Unreported / Non-Citable
Background
Lauren and Andrew Grace submitted a homeowners-insurance claim to American Mercury Lloyds Insurance Company after a water leak damaged their house. Mercury denied coverage, concluding that the damage resulted from long-term or repeated seepage. The Graces then retained a public appraiser and sent Mercury a presuit demand seeking $76,293.79, including the appraiser’s estimate and attorney’s fees.
After the Graces sued, Mercury invoked the policy’s appraisal provision to determine the amount of loss. The Graces declined to appoint an appraiser and argued that Mercury had waived appraisal. The trial court denied Mercury’s motion to compel appraisal and its related request for abatement, although Mercury sought mandamus relief only from the appraisal ruling.
The Court’s Holding
The Third Court of Appeals conditionally granted mandamus relief and directed the trial court to vacate its order denying Mercury’s motion to compel appraisal. The court held that the appraisal clause had been triggered because the parties failed to agree on the amount of loss: Mercury did not accept the amount demanded by the Graces, while the Graces did not accept Mercury’s position that no covered loss existed. Mercury’s denial of coverage did not prevent appraisal because appraisers may determine the amount of loss while courts separately resolve coverage.
The court also held that Mercury had not waived appraisal. The policy contained a written-nonwaiver provision, Mercury expressly reserved its appraisal rights, and the record did not show that Mercury understood further negotiations to be futile before demanding appraisal. Even assuming unreasonable delay, the Graces failed to establish prejudice; filing fees and attorney’s fees incurred after they chose to initiate litigation were insufficient. Because denial of a valid appraisal right cannot be adequately remedied on appeal, mandamus relief was available.
Key Takeaways
- An insurer’s complete denial of coverage does not prevent appraisal when the parties have failed to agree on the amount of loss.
- Waiver generally requires unreasonable delay after negotiations reach an impasse and resulting prejudice to the opposing party.
- Ordinary litigation expenses incurred by an insured who could have demanded appraisal generally do not establish the required prejudice.
Why It Matters
The decision reinforces Texas courts’ strong preference for enforcing contractual appraisal provisions even when coverage remains disputed. Appraisal can fix the amount of loss in advance, leaving the court to determine whether the policy covers that loss.
For insurers and policyholders, the opinion also underscores the importance of nonwaiver language, express reservation of appraisal rights, and concrete evidence of prejudice when waiver is asserted.