TEXAS PROMPT PAYMENT OF CLAIMS ACT POLICY APPRAISAL CLAUSES


BARBARA TECHNOLOGIES [BT] CORPORATION, PETITIONER

v.

STATE FARM LLOYDS [SFL], RESPONDENT


17-0640
JUNE 28, 2019
589 S.W.3d 806 (Tex. 2019)


DISSENTING OPINION OF CHIEF JUSTICE HECHT

The background of the case has already been described in Quinn’s Blogs on the Opinion of the Court (delivered by Justice Green) and the opinion of Justice Boyd which concurred in part and dissented in part. This opinion, that of Chief Justice Hecht, joined by two other Justices, is shorter and more succinct than the other two. In several ways, it appears to be simpler than the other two, as well as more pragmatic. 

One of the things Justice Hecht does is to tell a clearer version as to how the appraisal in the SFL/BT relationship came about. Very interesting and also puzzling.

Another thing Justice Hecht does is to mention the same point that the other two opinions describe at some length, namely, the decades-old history of 542 jurisprudence; something that is comparatively short given the century or more praiseworthy use of appraisal process in economically dealing with insurance claims handling, a proposition upon which all of the Justice agree. Chief Justice Hecht’s slant is different, however, and he expresses the view that the other two opinions will “hobble” its use, or kill it off.  (At one point, Justice Hecht adopts Shakespearian language and says that his opinion is set forth to bury the practice, even though it is praiseworthy, just as the other opinions have said. (His polite irony–or very gentle, civil scorn–of the opinion is difficult to miss.) In this short summary of Chief Justice Hecht’s opinion, I have not separated off my comments by smaller type.)

Justice Hecht’s actual argument is that a better way to interpret TPPCA is to recognize that the use of the appraisal process virtually guarantees that the insurer has rejected the insured’s claim to some degree and the insured has demanded an appraisal. That is more or less the way a large number of reported cases have seen things, and the legislature has had eight sessions in which to revise TPPCA if the courts have got it wrong. 

In summary, according to the opinion, “this Court has always viewed the appraisal process, in use for more than a century, as a positive means for resolving insurance claims. The Legislature has expressly provided for the appraisal of some claims [for example, by “authorizing a claimant to demand appraisal of a loss under a windstorm-and-hail-damage insurance policy”]. It is difficult to imagine that the Legislature could have intended anything that would impede the utility of appraisals to insurers and insureds alike, that courts would fail to recognize for 28 years, or that the Legislature would itself acquiesce in the failure.”

“Ordinarily, disagreement would be precipitated by the insurer’s rejection of all or part of a claim. An appraisal cannot resolve a disagreement over coverage. By the time an appraisal offers a means of resolution, coverage issues should have been resolved.” Thus the appraisal process will be a source of information about relevant values of covered things said to be damaged by covered perils. This may involve obtaining new information. There is nothing in TPPCA preventing an insurer from reconsidering its view in good faith and changing its valuations. Such reconsideration may be based on new information growing out of an appraisal. 

The Act does not entail that this violates TPPCA deadlines. Deadlines can simply be reset. If it did, then “[t]he only was to serve the Act is to violate it.” Absurd!, Justice Hecht implies. Just as absurd, Justice Hecht observes is the idea that every obligation producing invocation of appraisal in effect triggers TPPCA violation and penalties. Far more practical to conceive appraisal as often part of the adjustment process. 

Thus, the Court’s way of reading the Act is inconsistent with it clear meaning; discourages the use of the long-approved process “that fosters settlements, which the Legislature cannot possibly have intended; and upends 15 years of unanimous case law, which the Legislature has had multiple opportunities to correct if wrong.”

Chief Justice Hecht is especially hard Justice Boyd whose opinion “would hold that voluntary payment of a claim renders an insurer liable. In other words, unlike every other person or entity imaginable, an insurer cannot settle a claim without admitting liability.” A ridiculous idea, implies Hecht, CJ.  

“QED”

A Quinn Comment

Given the practicalities of the situation and the historical background, the “Hecht View” is very attractive. Very significantly, appraisals can be a form of negotiated settlement, in which there is no stipulation of concession as to liability. There is, however, a problem built into his theory of statutory interpretation. The essence of the idea expressed in his opinion is this: If a court cannot believe that, under actual historical circumstances, a legislature likely intended X, then it didn’t, and the court is not merely free to, but must, adopt that interpretation of the statute which best expresses what the court believes the legislature likely had in mind when it passed the statute at issue.  

Not everyone would regard this theory as anathema but some certainly would, and it does carry with it some danger of subjective bias.

 




Michael Sean Quinn, PhD, JD, CPCU, Etc

Michael Sean Quinn, PhD, JD, CPCU, Etc. (530)

One of Texas's leading insurance scholars, Michael Sean Quinn is a past chair of the Insurance Section of the State Bar of Texas and has a broad legal practice.

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