The U.S. Fifth Circuit Court of Appeals considered that an insurer might be liable for a delay in initial payment on a claim despite its prompt payment of an appraisal award but did not reverse an underlying judgment against it because the insurer initially overpaid the claim. Quibodeaux, et al., v. Nautilus Ins. Co., 2016 WL 3644641 (5th Cir. July 7, 2016).

An insured made a claim for property damage. It was undisputed that the insurer was late in accepting or rejecting the claim and then in making the initial payment. However, the insurer paid on a replacement cost value basis, which was more than it was required to pay, which was an actual cash value basis. The insured filed suit; an appraisal was later compelled and the insurer promptly paid the award. The insured still claimed breach of contract and violations of the prompt payment provisions of the Insurance Code for the initial payment.

The Fifth Circuit found that the insured had not preserved on appeal the issue of timely acceptance or rejection of the claim, only payment. As to the payment, the court found that the insured’s rights had not been substantially affected by summary judgment for the insurer because the amount of overpayment by the insurer exceeded any 18 percent statutory penalty on the amount.