COLEMAN v. AMGUARD INSURANCE COMPANY (2023)

Order

The motion by Plaintiff Ronnie Coleman to compel appraisal and abatement is denied. Dkt 12.

1. Background

This lawsuit concerns a property insurance claim for wind and hail damage filed by Coleman under his insurance policy with Defendant AmGuard Insurance Company.

The loss occurred on January 6, 2021. Dkt 1-4 at 1. AmGuard completed inspection of the property and paid Coleman according to its estimate in April 2021. Coleman then submitted an invoice for repair costs beyond the estimate. AmGuard promptly paid Coleman to satisfy that invoice on June 8, 2021. Dkt 13 at 2–3.

Over a year later, Coleman filed this lawsuit in state court on August 23, 2022, alleging that AmGuard failed to adequately compensate him under the policy's terms. Dkt 1-4. AmGuard timely removed. Dkt 1. Coleman filed the pending motion to compel appraisal and abatement on April 21, 2023. Dkt 12.

2. Legal standard

An appraisal clause in the insurance policy that AmGuard issued to Coleman provides, “If you and we fail to agree on the amount of loss, either may demand an appraisal of the loss.” Dkt 13-5. Such clauses in insurance contracts are generally enforceable under Texas law, absent illegality or waiver. In re Universal Underwriters of Texas Insurance Co, 345 S.W.3d 404, 407 (Tex 2011). The party challenging the validity or enforceability of an appraisal clause based on waiver bears the burden of establishing both waiver by conduct of the party seeking appraisal and prejudice to itself. In re Allstate Vehicle & Property Insurance Co., 549 S.W.3d 881, 889 (Tex App—Fort Worth 2018, no pet), citing Universal Underwriters, 345 S.W.3d at 411.

The Texas Supreme Court holds that the trial court has discretion over the timing of appraisal. State Farm Lloyds v Johnson, 290 S.W.3d 886, 888 (Tex 2009). Whether certain circumstances constitute waiver is a question of law that a court may decide, but the inquiry implicates questions of fact. Castanon v Safeco Insurance Company of Indiana, 2022 WL 2671866, *1 (WD Tex). See also McCrackin v Meridian Security Insurance Co, 2023 WL 4139024, *3 (SD Tex) (noting “fact-specific inquiry into” elements of waiver); Hayley v Meridian Security Insurance Co., 2022 WL 18859312, *3 (ND Tex) (noting “analysis of the circumstances of each case” to determine what constitutes waiver).

3. Analysis

The record ultimately establishes waiver of appraisal by Coleman and prejudice to AmGuard were it ordered to proceed at this late date.

a. Availability

AmGuard claims at the outset that the appraisal provision doesn't pertain because it and Coleman didn't “fail to agree on the amount of loss,” as required to trigger the clause. AmGuard asserts that the evidence shows that it paid Coleman in full for each of the invoices he submitted as claims. Dkt 13 at 1–4.

To be clear, the present record is favorable to AmGuard. It quite clearly did pay amounts of its own accord and in response to particular invoices submitted by Coleman. One wonders, on the ultimate merits, what amounts are yet outstanding that are legitimately owed, what conduct AmGuard undertook contrary to the insurance laws of Texas, and why Coleman waited so long—after recouping all that he'd asked for—to demand still more without having deigned to specify in advance what those amounts might be.

Still, the nature of this action itself signifies that the amount of loss is in dispute. Albeit obliquely, Coleman's petition alleges that AmGuard failed “to adequately compensate Plaintiff” and “misrepresented to Plaintiff that the damage to the property was not in excess to the amount paid.” Dkt 1-4 at 3–4. This suggests that Coleman didn't agree that the invoices represented the total amount of loss. Beyond this, the record is unclear whether the amount requested in the invoices was the total amount of the loss agreed on by both parties. And for its part, AmGuard cites no cases suggesting that an insured accepting payment in part constitutes agreement to a total amount of loss.

This means that the remedy of demand for appraisal was available to either party. The proper question is instead one of waiver.

b. Waiver

Waiver of an appraisal clause “requires intent, either the intentional relinquishment of a known right or intentional conduct inconsistent with claiming that right.” Universal Underwriters, 345 S.W.3d at 407, quoting In re General Electric Capital Corp, 203 S.W.3d 314, 316 (Tex 2006). Such intent may be established by acts “reasonably calculated to induce” the other party “to believe that a compliance by him with the terms and requirements of the policy is not desired, or would be of no effect if performed.” Ibid. Intent to waive must be clearly demonstrated by the surrounding facts and circumstances. In re Continental Casualty Co, 2010 WL 3703664, *3 (Tex App—Houston [14th Dist], no pet), citing Jernigan v Langley, 111 S.W.3d 153, 156–57 (Tex 2003).

Coleman himself acknowledges, “Completion of appraisal in accordance with Defendant's policy is a condition precedent to filing suit on the insurance contract.” Dkt 12 at 2, citing Woodward v Liberty Mutual Insurance Co, 2010 WL 1186323, *3 (ND Tex). And he notes that the purpose of appraisal is to resolve a case efficiently, with “no attorneys, no lawsuit, no pleadings, and no hearings.” Id at 3, citing Johnson, 290 S.W.3d at 894. But that purpose has already been defeated by his delay of nearly eight months after filing suit before seeking to invoke appraisal. Quite clearly, attorneys have been retained, the lawsuit is well underway, pleadings have been filed, initial conference has occurred, and discovery has been exchanged.

This was intentional litigation conduct. It was certainly sufficient to induce AmGuard to understand that its compliance with the terms and requirements of the policy wasn't desired. See Universal Underwriters, 345 S.W.3d at 407. All told, it was nearly twenty-two months from the date AmGuard paid the final bill to the date that Coleman sought to compel appraisal. Meanwhile, multiple litigation deadlines had already passed, including that for designation of expert witnesses. See Dkt 6 (scheduling and docket control order). At no point did Coleman indicate a desire to invoke appraisal—even when specifically asked about alternative dispute resolution at the very outset in this Court's standard joint discovery and case management plan. See Dkt 8 at 4; see also Emerald Isles Townhomes Owners Association, Inc v Westchester Surplus Lines Insurance Co., 2021 WL 7450496, *8 (MD Fla), report and recommendation adopted, 2021 WL 7450495 (finding conduct inconsistent with appraisal rights where party seeking appraisal didn't mention it in complaint or case management report).

In short, Coleman unreasonably delayed in invoking the appraisal clause. Given all of his related conduct in litigation, this constitutes waiver.

c. Prejudice

With waiver established, AmGuard must still show that compelling appraisal now will cause prejudice. Universal Underwriters, 345 S.W.3d at 411.

Late invocation of an appraisal clause is prejudicial if there is unfairness in terms of delay, expense, or damage to a party's legal position, such as when a party has “incurred expenses as a direct result of [opponent's] dilatory behavior.” Ibid, citing Menorah Insurance Co, Ltd v INX Reinsurance Corp., 72 F.3d 218, 222 (1st Cir. 1995). Although courts are hesitant to find prejudice when the policy allows either side to request appraisal at any time, prejudice may arise not only from delay but also from the requesting party's intentional conduct in the meantime. See Allstate, 549 S.W.3d at 893.

For example, the court in Allstate found prejudice where there was unreasonable delay in invoking the appraisal clause and the parties had already undertaken significant litigation expenses. Id at 893–94. There, the insurer waited for three months after the parties had reached an impasse to invoke the appraisal clause. Id at 893. It had in the meantime verbally expressed its intention to go to trial and conducted litigation activities to get ready for trial, while also undertaking negotiations and making a settlement offer. Id at 884–85, 90, 93–94. The court also observed that any appraisal would likely have been useless because the damage occurred two-and-a-half years prior to invocation of appraisal. Id at 893. It thus upheld the trial court decision denying the motion to compel appraisal upon finding this to be sufficient evidence of prejudice. Id at 894–95.

So, too, here. Coleman's conduct throughout this litigation has indicated that he intended to go to trial rather than resolve the dispute via appraisal. AmGuard has incurred expense throughout the litigation process, all or most of which would have been avoided if Coleman had demanded appraisal before—or at least promptly after—bringing this lawsuit. Cf In re GuideOne, 2013 WL 257371, *2 (Tex App—Beaumont 2013) (finding no prejudice where record failed to establish that expenses wouldn't have been incurred had appraisal been invoked earlier). And quite clearly, appraisal would be useless, given that the damage has long since already been repaired. See Dkt 13 at 2: “Coleman had a contractor replace his roof.”

Caselaw doesn't establish a specific time limit for when delay in compelling appraisal is so unreasonable as to cause prejudice. See Hayley v Meridian Security Insurance Company, 2022 WL 18859312, *3 (SD Tex). For example, one court found no prejudice when the insured used “bad-faith tactics” in invoking appraisal over a year after filing suit and after discovery and dispositive motion deadlines had passed. Alvarado v State Farm Lloyds, 2015 WL 12778684, *4 (SD Tex). But other courts have found prejudice where the insured invoked appraisal as early as four months after filing the lawsuit. Hayley, 2022 WL 18859312, at *1, *3 (ND Tex); see also Castanon v Safeco Insurance Company of Indiana, 2022 WL 2671866, *1–2 (finding prejudice where insured invoked appraisal six months after filing lawsuit); First Baptist Church Mineola Texas v. Church Mutual Insurance Company, 2021 WL 5332321, *3 (ED Tex) (finding prejudice where insured invoked appraisal seven months after filing lawsuit).

This simply means that the unique circumstances of each case matters as much—indeed, more—than the length of the delay. Plainly, Texas law as to appraisal is intended to serve a purpose, with waiver possibly attaching to late invocation, so long as there is prejudice. And here, prejudice to AmGuard is apparent if appraisal were to be ordered at this late date.

4. Conclusion

The motion by Plaintiff Ronnie Coleman to compel appraisal and abatement is denied. Dkt 12.

His related request for attorney fees related to the motion is also denied. Dkt 12 at 11–12.

So ordered.

Charles Eskridge, United States District Judge