United States District Court, N.D. Texas, Dallas Division
MEMORANDUM OPINION AND ORDER
C. Godbey United States District Judges.
Order addresses Plaintiffs Salas Realty, LLC and Salas
Plumbing, Inc.'s (collectively “Salas”)
Application for Appointment of Umpire . For the following
reasons, the Court directs the parties each to appoint an
appraiser and instructs the two appraisers to select an
Origins of the Dispute
insured its property with Defendant Transportation Insurance
Company (“Transportation”). Notice of Removal,
Ex. C, Salas Realty, LLC / Salas Plumbing, Inc.'s Appl.
Appointment Umpire (“Salas's Appl.”) 2 .
Salas submitted a claim with Transportation because Salas
alleged its property suffered damage after a hail storm.
Id. Transportation used an adjuster to investigate
the damage, but Transportation declined to pay for the damage
because its adjuster stated that the damage resulted from
wear and tear, which is not covered under the insurance
policy. Def. Transportation Insurance Company's Opp'n
Pl.'s Appl. Appointment Umpire (“Def.'s
Opp'n”) 4 . Salas demanded that Transportation
appoint an appraiser. Salas's Appl. 4. However,
Transportation claimed that under the insurance policy it was
not obligated to hire an appraiser. Def.'s Opp'n 5.
Now Salas ask the Court to appoint an umpire. Salas's
insurance contract includes an appraisal clause that states
in relevant part:
If the Named Insured and the Insurer fail to agree on the
amount of loss for physical damage or business income or
extra expense, either may make a written demand for appraisal
in which case within 20 days of that written demand each
shall select an appraiser and shall notify the other of its
chosen appraiser. This APPRAISAL Condition is not available
to the named Insured or the Insurer if there is a dispute as
to whether the loss or damage was caused in whole or in part
by the covered peril. This APPRAISAL Condition is not
available if there is a dispute as to whether or not the loss
is covered in whole or in part under this coverage part.
Id. at 3; see also Def.'s Opp'n 3.
Salas argues that it is entitled to an appraiser because the
disagreement concerns the amount of loss resulting from the
hail storm. Salas's Appl. 2. But Transportation contends
that the adjuster determined the loss resulted directly from
wear and tear, so the dispute concerns the cause of the
damage, not the amount of loss. Transportation Insurance
Company's App. Opp'n Pl.'s Appl. Appointment
Umpire (“Def.'s App.”), Ex. A-1 2 ;
Def.'s Opp'n 3-5.
History and Scope of Insurance Appraisals
are a “means of resolving disputes about the
‘amount of loss' for a covered claim.”
State Farm Lloyds v. Johnson, 290 S.W.3d 886, 889
(Tex. 2009) (internal quotations and citations omitted).
Texas law generally holds appraisal clauses are enforceable,
but appraisal-clause litigation is sparse. See Id.
at 888-89. Yet, in 2009, the Texas Supreme Court in State
Farm Lloyds v. Johnson clarified the appropriate scope
of appraisals. See Id. at 887.
History of Appraisals Before State Farm Lloyds v.
to 2009, the Texas Supreme Court addressed this topic only
five times, and each concerned either waiver or
enforceability. Id. at 889. Historically, insurance
companies have used these clauses in property insurance
contracts, and Texas law generally has encouraged courts to
enforce these clauses. Id. at 888, 894. In fact,
Texas law has pushed parties to conduct an appraisal prior to
filing suit because an appraisal does not require court
intervention and is usually faster and less expensive than
litigation. Id. at 894-95, 894 n.42 (noting that
Texas law considers appraisals a condition precedent to
Texas law limits appraisals to determining damage, not
liability, because the question of liability is left for the
courts. Id. at 889-90. However, the line between the
damage and liability question is not always clear.
Id. at 890. Prior to 2009, Texas courts split on
when an appraiser could decide causation as a part of his
damage determination. Id. (collecting cases).
The Texas Supreme Court Defined the Scope of Appraisals
in State Farm Lloyds v. Johnson
2009, the Texas Supreme Court defined the scope of appraisals
and the meaning of “amount of loss.” Id.
at 887, 895. In Johnson, the insurance company and
the insured disputed whether an appraisal was appropriate
under the contract's ...