A Houston Court of Appeals considered whether an insurer’s denial of a claim waived its right to later invoke appraisal, and held that the right to invoke appraisal continued after the denial and that the timely payment of the appraisal award precluded the insured’s contractual and extra-contractual causes of action as a matter of law. Ron Pounds v. Liberty Lloyds of Texas Insurance Company, 2017 WL 3270980 (Tex.App.—Hous. [14th Dist.], Aug. 1, 2017). This decision is significant in that it appears to be the first state court decision where no waiver was found even though the insurer initially denied the claim in full.
A property insurer denied a claim, and the insured sued the insurer for breach of contract, violations of the Texas Insurance Code and violations of the Texas Deceptive Trade Practices Act. The insurer filed an answer that included a reservation of its right to demand appraisal. Following an unsuccessful mediation, the insurer invoked the policy’s appraisal clause to determine the amount of loss. However, the insured refused to designate an appraiser, contending that the insurer had waived the right to invoke appraisal by initially denying the claim in full. The trial court subsequently compelled the insured’s participation in appraisal, during which designated appraisers agreed on the amount of loss, which was timely paid by the insurer. The carrier then moved for summary judgment on the grounds that timely payment of the appraisal award precluded the insured’s recovery on both contractual and extra-contractual claims. The trial court granted the motion.
On appeal, the insured argued that the trial court abused its discretion in compelling appraisal because the insurer’s initial denial waived that right under the policy. The appellate court noted that the insurer’s denial of the claim, standing alone, was not sufficient to establish waiver and that the circumstances surrounding the denial did not demonstrate an intentional relinquishment of the rights to appraisal. The court further noted that the policy guarded against implied waiver by requiring that “waiver[s] or change[s]” to the policy be in writing and that the declination letter asked that the insured submit any questions or concerns regarding the claim, which indicated an impasse had not yet been reached. The court also pointed out that the insurer reserved the right to invoke appraisal within its answer. Finally, because the insured possessed the right to invoke appraisal himself at any time during the claims process, the court held the insured could not establish he was prejudiced by the carrier’s invocation sufficient to prove waiver of the appraisal provision.