Ron Pounds v. Liberty Lloyd of Texas Insurance Company , 528 S.W.3d 222 ( 2017 )

Affirmed and Opinion filed August 1, 2017.
In The
Fourteenth Court of Appeals
NO. 14-16-00263-CV
RON POUNDS, Appellant
V.
LIBERTY LLOYDS OF TEXAS INSURANCE COMPANY, Appellee
On Appeal from the 215th District Court
Harris County, Texas
Trial Court Cause No. 2014-53921
OPINION
This case concerns whether an insurer waived appraisal of a homeowner’s
insurance claim by denying it and, if not, whether an appraisal award supported
summary judgment against the owner’s contractual and extra-contractual claims.
Appellant Ron Pounds purchased a home insurance policy from appellee Liberty
Lloyds of Texas Insurance Company. Pounds submitted a claim for storm damage,
which Liberty Lloyds denied on the ground that “no storm related damages were
found.” Pounds then sued Liberty Lloyds. When the parties were unable to resolve
their dispute at mediation, Liberty Lloyds invoked its right to an appraisal under the
policy. Pounds resisted appraisal, and the trial court granted Liberty Lloyds’s
motion to compel. The appraisers eventually agreed that Pounds’s home had
experienced covered damage as a result of the storm and agreed on the amount of
the loss. Liberty Lloyds moved for summary judgment on Pounds’s claims, which
the trial court granted.
Pounds raises three issues on appeal. In his first issue, he argues that the trial
court erred in compelling appraisal because Liberty Lloyds waived its right to
appraisal by initially denying his claim. We overrule this issue because (a) Pounds
failed to establish that Liberty Lloyds’s denial, standing alone, was a knowing
waiver of the right to an appraisal; and (b) Pounds failed to establish that he was
prejudiced as a result of Liberty Lloyds’ initial denial of his claim.
Pounds argues in his second and third issues that the trial court erred in
granting Liberty Lloyds’s motion for summary judgment on his breach-of-contract
claim and extra-contractual claims. We overrule both issues because Liberty Lloyds
established as a matter of law that it did not breach the insurance contract, which,
under the facts of this case, also defeats Pounds’s extra-contractual claims. We
therefore affirm the trial court’s final judgment.
BACKGROUND
The facts in this case are undisputed. Pounds purchased a home insurance
policy from Liberty Lloyds. The policy covered damage to property caused by wind
and/or hail. The policy provided that Liberty Lloyds would “pay no more than the
actual cash value of the damage until actual repair or replacement is complete.” The
policy also set the deductible for damage caused by wind or hail at $9,620.00.
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The policy included an appraisal provision:
E. Appraisal
If you and we fail to agree on the amount of loss, either may demand
an appraisal of the loss. In this event, each party will choose a
competent and impartial appraiser within 20 days after receiving a
written request from the other. The two appraisers will choose an
umpire. If they cannot agree upon an umpire within 15 days, you or we
may request that the choice be made by a judge of a court of record in
the state where the “residence premises” is located. The appraisers will
separately set the amount of loss. If the appraisers submit a written
report of an agreement to us, the amount agreed upon will be the
amount of loss. If they fail to agree, they will submit their differences
to the umpire. A decision agreed to by any two will set the amount of
loss. . . .
The policy did not set a time limit for invoking appraisal. The policy also provided
that “a waiver or change of a provision of this policy must be in writing by [Liberty
Lloyds] to be valid.”
On August 8, 2014, Pounds made a claim under the policy, alleging that a
wind and hail storm had caused damage to his property. An adjuster inspected the
property on August 14, 2014, and determined that there was no storm-related
damage. Liberty Lloyds sent a letter to Pounds two days later denying the claim
because “no storm related damages were found.” The letter concluded by informing
Pounds that if he had any questions or concerns about his claim, he could contact
Liberty Lloyds’s claims representative by phone or email.
Pounds responded to the denial letter by suing Liberty Lloyds. Pounds
asserted claims for breach of contract and violations of the Prompt Payment of
Claims statute, the Texas Insurance Code, and the Deceptive Trade Practices Act.
Liberty Lloyds answered, stating (among other things) that it did not waive, and
expressly reserved, its right under the policy to demand an appraisal to determine
the actual cash value of Pounds’s property damage claims. In a November 17, 2014
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letter, Liberty Lloyds informed Pounds that “nothing herein should be considered a
waiver of Liberty Lloyds’s right to invoke appraisal in this matter.” The parties
unsuccessfully mediated the case in March 2015.
After the unsuccessful mediation, Liberty Lloyds invoked the policy’s
appraisal clause to determine the amount of the loss. When Pounds refused to
designate his appraiser, Liberty Lloyds filed a motion to compel appraisal. In
response, Pounds argued that Liberty Lloyds had waived appraisal solely as a result
of the initial denial of his claim. The trial court granted Liberty Lloyds’s motion and
ordered an appraisal of the property.
Following an inspection of Pounds’s property, the appraisers agreed on the
amount of the loss. The appraisers determined that the Replacement Cost Value was
$15,161.73. They then applied $5,642.73 to depreciation and determined that the
Actual Cash Value of Pounds’s loss was $9,519.00. Because the appraisers
determined that the Actual Cash Value of Pounds’s loss was below the $9,620 policy
deductible for wind and hail damage, Liberty Lloyds moved for summary judgment
on all of Pounds’s claims. The trial court granted the motion and signed a final
judgment in favor of Liberty Lloyds. This appeal followed.
ANALYSIS
I. The trial court did not abuse its discretion when it compelled appraisal.
Pounds contends in his first issue that the trial court abused its discretion by
granting Liberty Lloyds’s motion to compel appraisal, arguing that Liberty Lloyds
waived appraisal by denying his claim. As the party challenging appraisal, Pounds
bore the burden to establish waiver by Liberty Lloyds. In re State Farm Lloyds, 170
S.W.3d 629, 634 (Tex. App.—El Paso 2005, orig. proceeding). We review a trial
court’s ruling on a motion to compel an appraisal for an abuse of discretion. See In
re Slavonic Mut. Fire Ins. Ass’n, 308 S.W.3d 556, 559 (Tex. App.—Houston [14th
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Dist.] 2010, orig. proceeding).
Appraisal clauses are “commonly found in homeowners, automobile, and
property policies,” and they “provide a means to resolve disputes about the amount
of loss for a covered claim.” In re Universal Underwriters of Tex. Ins. Co., 345
S.W.3d 404, 406–07 (Tex. 2011) (citing State Farm Lloyds v. Johnson, 290 S.W.3d
886, 888 (Tex. 2009)). Appraisal clauses are generally enforceable, barring
illegality or waiver. Id. at 407. This remains true even when an insurer denies
coverage, as the “appraisers can still set the amount of loss in case the insurer turns
out to be wrong.” Johnson, 290 S.W.3d at 894.
Waiver of a contractual right may be express or implied from conduct. G.T.
Leach Builders, Inc. v. Sapphire V.P., LP, 458 S.W.3d 502, 511 (Tex. 2015). To
waive rights under an appraisal clause, a party “must intend to relinquish a known
right or engage in intentional conduct inconsistent with claiming that right.” In re
State Farm Lloyds, 514 S.W.3d 789, 793 (Tex. App.—Houston [14th Dist.] 2017,
orig. proceeding) (citing In re Universal Underwriters, 345 S.W.3d at 407).
A different panel of this Court recently addressed a similar waiver argument.
See id. at 793–95. After reviewing cases from the Supreme Court of Texas and
courts of appeals addressing waiver of insurance appraisals, including many of the
same cases cited by Pounds, we concluded that “[d]enial of an insured’s claim does
not, by itself and in all circumstances, always constitute an ‘intentional
relinquishment’ of the insurer’s rights under the policy’s appraisal provision; nor
does it constitute ‘intentional conduct inconsistent with claiming’ these appraisal
rights.” Id. at 794. We explained that, “in deciding whether an insurer waived its
right to invoke an appraisal clause, [a court] . . . must consider [not only the denial
but also] the policy’s language and the surrounding circumstances to determine
whether the insurer intentionally relinquished its appraisal rights or engaged in
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intentional conduct inconsistent with claiming these rights.” Id.
Applying this test, we hold Pounds has not demonstrated that Liberty Lloyds
waived its right to invoke appraisal. The policy guards against implied waiver by
providing that “a waiver or change of a provision of this policy must be in writing
by [Liberty Lloyds] to be valid.” The denial letter itself does not mention appraisal,
and Pounds has not pointed to any other indication in the record that Liberty Lloyds
expressly waived the appraisal provision in writing.1 Further, although Liberty
Lloyds explained in the letter that it was denying Pounds’s claim because “no storm
related damages were found,” it also invited Pounds to contact the claims
representative if he had any questions or concerns about his claim. This indicates
an impasse had not been reached, as Liberty Lloyds was not foreclosing further
negotiation on Pounds’s claim.2 Finally, when Pounds filed suit, Liberty Lloyds
reserved its appraisal rights in its answer and also in correspondence sent during the
course of the litigation.3
Yet even if an intent to forgo appraisal under the policy could be implied from
1
See In re State Farm Lloyds, 514 S.W.3d at 794–95 (considering lack of evidence of
written waiver of appraisal in waiver analysis); In re Liberty Ins. Corp., 496 S.W.3d 229, 235 (Tex.
App.—Houston [1st Dist.] 2016, orig. proceeding) (same); In re Slavonic, 308 S.W.3d at 561
(considering policy’s anti-waiver provision in waiver analysis).
2
See In re Universal Underwriters, 345 S.W.3d at 408–10 (stating appraisal must be
invoked within reasonable time after impasse reached, defined as point at which parties have
mutual understanding neither will negotiate further); In re Public Service Mut. Ins. Co., No. 03-
13-0003-CV, 2013 WL 692441, at *6 (Tex. App.—Austin Feb. 21, 2013, orig. proceeding) (mem.
op.) (considering invitation to insured to submit further information on denied claim in waiver
analysis).
3
See In re Liberty Ins. Corp., 496 S.W.3d at 234 (considering reservation of appraisal
rights in answer and correspondence in determining that insurer did not waive appraisal); In re
Ooida Risk Retention Grp., Inc., 475 S.W.3d 905, 912 (Tex. App.—Fort Worth 2015, orig.
proceeding) (rejecting waiver argument based in part on contention that insured filing suit signaled
impasse in negotiations between insured and insurer); In re Public Service Mut. Ins. Co., 2013 WL
692441, at *5 (considering ongoing negotiations regarding claim in rejecting waiver by delay
argument).
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the denial letter, Pounds must also show prejudice to establish waiver. See In re
Universal Underwriters, 345 S.W.3d at 411–12. Pounds argues he is not required
to show prejudice because In re Universal Underwriters involved allegations of
waiver by delay, not waiver as a result of the denial of a claim. See id. But denial
of a claim and delay in invoking appraisal are simply circumstances to consider in
determining whether the insurer impliedly waived its appraisal right through
inconsistent conduct, not distinct types of waiver. Trelltex, Inc. v. Intecx, L.L.C.,
494 S.W.3d 781, 790 (Tex. App.—Houston [14th Dist.] 2016, no pet.) (“Waiver is
largely a matter of intent, and for implied waiver to be found through a party’s
conduct, intent must be clearly demonstrated by the surrounding facts and
circumstances.”). Accordingly, the distinction proposed by Pounds does not provide
a legal basis to excuse him from showing prejudice. See In re Universal
Underwriters, 345 S.W.3d at 412 (“Our failure to explicitly require prejudice is more
a function of the paucity of cases in which we have addressed waiver of appraisal
than its applicability to the doctrine.”).4
The Supreme Court of Texas has observed that “it is difficult to see how
prejudice could ever be shown when the policy, like the one here, gives both sides
the same opportunity to demand appraisal. If a party senses that impasse has been
reached, it can avoid prejudice by demanding an appraisal itself.” Id. at 412. As in
Universal Underwriters, the policy here gave both parties the ability to invoke
appraisal to resolve a dispute over the amount of loss. Once Liberty Lloyds denied
4
See also In re Ooida Risk Retention Grp., 475 S.W.3d at 912 (requiring prejudice showing
in automobile insurance case alleging waiver of appraisal resulting from insurance company’s
destruction of insured vehicle); In re Cypress Tex. Lloyds, 419 S.W.3d 443, 445 (Tex. App.—
Beaumont 2012, mand. denied) (“Where the insurance policy provides for an appraisal process,
compliance is excused only if the party resisting the appraisal can show prejudice.”); cf. In re
Universal Underwriters, 345 S.W.3d at 411 (noting other similar contexts in which supreme court
has required a showing of prejudice to establish waiver).
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Pounds’s claim, rather than invoke appraisal, he filed suit. We conclude Pounds has
not established that he was prejudiced by Liberty Lloyds’s demand for appraisal. In
re Century Surety Co., No. 07-15-00386-CV, 2015 WL 6689532, at *4 (Tex. App.—
Amarillo Nov. 2, 2015, orig. proceeding) (mem. op.); In re Cypress Tex. Lloyds, 419
S.W.3d at 445.
For these reasons, the trial court did not abuse its discretion when it compelled
appraisal. We overrule Pounds’s first issue on appeal.
II. The trial court did not err in granting Liberty Lloyds’s motion for
summary judgment.
In his second and third issues, Pounds challenges the trial court’s granting of
Liberty Lloyds’s motion for summary judgment on his claim for breach of contract
and his extra-contractual claims. We address these issues together.
A. Standard of review
We review a trial court’s order granting a traditional summary judgment de
novo. Mid-Century Ins. Co. v. Ademaj, 243 S.W.3d 618, 621 (Tex. 2007). To
prevail on a traditional motion for summary judgment, a movant must prove
entitlement to judgment as a matter of law on the issues set out in the motion. Tex.
R. Civ. P. 166a(c). When the movant is a defendant, a trial court should grant
summary judgment only if the defendant (1) negates at least one element of each of
the plaintiff’s causes of action, or (2) conclusively establishes each element of an
affirmative defense. Clark v. ConocoPhillips Co., 465 S.W.3d 720, 724 (Tex.
App.—Houston [14th Dist.] 2015, no pet.).
B. Liberty Lloyds established as a matter of law that it did not breach
the insurance contract.
Liberty Lloyds attached the following evidence to its motion for summary
judgment: (1) Pounds’s insurance policy; and (2) the appraisal award finding that
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the Actual Cash Value of Pounds’s loss was $9,519.00. Liberty Lloyds argued that
because it was undisputed the appraisal award was less than the policy’s deductible
for wind and hail damage, it did not presently owe Pounds anything and therefore
had not breached the insurance contract. In response, Pounds did not argue that the
appraisal award was wrong, nor did he present any evidence that he had repaired the
damage. He instead argued that the motion was premature because, if he did make
the repairs in the future, the full replacement cost would exceed the deductible and
he would, at that time, be entitled to a payment from Liberty Lloyds. The trial court
granted the motion.
On appeal, Pounds does not challenge the appraisal award. Nor does he point
to evidence in the record establishing that he had completed, or even initiated, repairs
on his damaged property. Pounds instead repeats his trial court argument that
Liberty Lloyds’s motion for summary judgment was premature because he might be
entitled to a future payment in the event he completes the repairs to his property.
An appraisal award made under the terms of an insurance policy is binding
and enforceable, and every reasonable presumption will be indulged to sustain it.
Franco v. Slavonic Mut. Fire Ins. Ass’n, 154 S.W.3d 777, 786 (Tex. App.—Houston
[14th Dist.] 2004, no pet.). The effect of an appraisal provision is to estop one party
from contesting the issue of damages in a suit on an insurance contract. Id. Because
the Actual Cash Value of the appraisal award was below the policy’s deductible
amount, Liberty Lloyds does not presently owe Pounds any payment under the terms
of the policy and has not breached the insurance contract. We conclude that Liberty
Lloyds established its right to summary judgment on Pounds’s claim for breach of
contract.5 We overrule Pounds’s second issue on appeal.
5
During oral argument, Liberty Lloyds represented to the Court that it would not assert
defenses such as res judicata or collateral estoppel if, within any time limits provided by the policy,
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C. Because Liberty Lloyds did not breach the insurance contract, it
was entitled to summary judgment on Pounds’s extra-contractual
claims.
In addition to his claim for breach of contract, Pounds alleged that Liberty
Lloyds violated several statutes in handling his claim. Pounds asserted that Liberty
Lloyds violated the Prompt Payment of Claims Act by failing “to pay for the losses
and/or to follow the statutory time guidelines for accepting or denying coverage.”
See Tex. Ins. Code Ann. § 542.058 (West 2009). Pounds also alleged that Liberty
Lloyds violated various provisions of the Texas Insurance Code and the Deceptive
Trade Practices Act because, prior to denying the claim, it did not (1) make a
reasonable investigation, and (2) cover all damage such an investigation would have
revealed. We conclude neither argument establishes that the trial court erred when
it granted Liberty Lloyds’s motion for summary judgment on Pounds’s extra-
contractual claims.
In USAA Texas Lloyds Co. v. Menchaca, No. 14-0721, 2017 WL 1311752, at
*12 (Tex. April 7, 2017), the Supreme Court of Texas concluded that “an insured
cannot recover any damages based on an insurer’s statutory violation if the insured
had no right to receive benefits under the policy and sustained no injury independent
of a right to benefits.” We have already determined that Pounds had no right to
receive benefits from Liberty Lloyds under the policy because the appraisers
determined that the Actual Cash Value of Pounds’s claim was an amount below the
deductible. In addition, Pounds did not allege that he sustained an independent
injury as a result of Liberty Lloyds’s handling of his claim. Pounds instead argued
that the independent injury rule did not apply. As a result, Pounds did not produce
Pounds completed his repairs and presented evidence to Liberty Lloyds that the cost of the repairs
was greater than the policy’s deductible and within the Replacement Cost Value found by the
appraisers.
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summary judgment evidence creating a genuine issue of material fact that he had
sustained an injury independent of a right to benefits under the insurance policy. We
therefore conclude that Liberty Lloyds established its entitlement to summary
judgment on Pounds’s extra-contractual claims. We overrule Pounds’s third issue
on appeal.
CONCLUSION
Having overruled each of the issues Pounds raised in this appeal, we affirm
the trial court’s judgment.
/s/ J. Brett Busby
Justice
Panel consists of Justices Boyce, Busby, and Wise.
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