The Southern District of Texas lately held that an appraisal award didn’t set up legal responsibility for a lined loss beneath 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 go well with, 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 social gathering 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 not agree upon an umpire inside 15 days, you or we might request that the selection be made by a decide of a courtroom of report 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’ll 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 entire appraisal quantity. The award didn’t comprise any assertion that mirrored an apportionment between uncovered and lined 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 lined beneath the coverage. Meridian argued that the appraisal award supplied an estimate of the property harm however didn’t decide whether or not the harm was lined. The events additionally disputed whether or not the loss occurred through 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 lined 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 lined loss; there was no differentiation between what harm was lined from what was not. The appraisers additionally made no effort to find out the timing of the loss.
Affect of Hoff
Hoff emphasizes that whereas the road between legal responsibility and harm questions are typically blurred, the scope of an appraisal is damages, not legal responsibility. Insurers must 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 keeping with a number of different jurisdictions, insurers ought to stay aware of the regulation that governs your protection dispute to the extent it might differ.
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