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Texas Courtroom of Appeals Provides Confusion to Publish-Appraisal Litigation Underneath the TPPCA

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Ever for the reason that 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 just lately, the Fourteenth Courtroom of Appeals weighed in on this problem 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 Concerning TPPCA Publish-Appraisal Litigation

The Texas Supreme Courtroom held in Barbara Applied sciences that an insured can get well 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 is no such thing as a 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 shouldn’t be 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 could have in opposition to the insurer.        

The Ahmed Resolution

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 price worth of the declare was $22,699.78, properly above the deductible. The insurer notified the insured that it will pay the complete substitute price 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 standard 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 an extra 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 displaying it had paid each the appraisal award and the statutory curiosity it decided could 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 info within the on the spot case have been just 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 just 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 indisputable fact that the insurer paid the appraisal award shouldn’t be 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’s not answerable 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 premise that the insurer had paid the appraisal award together with the statutory lawyer’s charges could 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:

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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 could 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 could 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 Resolution

It is very important word the constraints of Ahmed.  Whereas Ahmed is persuasive authority, it’s not the legislation of the land. It was issued by an intermediate appellate courtroom. So, aside from sure trial courts, it’s not binding on each Texas courtroom.  See In re Riggs, 315 S.W.3d 613, 616 n.2 (Tex. App.—Fort Value 2010, no pet.) (choices of different intermediate appellate which can be “not reviewed by our increased 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 likely 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 properly 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 choice) andfails to comply with Ortiz (which is a binding choice). So the authorized points raised in Ahmed are removed from settled at this level.     

That is necessary as a result of there may be case legislation, akin to White v. Allstate Car & Property Insurance coverage Co., 2021 U.S. Dist. LEXIS 180770 (S.D. Tex. Sept. 22, 2021), that finds the alternative of Ahmed. In White, Decide Tipton held that an insured can not get well 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 not do if penalty curiosity has been voluntarily paid. Notably, Decide Tipton even quoted a previous choice of the Fourteenth Courtroom of Appeals, stating that “a plaintiff who doesn’t get well precise damages can not get well 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 … aren’t damages.” Ortiz v. State Farm Lloyds, 589 S.W.3d 127, 135 (Tex. 2019). Notably, Decide Tipton additionally just lately denied reconsideration of his choice.  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 out there is entered into earlier than a dispute arises. Appraisal can also be out there to the insured earlier than litigation commences and earlier than the insured incurs any attorneys’ charges. Sometimes, there is no such thing as a contractual proper to require one other celebration to have interaction in settlement negotiations. Settlement negotiations, akin to 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 price of litigation.  Appraisal resolves solely the disputed quantity of the loss, not protection, and both the 2 appraisers should agree, or the umpire should aspect with one of many appraisers.  See Karl A. Schulz, Correct Outcomes in Appraisal – The Significance of the Umpire’s Topic Matter Experience, 15 J. Shopper & Business Legislation 54, 57 (2012).  And importantly, the Texas Supreme Courtroom has not held that implementing an appraisal award is akin to implementing a settlement settlement that was by no means bargained for as analogized in Ahmed and Martinez. That’s as a result of it’s not. There isn’t any query that the insured agrees to appraisal to set the quantity of loss—i.e., it’s a bargained-for contract provision—and might invoke appraisal at virtually any time, together with earlier than incurring any attorneys’ charges or participating in litigation.   

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