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Southern District of Texas Holds that Appraisal Award is Inconclusive of Whether or not a Loss is Coated


The Southern District of Texas lately held that an appraisal award didn’t determine 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 asked an appraisal pursuant to the next coverage language:

Should you [Hoff] and we [Meridian] disagree at the quantity of loss, both might call for an appraisal of the loss. On this match, every birthday party will make a selection a reliable and unbiased appraiser inside of 20 days after receiving a written request from the opposite. The 2 appraisers will make a selection an umpire. In the event that they can’t agree upon an umpire inside of 15 days, you or we might request that the selection be made through a pass judgement on of a court docket of document within the state the place the “place of abode premises” is situated. The appraisers will one by one set the volume of loss. If the appraisers put up a written record of an settlement to us, the volume agreed upon would be the quantity of loss. In the event that they fail to agree, they’ll put up their variations to the umpire. A call agreed to through any two will set the volume of loss.

The appraisers submitted their award and schedules detailing the bills and the whole appraisal quantity. The award didn’t comprise any commentary that mirrored an apportionment between exposed and lined losses or when the alleged loss happened.

The appraisal panel awarded an quantity above the coverage deductible, however Meridian refused to pay. Hoff therefore 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 once conclusive proof that Hoff’s declare was once lined beneath the coverage. Meridian argued that the appraisal award supplied an estimate of the valuables injury however didn’t resolve whether or not the wear and tear was once lined. The events additionally disputed whether or not the loss happened all the way through the coverage length.

The Courtroom denied Hoff’s movement, and agreed with Meridian that the award didn’t entitle Hoff to indemnity for a lined loss. The Courtroom reasoned that the appraisers issued an award as to the volume of Hoff’s damages, now not whether or not Meridian was once at risk of pay that quantity as a lined loss; there was once no differentiation between what injury was once lined from what was once now not. The appraisers additionally made no effort to resolve the timing of the loss.

Have an effect on of Hoff

Hoff emphasizes that whilst the road between legal responsibility and injury questions are every so often blurred, the scope of an appraisal is damages, now not legal responsibility. Insurers must be cognizant of those problems and explain the aim and extent of an appraisal. In lots of circumstances, the appraisal procedure must serve to bifurcate damages and legal responsibility disputes. Whilst the preserving in Hoff supplies some safety for insurers in Texas and is in line with a number of different jurisdictions, insurers must stay aware of the legislation that governs your protection dispute to the level it should range.

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