USA – TEXAS Trends and Developments Contributed by: Rodrigo (Diego) Garcia Jr. and Kolby J. Keller, Thompson, Coe, Cousins & Irons, LLP
claim manager visited the property until “long after the repair work was completed”. The underlying insurance policy contained an apprais- al provision authorising either party (insured or insurer) to make a “written demand for an appraisal of the loss” should either party “disagree on the amount of loss”. On 30 January 2023, approximately six months after the loss, the insurer sent a written demand invoking the policy’s appraisal provision because “the par- ties are at an impasse with respect to the remaining scope of damage and costs related to the Claim”. The insurer decided to invoke the appraisal provi- sion despite making various undisputed payments. The insured responded to the invocation of appraisal claiming it was “premature and unwarranted”. The parties attempted to continue negations until a sec- ond impasse was reached and the insurer sent a letter on 14 June 2024 reasserting its previous demand for appraisal. The insured still refused to participate. The insurer ultimately filed suit and moved to compel appraisal, the insured filed counterclaims, including breach of contract, bad faith, and Insurance Code Vio- lations, among other causes of action. The trial court denied the insurer’s Motion to Compel appraisal. The insurer then filed a petition for writ of mandamus. Insured’s argument regarding scope of appraisal The insured presented five different coverage-related arguments. The insured argued: • the mould issue implicated coverage concerns due to the potential for an unrelated policy providing coverage; • the mould remediation work should have been paid on time and on a materials basis rather than as a fixed cost; • the cost increased due to code and ordinance coverage; • there was disagreement on the scope of the “replacement cost” coverage; and • appraisers are not appropriately equipped or quali- fied to address “the use of highly technical engi- neering and construction issues”.
The insured first argued that the mould issue impli- cated coverage concerns because the insurer took the position that further payments for mould damage depended on whether an unrelated policy provided mould coverage for the property. In analysing the insured’s argument, the court looked to the insurer’s payment of USD1.2 million already paid, along with the possibility of other coverage from an unrelated policy, which did not render the dispute to the amount of loss irrelevant. The insured’s second argument that the mould-reme- diation work should have been performed on time and on a materials basis rather than at a fixed price pro- vided by the contractor, was accepted by the insurer. The court disregarded this position on the basis that the cost of remediation of the mould caused by the fire-sprinkler system break was squarely an issue for the parties’ appraisers. The insured’s third argument, asserting a coverage issue claiming increased costs from complying with the code and ordinance was covered, and the insurer did not dispute that the policy provided for this. How- ever, the insurer’s claim codes triggered were caused by the insured’s increased scope of repairs that were not necessary to bring the building back to its pre-loss condition. The court disagreed with the insured again, stating, “to the extent discrete disagreements exist regarding coverage for any particular cost of regula- tory compliance, we see no reason an appraisal would foreclose a court from resolving those issues.” The fourth argument was also shot down by the court. The insured asserted appraisal could not be con- ducted until the court determined what the replace- ment cost of damaged property included. The court agreed that the insured may be correct on the basis the parties disagreed over “complex engineering and construction methodologies”, but disagreed on the basis that those issues are still within an appraiser’s role. The court went further and stated, “an appraiser would be well within the ‘amount of loss’ lane in con- cluding that replacing the damaged property required less extensive techniques and materials than those used by the engineers and contractors” hired by the insured.
358 I NSURANCE L I T IGATI O N 2026
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