Texas Church Fails to Invoke Appraisal Clause

In Richardson East Baptist Church v. Philadelphia Indemnity Insurance Company, a Texas appellate court considered a church’s claims for breach of the duty of good faith and fair dealing, breach of contract, conspiracy, and violations of the Texas Insurance Code. The case arose because the church owned several buildings, all of which were insured by Philadelphia Indemnity.

In 2013, the church notified its insurer that a hailstorm had damaged the roofs of two buildings. It submitted a roofer’s estimate of $32,713.13 to replace the roofs. The insurer assigned an independent adjusting company to investigate. The company assigned an adjustor, who inspected the property and told the insurer his findings. He’d concluded that the hail damage necessitated the replacement of certain slopes and spot repairs. His estimate was that the repairs totaled $10,441.55, minus the $2,500 deductible.

The pastor disagreed with the estimate, claiming that an expert had found more damage. The insurer told the adjustor to hire an engineer to evaluate the damage, and the engineer found only limited hail damage to one slope—even less than what the adjustor had found. Nonetheless, the insurer offered to pay the church based on the adjustor’s initial estimate. The pastor still disagreed and told the adjustor he would take the option for the appraisal provision in the policy.

The insurer issued a check to the church for the initial amount estimated by the adjustor. The church hired a public adjustor, who estimated it would cost $36,372.58 to replace the roof. The public adjustor emailed the insurance adjustor, stating his disagreement, proposing a settlement, and notifying him that the church would likely name a particular appraiser if no agreement could be reached.

The church hired a lawyer and an expert litigation adjustor to inspect the church. The expert estimated the hail damage was worth $112,077.32. The insurance adjustor provided a report to the insurance company, claiming he’d met with the expert, but they couldn’t agree on the claim. The church sued the insurer and the insurance adjustor, but before the lawsuit was served, the insurer requested an appraisal under the policy terms. The appraisers determined that the repair costs were $30,175, and the value of the damages was $18,375. The insurer sent a check to the church for $7,933.45, which was the appraiser’s award minus the deductible and the amount it had already paid.

The church asserted that the insurer had breached the policy and engaged in prohibited, unfair settlement practices. The church also claimed that the adjustor didn’t follow the requirements of the Insurance Code and had engaged in a conspiracy with the insurer to underpay its claims. The insurer and adjustor moved for summary judgment. These motions were granted.

The church appealed. It argued that its acceptance of the appraisal award didn’t bar its claim that the insurer had breached its contract. It claimed it had suffered damages that were not addressed by the appraisal. The church claimed there was a breach of contract because the insurer refused the request for appraisal and misrepresented what was necessary to permissibly invoke the appraisal, which delayed the appraisal award. The church also claimed the insurer had intentionally underestimated its loss.

The appellate court explained that the policy set forth the appraisal procedure in which either party could make a demand in writing for an appraisal. Each party would select an appraiser, and those two would choose an umpire. Additional steps had to be taken after that. The insurer argued that the church had made no written demand for appraisal, whereas the church argued it had made two written demands.

The appellate court concluded that what the church called “demands” were simply statements, neither of which notified the insurer the church wanted to enter into the appraisal process specified in the policy. Accordingly, it found there was no breach of contract in this regard. The church also claimed an intentional undervaluing of its loss that breached the contract. The appellate court did not see sufficient evidence of this in the record. The lower court’s judgment was affirmed.

If you have a property damage claim and want to invoke an appraisal clause in your policy, contact the Hoch Law Firm at 1-800-828-5160 or through our online form.