Farm Lloyds

Court of Appeals of Texas, Fourteenth District

January 10, 2017

IN RE STATE FARM LLOYDS, Relator

         ORIGINAL PROCEEDING WRIT OF MANDAMUS 400th District Court Fort Bend County, Texas Trial Court Cause No. 16-DCV-229864

          Panel consists of Chief Justice Frost and Justices Boyce and Christopher.

          OPINION

          Kem Thompson Frost Chief Justice

         This original proceeding arises out of a dispute between insureds and their insurer over the insurer's right to an appraisal of the loss under the insurance policy. The insureds brought suit for breach of the policy. The insurer, as relator in this proceeding, seeks a writ of mandamus commanding the trial judge to vacate her order denying the insurer's motion to compel appraisal and ordering the trial judge to compel the parties to engage in the appraisal process. We reject the insureds' arguments that (1) the insurer waived the appraisal provision by partially denying coverage of their claim or by demanding a jury trial; and (2) the appraisal provision lacks mutuality of obligation. The insurance policy mandates appraisal to resolve the parties' dispute over the value of the loss, and the insureds have not shown a basis for denying enforcement of the appraisal provision. We conditionally grant mandamus relief to compel the appraisal.

         I. Factual and Procedural Background

         Relator State Farm Lloyds issued to real parties in interest Hai and Kieu Nga Tran (the "Insureds") a homeowner's insurance policy, effective November 5, 2014 through November 5, 2015 (the "Policy"), for the dwelling located at 323 Lake Bend Drive, Sugar Land, Texas (the "Property"). When the Insureds reported that a storm had damaged their dwelling, State Farm assigned an adjuster and commenced an investigation of the claim. After inspecting the Property, State Farm's adjuster prepared an estimate of $432 to repair storm-related damage. The estimate did not exceed the Insureds' $8, 174 deductible amount under the Policy.

         State Farm wrote to the Insureds, stating that State Farm agreed that the wind caused damage and that the covered damages amounted to $432. Though State Farm admitted that the Policy covered part of the loss, State Farm refused payment at the time it sent the letter because the amount of the loss fell below the Policy's deductible. State Farm also admitted that the Insureds suffered other damage to the Property, but denied coverage for this damage.

          The Insureds' public adjuster[1] inspected the Property and determined that storm-related damage amounted to $73, 000. This sum included damage to the Property's roof, exterior, and interior. State Farm had no further contact with the Insureds until they filed suit against State Farm and State Farm adjuster Bruce White. The Insureds have asserted claims for breach of contract, violations of the Texas Insurance Code and the Deceptive Trade Practices Act, and breach of the common law duty of good faith and fair dealing. They seek to recover, among other things, benefits under the Policy for damage allegedly sustained as a result of the storm.

         State Farm answered the suit and made a jury demand. State Farm then invoked the Policy's appraisal provision before either party conducted any discovery. In its letter demanding an appraisal, State Farm cited the following relevant text in the Policy:

SECTION I - CONDITIONS
Appraisal. If you and we fail to agree on the amount of loss, either one can demand that the amount of the loss be set by appraisal. If either makes a written demand for appraisal, each shall select a competent, disinterested appraiser. Each shall notify the other of the appraiser's identity within 20 days of receipt of the written demand. The two appraisers shall then select a competent, impartial umpire. If the two appraisers are unable to agree upon an umpire within 15 days, you or we can ask a judge of a court of record in the state where the residence premises is located to select an umpire. The appraisers shall then set the amount of the loss. If the appraisers submit a written report of an agreement to us, the amount agreed upon shall be the amount of the loss. If the appraisers fail to agree within a reasonable time, they shall submit their differences to the umpire. Written agreement signed by any two of these three shall set the amount of the loss. Each appraiser shall be paid by the party selecting that appraiser. Other expenses of the appraisal and the compensation of the umpire shall be paid equally by you and us.

         The Insureds' counsel rejected State Farm's appraisal demand, stating that the Insureds "instead would like to proceed with litigation."

         State Farm filed a "Motion to Compel Appraisal and Abate Case Pending Appraisal Outcome." The Insureds responded, arguing that State Farm had waived its right to appraisal by denying coverage and by demanding a jury trial. They also argued that State Farm's claimed appraisal right was "illusory and unenforceable."

         The respondent trial judge, the Honorable Maggie Perez-Jaramillo of the 400th District Court of Fort Bend County (the "Trial Court"), signed an order denying the motion to compel appraisal and the ...


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