A frequently encountered question in the insurance world is whether payment of an appraisal award forecloses or bars first party claims against an insurer by the insured, and if so, under what circumstances. The Texas Supreme Court has taken this matter up in numerous cases in the last several years, but which claims are barred by payment of an appraisal award is still partially unresolved. Three recent decisions from the Texas Supreme Court have provided guidance on the correct interpretation of Texas Prompt Payment of Claims Act ("TPPCA") claims, but questions still remain.
Texas Prompt Payment of Claims Act
In three recent decisions, the Texas Supreme Court reiterated its prior position, that payment of an appraisal award does not automatically entitle an insurer to summary judgment on an insured's TPPCA claims.1 In short, the TPPCA requires insurance claims under certain types of policies to be investigated, and paid or denied, within a certain prescribed period. If they are not, those claims can be subject to the award of an eighteen percent statutory interest rate from the time of accrual, prejudgment interest, and attorney's fees.2
In both Alvarez & Lazos, the dispute started when the insurer's initial inspection led them to provide an estimate to the insured indicating that the insured's residential wind and hail damage claims fell below their deductibles. Later, the insurers conducted a second inspection, which included additional damages, resulting in an increased estimate, and made payment. However, the insureds still believed the estimates undervalued their damages, and each filed suit. In both suits, an appraisal was ordered by the trial court. These appraisals valued the damages higher than any prior estimate in each respective case, which the insurer in each case promptly paid. After making the payments, the insurers each moved for summary judgment, arguing that their contractual obligation to pay had been satisfied.
In both cases, the trial court granted summary judgment for the insurer, and the court of appeals affirmed.3 The Texas Supreme Court, reversing and remanding both decisions, found that the claims for damages under the TPPCA were not barred by payment of appraisal award.4 Interestingly, the Court found that these claims were not barred despite the fact that the insureds had not pled a specific claim for damages arising under the TPPCA.5 The Court found that each insured's demand in the petition for the 18% statutory interest provided under the TPPCA, combined with their assertions in response to summary judgment (that they were not barred from the TPPCA cause of action), was sufficient to preserve the TPPCA claims for review and remand.
Other Claims
In most first party cases, the insured includes additional causes of action for contractual and extra-contractual claims (i.e., breach of contract, statutory and common law bad faith). The Lazos and Alvarez holdings did not provide any guidance on those other claims, because in both cases the insureds amended their petitions for review to remove all contractual and extra-contractual causes of action, and only petitioned the Texas Supreme Court on the TPPCA.6 However, in the third case, Steven Biasatti and Paul Gross D/B/A Topdog Properties v. Guideone National Insurance Company, the insured did not drop the contractual and extra-contractual...
