In another of what seems like an endless number of lawsuits arising from Hurricane Harvey, the Corpus Christi Court of Appeals has substantially upheld a summary judgment in favor of the Texas Windstorm Insurance Association (TWIA). The case, Thomas W. Sankey v. Texas Windstorm Insurance Association (No. 13-21-00297-CV), raises important issues with respect to the appraisal process that was a central part of the TWIA reforms enacted by the Legislature in 2011 (HB 3).
The fact pattern is probably not that unusual. The policyholder filed a claim for more than $300,000 with TWIA in the wake of Harvey. TWIA accepted part of the claim and paid it. Unsatisfied, the policyholder invoked the appraisal process and signed an agreement with an ap;praisal firm to represent him in the appraisal process. TWIA appointed an independent appraiser who had done previous work on other Harvey claims. The policyholder’s firm sent an appraiser to inspect the damage, who returned with a $475,000 estimate well in excess of policy limits. However, the firm evidently did not accept the appraisal and “reassigned” it to an independent adjuster, whom the policyholder did not authorize. The adjusters wrangled over the appraisal award for a while, and TWIA notified the policyholder that an umpire may have to be appointed. Shortly thereafter, the adjusters settled on an award of about $233,000. The policyholder sued TWIA, as well as his appraisal consulting firm and the independent appraiser to whom the firm assigned his claim. TWIA moved for summary judgment on the basis that an appraisal award is binding and may not be vacated. The trial court granted the motion but signed an order allowing the policyholder to take a permissive interlocutory appeal.
On appeal, the policyholder argued that the appraisal award should be vacated in essence because the appraisers were prejudiced and the appraisal was obtained by corruption or fraud. He further claimed that an umpire should have been appointed, as required by statute, to resolve the claim. The court of appeals rejected these arguments. Noting that the TWIA’s and the policyholder’s appraisers reached an agreement and an umpire, even if appointed, would not be involved, the court refused to find that the policyholder’s rights were not prejudiced because one was not appointed. It further found no irregularity in the negotiation process that produced the appraisal, observing that no legal authority provides “that an appraiser commits misconduct or lacks impartiality if he ‘abandons’ his own initial estimate and agrees to an estimate of the opposing appraiser” (citations omitted). Even a “gross disparity” between the appraisal award and the cost of repair “cannot support a finding of bias or partiality without additional evidence.”
With respect to the alleged financial conflict-of-interest of TWIA’s appraiser (TWIA had retained his firm on 115 Harvey claims), the court stated that the “existence of pre-existing business relationship between an insurer and an appraiser, without more, does not support a finding of bias or partiality” (citations omitted). Moreover, state regulations specifically provide that previous work for TWIA does not constitute “one of the ‘potential conflict[s]’ of interest’ which an appraiser must disclose to the parties under the regulations” (citing 28 TAC §§ 5.4212(b), 5.4123(a)). Similarly, the court found no evidence of “manipulation” of the award, as alleged by the policyholder. The trial court thus properly granted summary judgment on the TWIA claims.
The court of appeals did reverse the trial court’s summary judgment order with respect to two of the policyholder’s issues: that his appraisal firm improperly delegated its duties to another appraiser, and that both of his appraisers refused to consider the initial $475,000 estimate. But neither of those claims has anything to do with TWIA’s conduct. With respect to the claims against TWIA, however, this case strikes us as one that the court of appeals should have been bothered with. Mere conclusory allegations that an appraiser is prejudiced or that an appraisal award was obtained by “corruption” just because one doesn’t like the result is about all the policyholder had here. We suppose the appeal must be counted a success because the claims against other defendants (the firm, the firm’s appraiser, and the independent appraiser hired by the firm) were sent back, but only because TWIA did not address them in the appeal. In any event, this case epitomizes the continuous churning of TWIA claims in the court system, which raises costs for all policyholders.