A Texas appellate court held that an insurance carrier’s timely payment of an appraisal award barred a policyholder’s recovery for breach of contract and extra-contractual claims even where the policyholder refused to accept the award. National Security Fire & Casualty Company v. Hurst, 2017 WL 2258243 (Tex.App.—Hous. [14th Dist.] May 23, 2017).
The insured submitted a claim for wind damage. Payment was made and accepted, but no repairs were made. The insured sued the carrier asserting claims for breach of contract, bad faith, violations of Chapters 541 and 542 of the Texas Insurance Code, and violations of the Texas Deceptive Trade Practices Act. The insured invoked appraisal and an award was issued by a court-appointed umpire. The carrier then paid the award, less amounts previously paid, but instructed the insured to hold the money in trust until a release had been executed. The insured never cashed the appraisal check and continued to pursue litigation against the carrier. Ultimately, trial was held and the jury found in favor of the insured on all counts and a verdict was rendered for a greater amount.
On appeal, the carrier contended its payment of the appraisal award should have precluded recovery. The insured argued that, because he never accepted the appraisal award, he could not be estopped from pursuing his contractual and extra-contractual claims. The appellate court ruled in favor of the carrier, holding that because the insurer’s payment complied with the terms of the policy, there could be no breach. The court recognized that the carrier’s request for a release in exchange for payment of the award did not change the fact that the carrier still remitted the full payment required under the contract. The court further noted that because the claim was timely paid, the insured’s claims under Chapter 542 failed. Moreover, because the insured could not prove injury independent from loss of policy benefits, the insured’s remaining claims were likewise foreclosed. This decision reflects a continuing trend among Texas state courts to hold that an insurance carrier’s timely payment of an appraisal award can preclude both contractual and extra-contractual claims.