The Texas Supreme Court has granted a group of insurance companies’ petition for writ of mandamus to compel a Dallas County trial court to grant their motion to compel appraisal in a dispute with three national commercial property owners over damage to a warehouse caused by a ruptured water line.
In re ACE American Insurance Company, et al. (No. 25-0461; May 8, 2026) arose from a dispute between several commercial property carriers and three insureds that own commercial properties across the country. In 2022 a water line that supplied a Dallas food-distribution warehouse’s fire-suppression system ruptured beneath the structure’s concrete slab, causing a lot of damage. The policy included an appraisal provision allowing either party to invoke appraisal in the event the parties “disagree on the amount of loss.” Insurers invoked appraisal regarding the parts of the claim that remained in dispute. When the insured demurred, the parties entered into a standstill agreement and negotiated, eventually unsuccessfully. Insured again refused appraisal, so Insurers sued and moved to compel appraisal. Insured counterclaimed for breach of contract and asserted extracontractual claims. The trial court denied Insurers’ motion. They sought mandamus relief, which the court of appeals denied. Insurers filed a petition for writ of mandamus with SCOTX.
In an opinion by Justice Lehrmann, SCOTX granted relief. The issue was whether the parties’ dispute concerned the amount of loss (or damages), which the appraisal provision covered, or Insurers’ liability, which appraisal does not. The court turned to the relevant authority, State Farm Lloyds v. Johnson, 290 S.W.3d 886 (Tex. 2009), a hailstorm case in which State Farm, resisting the insured’s demand for appraisal, argued that the parties’ disagreement “concerned causation and not ‘amount of loss.’” SCOTX determined that the dispute “was not about what caused the property damage—the record indicated nothing other than hail, which the policy covered. (internal citation omitted) Instead, the parties essentially disputed how many shingles were damages and needed replacing, which was a question for the appraisers because it necessarily affected the replacement cost and, in turn, the amount of loss.” The Court further stated that “the extent to which damages property may be repaired or should be replaced is an ‘amount of loss’ question,” and that “separating loss due to a covered event from a property’s preexisting condition is a task for appraisers.”
In any event, the Johnson court went on to say that questions of causation always implicates appraisal, and “the fact that an appraisal may ‘turn[] out to involve not just damage but [also] liability questions … does not mean appraisal should be prohibited as an initial matter.” Applying Johnson, SCOTX concluded that dispute in this case “is at least in part about the amount of loss and that potential coverage disputes do not defeat a contractual right of appraisal.” Here the parties disputed whether the amount of money Insureds spent to fix the warehouse was too high, that is, the dispute involved the amount of loss. The Court observed that Insurers had already paid $1.2 million to remediate mold damage but that Insureds claim that they are owed the full $10 million policy sublimit for mold. Insureds other arguments seeking to deflect the issue towards coverage rather than amount of loss likewise failed, particularly the one alleging that compliance with Dallas County building codes had something to do with Insurers liability and not the cost of repairs. But the Insurers didn’t dispute that replacement cost included building code compliance in the first place. Nor was the Court persuaded that just because resolution of the dispute would involve “highly technical engineering and construction issues that appraisers are not appropriately equipped or qualified to address,” the appraisal provision shouldn’t apply.
The Court thus held that any coverage issues that may exist in the case “do not render an appraisal improper in the first instance.” Finally, the Court rejected Insureds’ assertions that there was no “genuine disagreement” about the amount of loss “because Insurers’ position on that amount has been ‘inconsistent and constantly shifting,” and that they were excused from the appraisal provision because Insurers’ breached the policy and failed to adjust the claim timely and in good faith. Neither of these arguments held any water whatsoever and were summarily dismissed by the Court. SCOTX granted the writ and instructed the trial court to grant Insurers’ motion to compel appraisal.
