The Southern District of Texas not too long ago held that an appraisal award didn’t set up legal responsibility for a coated loss below the coverage. In Hoff v. Meridian Sec. Ins. Co., 2023 WL 5192013 (S.D. Tex. Aug. 11, 2023), Meridian Safety Insurance coverage (“Meridian”) insured Flemming Hoff (“Hoff”). After submitting swimsuit, Hoff requested an appraisal pursuant to the next coverage language:
When you [Hoff] and we [Meridian] disagree on the quantity of loss, both might demand an appraisal of the loss. On this occasion, every occasion will select a reliable and neutral appraiser inside 20 days after receiving a written request from the opposite. The 2 appraisers will select an umpire. If they can’t agree upon an umpire inside 15 days, you or we might request that the selection be made by a choose of a court docket of document within the state the place the “residence premises” is positioned. The appraisers will individually set the quantity of loss. If the appraisers submit a written report of an settlement to us, the quantity agreed upon would be the quantity of loss. In the event that they fail to agree, they are going to submit their variations to the umpire. A choice agreed to by any two will set the quantity of loss.
The appraisers submitted their award and schedules detailing the bills and the full appraisal quantity. The award didn’t include any assertion that mirrored an apportionment between uncovered and coated losses or when the alleged loss occurred.
The appraisal panel awarded an quantity above the coverage deductible, however Meridian refused to pay. Hoff subsequently moved for partial abstract judgment, arguing that the appraisal award entitled him to judgment on his breach of contract declare as to legal responsibility and set the damages quantity. In opposition, Meridian disputed that the issuance of the award was conclusive proof that Hoff’s declare was coated below the coverage. Meridian argued that the appraisal award offered an estimate of the property harm however didn’t decide whether or not the harm was coated. The events additionally disputed whether or not the loss occurred throughout the coverage interval.
The Court docket denied Hoff’s movement, and agreed with Meridian that the award didn’t entitle Hoff to indemnity for a coated loss. The Court docket reasoned that the appraisers issued an award as to the quantity of Hoff’s damages, not whether or not Meridian was liable to pay that quantity as a coated loss; there was no differentiation between what harm was coated from what was not. The appraisers additionally made no effort to find out the timing of the loss.
Impression of Hoff
Hoff emphasizes that whereas the road between legal responsibility and harm questions are generally blurred, the scope of an appraisal is damages, not legal responsibility. Insurers needs to be cognizant of those points and make clear the aim and extent of an appraisal. In lots of circumstances, the appraisal course of ought to serve to bifurcate damages and legal responsibility disputes. Whereas the holding in Hoff offers some safety for insurers in Texas and is in line with a number of different jurisdictions, insurers ought to stay conscious of the regulation that governs your protection dispute to the extent it could fluctuate.
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