Texas Courtroom of Appeals Provides Confusion to Submit-Appraisal Litigation Below the TPPCA

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Ever because the Texas Supreme Courtroom modified the panorama of Texas legislation relating to appraisal in Barbara Applied sciences Corp. v. State Farm Lloyds, 589 S.W.3d 806 (Tex. 2019) and Ortiz v. State Farm Lloyds, 589 S.W.3d 127 (Tex. 2019), practitioners and courts have been struggling to use the Texas Supreme Courtroom’s holdings.  Barbara Applied sciences and Ortiz answered some questions however raised others. 

One query ensuing from Barbara Applied sciences and Ortiz is: Does the cost of an appraisal award plus the estimated curiosity due below the Texas Immediate Fee of Claims Act (“TPPCA”) entitle an insurer to abstract judgment on an insured’s claims below the TPPCA, absolving the insurer from having to pay lawyer’s charges below the Act? Courts have now answered this query otherwise.  Most lately, the Fourteenth Courtroom of Appeals weighed in on this concern and located that the reply is “No.”  See Texas Truthful Plan Ass’n v. Ahmed, 2022 Tex. App. LEXIS 5770 (Tex. App.—Houston [14th Dist.] Aug. 11, 2022, mot. for reh’g en banc filed Aug. 26, 2022).

Background Relating to TPPCA Submit-Appraisal Litigation

The Texas Supreme Courtroom held in Barbara Applied sciences that an insured can recuperate damages below the TPPCA (and lawyer’s charges) regardless of an insurer’s well timed cost of an appraisal award below sure circumstances.  Nonetheless, the Courtroom additionally held that there isn’t any legal responsibility for the insurer below the TPPCA until the insurer accepts legal responsibility or is adjudicated liable below the coverage, and the insurer violated a deadline below the TPPCA.  The Courtroom defined that cost of an appraisal award just isn’t an acknowledgement of legal responsibility nor a dedication of legal responsibility for functions of damages below the TPPCA.  Thus, the Texas Supreme Courtroom overruled ample case legislation that immediate cost of an appraisal award disposed of all contractual and extra-contractual claims, together with statutory claims, the insured might have in opposition to the insurer.        

The Ahmed Determination

Ahmed concerned a hail declare.  The insurer investigated the declare and decided that it was under the deductible.  The insured sued the insurer, together with allegations that the insurer violated the TPPCA.  The insurer demanded appraisal.  The appraisers issued an agreed appraisal award figuring out the substitute value worth of the declare was $22,699.78, effectively above the deductible. The insurer notified the insured that it could pay the complete substitute value worth. The insurer paid the insured $13,193.78, which it characterised as the worth of the appraisal award minus the deductible. The insurer then filed a conventional and no-evidence summary-judgment movement on the insured’s claims below the TPPCA. The trial courtroom denied the movement.

In 2019, whereas this case was nonetheless pending within the trial courtroom, the Texas Supreme Courtroom determined Barbara Applied sciences. The insurer then made a further cost to the insured of $6,458.26, which it characterised as constituting $3,206.19 in statutory curiosity, $752.23 in prejudgment curiosity, and $2,500 for “estimated lawyer’s charges.” The insurer moved for reconsideration of its abstract judgment movement on the insured’s TPPCA declare, attaching new proof exhibiting it had paid each the appraisal award and the statutory curiosity it decided can be recoverable below the TPPCA.  The insured filed a cross movement for abstract judgment in assist of his TPPCA claims, which the trial courtroom granted.  The trial courtroom then held a bench trial on lawyer’s charges and awarded the insured $96,358.50.

The Courtroom in Ahmed noticed that the details within the prompt case have been much like these in Barbara Applied sciences.  The Courtroom in Ahmed was persuaded by language in Barbara Applied sciences that cost of an appraisal award is much like a settlement.  The Courtroom in Ahmed noticed: 

As a result of cost of the appraisal award constitutes neither an admission of legal responsibility below the coverage nor a judicial dedication of legal responsibility, the mere incontrovertible fact that the insurer paid the appraisal award just isn’t determinative of legal responsibility, a core inquiry in a [claim under the TPPCA].  Accordingly, the insurer’s cost of an appraisal award “didn’t conclusively set up that it isn’t accountable for [the insured’s] declare, because it should to keep away from [damages under the TPPCA] as a matter of legislation below part 542.060.

The Courtroom in Ahmed additionally relied on Martinez v. Allstate Car & Property Insurance coverage Co., 2020 U.S. Dist. LEXIS 220008 (S.D. Tex. 2020).  There, Decide Ellison reasoned that dismissing a declare below the TPPCA on the idea that the insurer had paid the appraisal award together with the statutory lawyer’s charges can be akin to forcing an insured right into a settlement to which it didn’t agree.  The Courtroom in Martinez relied on case legislation that didn’t concern appraisal and even insurance coverage.  Regardless, the Courtroom in Ahmed concluded:

As mentioned in Martinez, and following the logic of Barbara Applied sciences, we conclude that, whereas advance cost of an appraisal award and statutory curiosity might entitle an insurer to an offset, it doesn’t entitle the insurer to abstract judgment on an insured’s [claim under the TPPCA]. To conclude in any other case can be to topic the insured on this case, Ahmed, to a settlement to which he didn’t agree.     

Individually, the Courtroom in Ahmed decided the trial courtroom erred in granting abstract judgment in favor of the insured on legal responsibility.  The insurer disputed that its cost of the appraisal award was an admission of legal responsibility on the insurance coverage declare that would topic it to legal responsibility below the TPPCA.

Implications of the Ahmed Determination

You will need to be aware the restrictions of Ahmed.  Whereas Ahmed is persuasive authority, it isn’t the legislation of the land. It was issued by an intermediate appellate courtroom. So, aside from sure trial courts, it isn’t binding on each Texas courtroom.  See In re Riggs, 315 S.W.3d 613, 616 n.2 (Tex. App.—Fort Price 2010, no pet.) (selections of different intermediate appellate which might be “not reviewed by our greater courtroom” “are persuasive however not binding on the opposite intermediate appellate courts of our state”).  

It additionally stays to be seen whether or not Ahmed will probably be appealed to and reviewed by the Texas Supreme Courtroom. To this finish, the insurer in Ahmed already filed a movement for rehearing en banc with the Fourteenth Courtroom of Appeals, which sits in Houston. In its movement, the insurer argues that the panel opinion departs from the effectively settled rule that lawyer’s charges are barred absent damages. It additionally argues that the panel opinion misconstrues and misapplies Martinez (which can also be a non-binding determination) andfails to comply with Ortiz (which is a binding determination). So the authorized points raised in Ahmed are removed from settled at this level.     

That is essential as a result of there may be case legislation, resembling White v. Allstate Car & Property Insurance coverage Co., 2021 U.S. Dist. LEXIS 180770 (S.D. Tex. Sept. 22, 2021), that finds the other of Ahmed. In White, Decide Tipton held that an insured can’t recuperate lawyer’s charges below the TPPCA with out first establishing its proper to damages below the TPPCA—i.e., penalty curiosity, which the insured can’t do if penalty curiosity has been voluntarily paid. Notably, Decide Tipton even quoted a previous determination of the Fourteenth Courtroom of Appeals, stating that “a plaintiff who doesn’t recuperate precise damages can’t recuperate attorneys’ charges below the Insurance coverage Code.” This corresponds with the black-letter rule mentioned in Ortiz that “lawyer’s charges and prices incurred within the prosecution or protection of a declare … should not damages.” Ortiz v. State Farm Lloyds, 589 S.W.3d 127, 135 (Tex. 2019). Notably, Decide Tipton additionally lately denied reconsideration of his determination.  See No. 6:19-CV-00066, 2021 WL 4311114, (S.D. Tex. Sept. 21, 2021). White was mentioned in a previous weblog right here.

Additional, opposite to Ahmed, appraisal and settlement negotiations are totally different in some ways. Appraisal is a creature of contract and the settlement to make appraisal accessible is entered into earlier than a dispute arises. Appraisal can also be accessible to the insured earlier than litigation commences and earlier than the insured incurs any attorneys’ charges. Sometimes, there isn’t any contractual proper to require one other celebration to have interaction in settlement negotiations. Settlement negotiations, resembling people who happen at a mediation, are often a method to reach at a compromise of the whole matter to keep away from the time and value of litigation.  Appraisal resolves solely the disputed quantity of the loss, not protection, and both the 2 appraisers should agree, or the umpire should facet with one of many appraisers.  See Karl A. Schulz, Correct Outcomes in Appraisal – The Significance of the Umpire’s Topic Matter Experience, 15 J. Client & Industrial Legislation 54, 57 (2012).  And importantly, the Texas Supreme Courtroom has not held that imposing an appraisal award is akin to imposing a settlement settlement that was by no means bargained for as analogized in Ahmed and Martinez. That’s as a result of it isn’t. There isn’t a query that the insured agrees to appraisal to set the quantity of loss—i.e., it’s a bargained-for contract provision—and may invoke appraisal at nearly any time, together with earlier than incurring any attorneys’ charges or partaking in litigation.   

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