TEXAS PROMPT PAYMENT OF CLAIMS ACT [TPPCA]

APPRAISALS

&

INSURANCE BAD FAITH

Ortiz v. State Farm Lloyds Insurance [SFL]589 S.W.3d 127 (Tex. 2019)

Opinion of Chief Justice Hecht Concurring in Part and Dissenting in Part

Chief Justice Hecht is joined by three other Justices.

Justice Hecht would have affirmed the court of appeals’ decision in full. His disagreement with the majority Opinion of the Court is to be found in its Part III-D. Chief Justice Hecht would hold that the insurer’s voluntarily and unconditional payment of the appraisal award does, as a matter of law, bar the insured’s recovery under TPPCA. (The reader is referred to Chief Justice Hecht’s remarkably interesting opinion in the Barbara Tech case.)

Quinn Comment. None of the Justices seem sympathetic to the idea that appraisal eventuates in an “award” as to the value of a covered loss. Thus, it comes pursuant to an agreement of the parties. It does not decide any coverage issues at all. It seems to me that if an insurer pays an “appraisal award” what it is doing is settling or partially settling it. It is not an admission of liability of any sort. The “appraisal award” is not a judgment, and it does not automatically entitle the insured to anything. 
The use of the term “award” in this context is unfortunate. Receiving an award makes it sound like one has won something which must then be turned over. To be sure, an appraisal award may be a tactical victory, and it certainly determines how much an insurer will get for his loss, or part thereof, if the insured prevails in the rest of the case.  It does not constitute or indicate a final victory. 
This last observation is no dispute as to coverage. Now, at this point insurance language gets subtle and/or ambiguous. What is “coverage?” Can there be coverage and yet be an applicable exclusion? Different people say different things; the “insurance dialect” varies. What about this: Can there be coverage, but the claim defeated by the fact that a condition set forth in the policy is not satisfied?  There is universal agreement that this is true. Hence, an agreement between an insurer and an insured that there is coverage, can go nowhere, if the insurer and the insured use the term “coverage” differently. 
Now, it is true that settlement agreements often involve nondisclosure clauses, and payment of an appraisal award may not involve one. But that is not a determinative fact. The absence of a nondisclosure agreement does not entail that the arrangement is not a settlement. Nor does the fact that the appraisal arises from a clause in the contract. The standard clause does not describe the appraisal award as a determination as to liability. Obviously, the insurer may be stuck with the number in the appraisal award as the measure of what it owes, but the lawsuit can continue as to other issues. Or not. 

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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