Texas Offers Insurers A “Get Out of Jail” Free Card When Appraisal Is Demanded

Steve Badger and your entire Texas insurance coverage business are happy as Texas punch that insurance coverage corporations are immune from unhealthy religion accountability when an insurer has brought about these details:

On July 21, 2021, greater than two years after the twister and precisely one yr after Safeco answered the lawsuit, Safeco invoked the Coverage’s appraisal provision. Mr. Rodriquez incurred an extra $4,302.39 in bills for his appraiser and the umpire. On April 5, 2022, the appraisal panel decided the alternative value worth of the injury to Mr. Rodriquez’s dwelling to be $36,514.52 – greater than twenty-eight instances Safeco’s $1,295.55 estimate and roughly $7,000 or 25% greater than the quantity said within the pre-suit [demand] to which Safeco didn’t reply.¹

The insurance coverage firm’s outcome-oriented engineer even doctored a report to cover the excessive wind areas placing the house.

The Texas Supreme Courtroom dominated the next:

When it applies, Chapter 542A modifications the foundations relevant to the litigation of sure statutory and common-law claims towards insurers, together with claims asserting violations of Chapter 542’s prompt-payment necessities…We perceive the events to agree that Chapter 542A governs Rodriguez’s claims.

Amongst its many different provisions, Chapter 542A limits the restoration of lawyer’s charges. Rodriguez acknowledges that part 542A.007’s restrictions on lawyer’s charges apply to his claims. He likewise doesn’t dispute that Safeco has paid the total appraisal quantity plus curiosity. With these undisputed issues established, we perceive the Fifth Circuit to ask a purely authorized query about Chapter 542A’s impact on the provision of lawyer’s charges: Does Chapter 542A prohibit the restoration of lawyer’s charges when an insurer in Safeco’s place has paid the total appraisal award plus any potential statutory curiosity? The reply is sure.

We want not and shouldn’t search the reply from any supply apart from the statute’s plain language. The Legislature’s ‘voted-on language is what constitutes the regulation….’²

The illogic of judge-made and statutory regulation comes from the small print present in all insurance coverage corporations concerning the timing of when fee is due. The overwhelming majority of all property insurance coverage insurance policies say phrases to the impact that an insurance coverage firm doesn’t need to pay coverage advantages till 60 days after considered one of three issues occurs. First, they attain an settlement with the policyholder on the quantity of the loss. Second, an appraisal award is entered. The third is {that a} judgment is entered. These coverage provisions don’t have anything to do with whether or not the insurance coverage firm acted in good religion or breached the coverage by not paying the quantity well timed. Certainly, the insurance coverage firm might pay thousands and thousands extra after 5 years of litigation after which say they “well timed paid” the coverage advantages as a result of the coverage doesn’t require them to pay till 60 days after a judgment.

It’s silly to get caught up on this “time of fee” provision. If the policyholder has met its post-loss obligations and the insurance coverage firm fails to pay the total quantity owed as a result of it failed to find out the right amount, it has breached the basic obligation and function of the contract—fee of insurance coverage advantages. Underneath the brand new Texas statutory regulation, insurance coverage corporations can demand appraisal and escape accountability for probably the most atrocious unhealthy religion habits.

I’ve a number of respect for Steve Badger. I recommend that individuals learn his feedback on LinkedIn about this case. In my personal remark to him, I attempted to indicate why the logic of the opinion and the interpretation of present Texas regulation is so flawed:

… an insurance coverage firm can deny a declare saying that the insured is black and Islamic, do nothing or deliberately delay the declare, and you purchase your method out of all that unhealthy religion conduct by belatedly paying an appraisal award. Fairly unhappy public coverage. Silly logic.

Steve Badger filed a person amicus temporary to the Texas Supreme Courtroom on this case reflecting his considerations, which all can learn.

The underside line is that Texas had a 100 yr historical past of holding a Texas insurer accountable when it acted in unhealthy religion and didn’t well timed pay a policyholder full advantages after the policyholder glad all circumstances precedent to restoration. Present case and statutory regulation not maintain insurers accountable when that happens as long as the insurer calls for appraisal and pays the appraisal award inside 60 days.

This is sort of a member of the mafia figuring out unhealthy issues could be accomplished however all forgiven by well timed going to confession. Certainly, there may be not even a penance requirement for the bad-acting insurer.

Thought For The Day    

In case you are impartial in conditions of injustice, you’ve chosen the facet of the oppressor. If an elephant has its foot on the tail of a mouse, and also you say that you’re impartial, the mouse won’t admire your neutrality.

— Archbishop Desmond Tutu

¹ Appellant’s Transient on the Deserves in Rodriguez v. Safeco Ins. Co., 23-0534, at *9.

² Rodriguez v. Safeco Ins. Co., — S.W.3d —, 2024 WL 388142 (Tex. Feb. 2, 2024).