Appraisal clauses are commonly featured in property insurance policies and provide a means to resolve disputes about the amount of loss for a covered claim. Recently the Texas Supreme Court addressed the following question concerning the enforcement of such clauses: “When the parties disagree, but neither seeks appraisal until one has filed suit, has the party demanding appraisal waived its right to insist on the contractual procedure?”
In In re Universal Underwriters, a car dealership suffered hail damage to its buildings and filed a claim with its insurer, Universal Underwriters (Universal). After Universal inspected the property and made payment, the dealership requested a re-inspection. This request was granted and resulted in an additional payment by Universal. No further demands or inquiries were made by the dealership. Four months later, the dealership filed suit, claiming the policy was breached. Universal responded by invoking the policy’s appraisal clause in order to resolve the dispute over the value of the damaged property. Under the clause, each party was to select a disinterested appraiser, and if those two appraisers could not agree, they would submit their differences to an umpire. Universal moved to compel appraisal under this clause.
The dealership argued that Universal had waived its right to compel appraisal by waiting eight months from the date of re-inspection. The trial court agreed and denied Universal’s motion. The Texas Supreme Court granted a writ of mandamus and ordered the trial court to grant Universal’s motion to compel appraisal, finding that the length of delay should have been measured from the date that the parties reached an impasse, which was the date on which suit was filed. The court found there was no unreasonable delay from the lawsuit filing until the date of the motion to compel appraisal. Even if there had been an unreasonable delay, the court held, the dealership would have to show that it was prejudiced by the delay.