Texas Law360
October 9, 2018
Most property insurance policies contain an appraisal provision which provides an alternative to litigation when the insurer and insured cannot reach agreement regarding the amount of a covered loss. The Texas Supreme Court has made clear that that appraisal provisions are to be enforced, absent illegality or waiver.[1] While arguments regarding the “illegality” of an appraisal provision are rare, “waiver” has been a point of considerable contention. As discussed below, the party seeking to avoid appraisal has a high burden to establish waiver. It is the burden of the party challenging the validity or enforceability of an appraisal provision to establish waiver.
It is well-settled under Texas law that a party’s mere delay in seeking appraisal is not enough to find waiver of the right to appraisal; rather, in order to establish waiver of the right to appraisal, a party must show that an impasse was reached and that any failure to demand appraisal within a reasonable time prejudiced the opposing party.
Delay, as a consideration in determining waiver, is measured from the point of impasse — the point at which the parties have mutual understanding that neither will negotiate further.[2] And as elaborated upon below, courts must analyze whether or not a party engages in intentional conduct inconsistent with claiming the right to invoke appraisal.[3]
A recent decision issued by the United States District Court for the Eastern District of Texas, Sherman Division, details the appropriate analysis for identifying waiver of the right to invoke appraisal. In Rogers v. Nationwide General Insurance Co.,[4] the insured argued that Nationwide unreasonably delayed invoking appraisal for six months after impasse, and four months into active litigation, and that he suffered prejudice as a result of that delay. Judge Mazzant acknowledged that the inherent benefits of appraisal are lost if a party is permitted to delay invoking the appraisal, but ultimately found that Nationwide had not waived its right to invoke appraisal.
First, Judge Amos Mazzant identified the parties’ point of impasse. The record indicated that on Dec. 19, 2017, the insured’s counsel sent Nationwide an offer of settlement, and on Dec. 21, 2017, Nationwide rejected the offer. Based on this, Judge Mazzant held that the parties reached impasse by Dec. 21, 2017 when the settlement offer was rejected without a counter-offer. After the plaintiff’s offer was rejected, no settlement discussions took place, even after the lawsuit was filed in February 2018. Accordingly, the key date considered under the waiver analysis was Dec. 21, 2017 — the date the parties reached an impasse.
Nationwide invoked appraisal on June 27, 2018, approximately six months after impasse. Judge Mazzant rejected the idea that a six-month delay is per se invalid, noting that the insured had failed to provide any support for such a position. In fact, Texas courts have held that even if appraisal is invoked after suit is filed, this might not constitute an unreasonable amount of time between the impasse and the invocation.[5] Instead, the focus of Judge Mazzant’s analysis was whether Nationwide’s actions constituted “intentional conduct inconsistent with its right to invoke … appraisal.”
As part of the waiver analysis, Judge Mazzant distinguished Nationwide’s conduct from conduct by the insurer in a recent case decided by the Fort Worth Court of Appeals, In re Allstate Vehicle & Property Insurance Co.[6] In that case, the appellate court found an appraisal demand was unreasonably delayed because the insurer’s “conduct clearly constituted intentional conduct inconsistent with its right to invoke the...
