Policyholders may not be aware that their property insurance policy contains an appraisal provision. Insurance companies sometimes use these appraisal provisions to delay the claims process, increase costs for policyholders, or prevent the policyholder from filing lawsuits against them.
Some form of an appraisal provision is in almost every property insurance policy sold in Texas and throughout the country. The provision is supposed to serve as an alternative dispute resolution process. The typical appraisal provision provides that if the parties cannot agree on adequate compensation for a loss covered under the policy, either party can demand appraisal. The policyholder and insurer each hire an appraiser to attempt to reach an agreement on the amount of the loss. If they can’t, an umpire is brought in to resolve the dispute. The umpire must reach an agreement with one of the appraisers in order to have a binding appraisal award. The policyholder has to pay for their own appraiser and share the cost of the umpire. Unfortunately, some insurance companies abuse this process.
Pearson Legal recently represented a commercial policyholder, TopDog Properties, that was facing a dispute with its insurer. In 2013, TopDog’s apartment complex was damaged by wind and hail. Upon inspection, the insurance company, GuideOne, determined that the loss fell below TopDog’s deductible and denied the claim. Believing that the roofs needed to be replaced because of the hail, TopDog attempted to invoke the appraisal provision to resolve the dispute. Guide One refused, arguing that only they could invoke the appraisal provision. TopDog was forced to file suit against GuideOne.
Surprisingly, eight months after the suit was filed, GuideOne demanded appraisal. The two appraisers agreed that the hail damage was obvious, the roofs needed to be replaced and awarded TopDog $168,808. GuideOne paid the award but then moved to dismiss the case claiming that TopDog was not entitled to attorney’s fees and other damages because they had paid the appraisal award. The fight made it all the way to the Texas Supreme Court.
The Supreme Court of Texas relied on two cases they had recently decided in ruling in TopDog’s favor. The Supreme Court of Texas ruled that the trial court should consider TopDog’s claims for other damages, attorney’s fees and a penalty against GuideOne based on the favorable appraisal award. After the case was remanded to the trial court, the parties reached a confidential settlement.
Matthew Pearson, one of TopDog’s attorneys, said, “The TopDog decision is a win for all Texas policyholders. When policyholders receive an appraisal award, they should have the right to received additional compensation from an insurance company that wrongfully denied or underpaid a claim.”
Pearson Legal, P.C. represents property owners on contingency in insurance recovery and construction defects litigation, as well as commercial litigation, throughout Texas, and the country. The firm represents commercial property owners, school districts and other public and private entities. According to Texas Lawyer, Matthew R. Pearson is responsible for some of the largest insurance verdicts in the State of Texas in recent years.