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Is a Denial a Waiver of the Appraisal Provision?

By: Fred Shuchart

Most every policy of insurance providing property coverage contains an “appraisal provision,” which requires that the parties proceed with the appraisal process it the event there is a dispute as to the “amount of the loss.”  Courts throughout the state and federal levels have repeatedly concluded that the “appraisal provision” is clear and unambiguous and have enforced it as written.  The only method by which insureds have avoided the “appraisal provision” is to prove the insurance company waived its right to assert the provision.

The issue of waiver and the “Appraisal Provision” was addressed by the First Court of Appeals in In re: Liberty Ins. Corp., No. 01-15-00956-CV (Tex. App.—Houston [1st Dist.] June 9, 2016, orig. proceeding).  In Liberty, the insured submitted a wind and hail damage claim to his homeowner’s carrier, Liberty.  Liberty sent an adjuster to inspect the damage and determined there was no storm related damage and therefore denied the claim.  The insured brought suit.  Five months after the suit was brought and after an unsuccessful mediation, Liberty sent the insured a letter invoking the appraisal provision in the policy.  The insured failed to comply with the appraisal clause and Liberty filed a Motion to Compel Appraisal.  In response, the insured’s primary argument was that Liberty waived its right to enforce the appraisal provision because it denied the claim outright.

In addressing the issue, the Court acknowledged that waiver requires either the intentional relinquishment of a known right or intentional conduct inconsistent with claiming that right.  The Court concluded that the denial of a claim for damage does not, by itself, constitute waiver of the right of appraisal.  Although the denial does not by itself constitute a waiver, it is relevant to the question of waiver along with the language in the policy itself and whether the insurer expressed its intent to reserve its appraisal rights.  In the case before it, Liberty’s denial letter contained a concluding sentence that the denial should not be construed as a waiver or estoppel of any of the terms, conditions, or defenses afforded by the policy or applicable law; Liberty’s response to the DTPA demand letter stated that nothing therein should be considered as a waiver of the right to invoke the appraisal process and Liberty’s Answer contained a paragraph reserving the right to appraisal under the policy.   Based upon all of the evidence before it, the Court concluded that Liberty did not waive its right to invoke the appraisal provision.


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