“When an insurer denies coverage, appraisers can still set the amount of loss in case the insurer turns out to be wrong.” State Farm Lloyds v. Johnson, 290 S.W.3d 886, 888, 894 (Tex. 2009). See also, Texas Farmers Ins. Co. v. Minjarez, №08–12–00272-CV, 2012 WL 5359284 (Tex.App.–El Paso Oct. 31, 2012, no pet.) (memo. op.).
In several recent cases, the Texas Supreme Court has explained that appraisal clauses found in insurance policies are mandatory, binding, and unavoidable. “[I]n every property damage claim, someone must determine the ‛amount of loss,’ as that is what the insurer must pay. An appraisal clause binds the parties to have the extent or amount of loss determined in a particular way.” State Farm Lloyds v. Johnson, 290 S.W.3d 886, 888, 895 (Tex. 2009). (internal quote marks and footnote citation omitted). “Appraisal clauses, commonly found in homeowners, automobile, and property policies in Texas, provide a means to resolve disputes about the amount of loss for a covered claim.” In re Universal Underwriters of Tex. Ins. Co., 345 S.W.3d 404, 406–07 (Tex.2011), citing Johnson, 290 S.W.3d at 888.
“Like any other contractual provision, appraisal clauses should be enforced.” Johnson, 290 S.W.3d at 895. Such clauses are generally enforceable, absent illegality or waiver. Universal Underwriters, 345 S.W.3d at 407. “Appraisals can provide a less expensive, more efficient alternative to litigation, and we recently held they should generally go forward without preemptive intervention by the courts.” Universal Underwriters, 345 S.W.3d at 407, citing Johnson, 290 S.W.3d at 895.
The Johnson Court ruled that appraisal is not prohibited even if the dispute involves liability as well as the amount of damage. Johnson, 290 S.W.3d at 893. The Court pointed out that appraisal is intended to take place before suit is filed, and is a condition precedent to suit. Id. at 894. The Court went on to explain that the appraisal can be structured in a way that decides the amount of loss without deciding any liability questions: When an indivisible injury to property may have several causes, “appraisers can assess the amount of damage and leave causation up to the courts.” Id. When the losses may be divisible, “appraisers may have to decide the damage caused by each before the courts can decide liability.” Id.
“When an insurer denies coverage, appraisers can still set the amount of loss in case the insurer turns out to be wrong.” State Farm Lloyds v. Johnson, 290 S.W.3d 886, 888, 894 (Tex. 2009). See also, Texas Farmers Ins. Co. v. Minjarez, №08–12–00272-CV, 2012 WL 5359284 (Tex.App.–El Paso Oct. 31, 2012, no pet.) (memo. op.).
Appraisals should generally go forward unless the amount of loss will never be needed — a “difficult prediction” when litigation has yet to begin. Johnson, 290S.W.3d at 895.
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