Appraisers have no authority to distinguish between different causes for a single injury to property.
“In most cases appraisal can be structured in a way that decides the amount of loss without deciding any liability questions.” State Farm Lloyds v. Johnson, 290 S.W.3d 886, 894 (Tex. 2009).
“Thus, when different causes are alleged for a single injury to property, causation is a liability question for the courts. For example, in Wells v. American States Preferred Insurance Co., 919 S.W.2d 679 685-86 (Tex.App.—Dallas 1996, writ denied) appraisers assessed foundation damage due to plumbing leaks (a covered peril) as “0” but damage due to settling (an excluded peril) as $22,875.94. 31 The Dallas Court of Appeals set aside the appraisal, holding appraisers could decide the amount of damage but not what caused it. Appraisers can decide the cost of repairs in this context, but if they can also decide causation there would be no liability questions left for the courts.” Id.
Wells v American States Preferred Ins. Co. is instructive for several reasons:
- A single injury to property is not to be conflated with the different causes that might give rise to that single injury. In Wells, the single injury was ‘water damage.’ Determining the amount of loss arising from different “causes” of that foundation damage [plumbing leaks: a covered peril versus foundation settling: an excluded peril] was outside the “authority” of the appraisal panel. Put simply, the appraisers could decide the amount of loss from the resulting foundation damage but not what caused it.
- Foundation damage is just one example of a “single injury to property” an appraisal panel might be asked to appraise. Hail, Wind and Fire damage are all examples of a “single injury to property.” All too often, an appraiser may be tempted to distinguish between ‘old and new’ hail or wind damage (for example). In keeping with the Supreme Court’s warning in State Farm Lloyds v Johnson, what caused the damage (old versus new damage, covered or excluded damages) is outside the authority of the appraisal panel and any award that attempts to do so may be set aside.
An appraisal is limited to the ‘dispute’ between the parties—the panel has no authority to place matters in dispute that were previously agreed upon during the adjustment process.
Even while it should be a matter of simple common sense that appraisers are limited to the ‘dispute’ between the parties, all too often some appraisers attempt to expand their authority.
“Whether the appraisers have gone beyond the damage questions entrusted to them will depend on the nature of the damage, the possible causes, the parties’ dispute, and the structure of the appraisal award.” Johnson, 290 S.W.3d at 893 (emphasis added).
An award that ignores damage previously agreed upon during the adjustment process and expands the parties’ dispute to now include the previously agreed upon damage may be set aside.
The level of hubris involved in ignoring previously resolved issues between the parties not only places the appraiser’s impartiality at issue but violates the very basis upon which appraisal is utilized in Texas:
In theory, appraisal is to be used to provide a ‘simple, speedy, inexpensive, and fair method of determining the amount of loss.’ Fire Ass’n v. Ballard, 112 S.W.2d 532, 534 (Tex.Civ.App. — Waco 1938, no writ).
Ignoring damages previously agreed upon by the parties and treating the appraisal process as ‘starting over again’ is neither cost-effective nor speedy.
Coffee with Tom 