in Re Certain Underwriters at Lloyds ( 2011 )

IN THE
TENTH COURT OF APPEALS
No. 10-11-00263-CV
IN RE CERTAIN UNDERWRITERS AT LLOYDS
Original Proceeding
MEMORANDUM OPINION
Relator, Certain Underwriters at Lloyds, filed a petition for writ of mandamus,
arguing that the trial court abused its discretion by: (1) refusing to enforce a valid
appraisal clause contained in the contract between relator and real parties in interest,
Mittie and Henry Anderson; and (2) denying objections to discovery that allegedly was
unduly burdensome and abusive. Through this original proceeding, relator requests
that we grant them mandamus relief and direct the trial court to vacate its order
denying appraisal and ordering discovery. For the reasons stated herein, we
conditionally grant the writ, in part, and deny, in part.
I. BACKGROUND
A. The Andersons’ Claim
This case involves an insurance claim made by the Andersons with regard to
their house located in New Waverly, Texas, which was damaged as a result of
Hurricane Ike on September 13, 2008. The Andersons allege that the roof of their house
sustained extensive damage and that water damaged the ceilings, walls, insulation, and
flooring of the house. The Andersons further allege that, immediately after the storm,
they filed a claim with relator, their insurance company. Thereafter, relator sent an
adjustor to the Andersons’ home to inspect the damage. The Andersons note that the
adjustor only spent ten to fifteen minutes at the house and did not get on the roof.
Upset by what they perceived as an inadequate inspection, the Andersons called relator
and requested that a different adjuster inspect the property. The Andersons’ property
was re-inspected, and the adjustor concluded that the extent of the damage to the
property did not exceed the $750 deductible associated with the homeowner’s policy
covering the house. As a result, relator informed the Andersons that no payment
would be made on their claim because the damages did not exceed the deductible. 1 In a
letter dated December 5, 2008, relator told the Andersons:
If you disagree with or have a question about the enclosed property
damage estimate, please call Quality Claims Service. Should you have
any questions concerning the above, or if you have any additional
information that would help Certain Underwriters at Lloyds re-evaluate
your claim, please do not hesitate to call.
1Relator determined that the only damage sustained by the Andersons’ property was to a storm
door and estimated that the replacement cost for the damage sustained would be $158.49 with an actual
cash value of $130.23 once $28.26 in depreciation was deducted.
In re Certain Underwriters at Lloyds Page 2
In response to relator’s December 5, 2008 letter, the Andersons repeatedly called
“to complain about the adjuster’s poor investigation of [their] damages and [their]
disagreement with [relator’s] estimate of the claim.” In an affidavit, Mittie averred that:
The . . . representative said that there was nothing more that could be
done with my claim and that my estimate included the only damage
amount I was entitled to. When I asked to speak to a manager, the
representative told me that she was the owner of the business along with
her husband, that her decision was final, and that the claim would remain
closed. During the next few weeks I called . . . again to demand a re-
inspection of my home with a different adjuster, but I was told that the
evaluation of my claim was final and that my file would remain
closed. . . . In sum, starting upon receipt of the denial letter and
continuing through the next couple months, I consistently made it
clear . . . that I was disputing the amount of my damages, but [relator]
[n]ever did anything to reconcile our differences.
....
Despite my several attempts to inform them of the inadequacies of their
investigation, [relator] never sent another adjuster, an engineer, or any
payments for damages to my home. My husband and I ended up using
the money in our savings account we saved in case of an emergency to
pay for repairs that should have been covered under our homeowner’s
insurance policy.
Relator asserts that, after the initial inspection, the Andersons never provided
information to them showing additional covered damages, which would have required
a re-evaluation of the claim. Nevertheless, after complaining for a couple months from
the time the claim was made, the Andersons ceased all communications with relator for
a period of approximately two years until they filed this lawsuit, which relator alleges
was done without providing notice, though required by section 541.154 of the insurance
code. See TEX. INS. CODE ANN. § 541.154 (West 2009).
In re Certain Underwriters at Lloyds Page 3
B. The Lawsuit and Appraisal Request
In their lawsuit, which was filed on August 25, 2010, the Andersons asserted
causes of action against relator for: (1) violations of the insurance code, including unfair
settlement practices and the failure to promptly pay claims; (2) fraud; (3) conspiracy to
commit fraud; (4) breach of contract; and (5) breach of the duty of good faith and fair
dealing. In their original answer and in a separate motion to compel, relator requested
that the proceedings be abated and that the matter be sent to appraisal, as allowed by
the underlying homeowner’s insurance policy.2 Specifically, the policy provided:
8. Appraisal. If you and we fail to agree on the actual cash value,
amount of loss, or cost of repair or replacement, either can make a written
demand for appraisal. Each will then select a competent, independent
appraiser and notify the other of the appraiser’s identity within 20 days of
receipt of the written demand. The two appraisers will choose an umpire.
If they cannot agree on an umpire within 15 days, you or we may request
that the choice be made by a judge of a district court of a judicial district
where the loss occurred. The two appraisers will then set the amount of
loss, stating separately the actually [sic] cash value and loss to each item.
If the appraisers fail to agree, they will submit their differences to
the umpire. An itemized decision agreed to by any two of these three and
filed with us will set the amount of the loss. Such award shall be binding
on you and us.
Each party will pay its own appraiser and bear the other expenses
of the appraisal and umpire equally.
....
12. Suit Against Us. No suit or action can be brought unless the
policy provisions have been complied with. Action brought against us
must be started within two years and one day after the cause of action
accrues.
2On September 8, 2010, less than two weeks after the Andersons filed suit, relator sent the
Andersons a letter formally requesting appraisal pursuant to paragraph 8 of the underlying homeowner’s
insurance policy.
In re Certain Underwriters at Lloyds Page 4
....
18. Waiver or Change of Policy Provisions. Changes in this policy
may be made and perils insured against added only by attaching a written
endorsement properly executed by our authorized agent. No provision of
this policy may be waived unless the terms of this policy allow the
provision to be waived. Our request for an appraisal or examination will
not waive any of our rights.
(Emphasis in original). The Andersons responded to relator’s request for appraisal by
arguing that the request had been waived.
On November 8, 2010, the trial court denied relator’s appraisal request.
However, after the trial court denied relator’s appraisal request, the Texas Supreme
Court issued its opinion in In re Universal Underwriters of Texas Insurance Company,
which, as relator asserts, requires the trial court to grant its request for appraisal. See
2011 Tex. LEXIS 357 (Tex. May 6, 2011). In light of the Universal Underwriters decision,
relator moved the trial court to re-hear its motion to compel appraisal. In response, the
Andersons once again argued waiver. Thereafter, on June 15, 2011, the trial court again
denied relator’s motion to compel appraisal.
C. Discovery Issues
After filing their lawsuit, the Andersons propounded discovery requests on
relator. In response to the requests, relator produced the claim file and underwriting
file pertinent to the Andersons’ insurance policy and to the adjustment of their claim.
However, realtor notes that the Andersons sought additional information from them,
including: (1) adjusters’ personnel files; (2) material provided to appraisers in other
losses; (3) criteria used to qualify persons for an approved vendors list; (4) copies of job
In re Certain Underwriters at Lloyds Page 5
descriptions of adjusters; and (5) claims from other losses beyond Hurricane Ike.
Relator objected to the production of the above-mentioned information on various
grounds to which the Andersons responded by filing a motion to compel. Realtor states
that, on June 15, 2011, the trial court overruled its discovery objections and granted the
Andersons’ motion to compel. Relator further states that it was ordered to respond to
the Andersons’ discovery requests by July 15, 2011. However, relator does not direct us
to a trial court order specifically requiring relator to provide the information they
complain about.
D. The Mandamus
On July 14, 2011, relator filed a petition for writ of mandamus in this Court.
Accompanying its mandamus petition was an emergency motion to stay the trial court
proceedings. Upon receiving the filings, we granted relator’s emergency motion to stay
the trial court proceedings and requested a response. The Andersons filed a response to
relator’s petition on September 2, 2011.
In this original proceeding, relator argues that the trial court abused its
discretion: (1) in denying appraisal; and (2) by ordering “responses to discovery that is
overbroad on its face, unduly burdensome, and abusive.”
II. STANDARD OF REVIEW
Mandamus is an “extraordinary” remedy. In re Sw. Bell Tel. Co., L.P., 235 S.W.3d
619, 623 (Tex. 2007) (orig. proceeding); see In re Team Rocket, L.P., 256 S.W.3d 257, 259
(Tex. 2008) (orig. proceeding). To obtain mandamus relief, the relator must show that
the trial court clearly abused its discretion and that the relator has no adequate remedy
In re Certain Underwriters at Lloyds Page 6
by appeal. In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 135-36 (Tex. 2004) (orig.
proceeding); see In re McAllen Med. Ctr., Inc., 275 S.W.3d 458, 462 (Tex. 2008) (orig.
proceeding). A trial court abuses its discretion if it reaches a decision so arbitrary and
unreasonable as to constitute a clear and prejudicial error of law, or if it clearly fails to
correctly analyze or apply the law. In re Cerberus Capital Mgmt., L.P., 164 S.W.3d 379,
382 (Tex. 2005) (orig. proceeding) (per curiam); Walker v. Packer, 827 S.W.2d 833, 839
(Tex. 1992) (orig. proceeding). To satisfy the clear abuse of discretion standard, the
relator must show that the trial court could “’reasonably have reached only one
decision.’” Liberty Nat’l Fire Ins. Co. v. Akin, 927 S.W.2d 627, 630 (Tex. 1996) (quoting
Walker, 827 S.W.2d at 840).
Historically, mandamus was treated as an extraordinary writ that would issue
“only in situations involving manifest and urgent necessity and not for grievances that
may be addressed by other remedies.” Walker, 827 S.W.2d at 840. Now, whether a clear
abuse of discretion can be adequately remedied by appeal depends on a careful analysis
of the costs and benefits of interlocutory review. See In re McAllen Med. Ctr., Inc., 275
S.W.3d at 462. Sometimes, “[a]n appellate remedy is ‘adequate’ when any benefits to
mandamus review are outweighed by the detriments.” In re Prudential Ins. Co. of Am.,
148 S.W.3d at 136. According to the Texas Supreme Court:
Mandamus review of significant rulings in exceptional cases may be
essential to preserve important substantive and procedural rights from
impairment or loss, allow the appellate courts to give needed and helpful
direction to the law that would otherwise prove elusive in appeals from
final judgments, and spare private parties and the public the time and
money utterly wasted enduring eventual reversal of improperly
conducted proceedings.
In re Certain Underwriters at Lloyds Page 7
Id.
III. THE APPRAISAL CLAUSE
In their first issue, relator contends that the trial court clearly abused its
discretion in light of the recent Universal Underwriters case because the Andersons failed
to prove that relator unreasonably delayed invoking appraisal after knowing an
impasse had been reached and that the Andersons suffered prejudice because of the
alleged delay in requesting appraisal. See generally In re Universal Underwriters of Tex.
Ins. Co., 2011 Tex. LEXIS 357. The Andersons counter that mandamus is unavailable to
resolve disputed factual issues that were presented to the trial court. In addition, the
Andersons assert that the trial court did not abuse its discretion in determining that an
impasse had occurred; that relator waived its right to compel appraisal; and that relator
unreasonably delayed the invocation of its appraisal rights.
A. Applicable Law
1. Appraisal Clauses
“Today, appraisal clauses are uniformly included in most forms of property
insurance policies. Virtually every property insurance policy for both homeowners and
corporations contains a provision specifying ‘appraisal’ as a means of resolving
disputes about the ‘amount of loss’ for a covered claim.” State Farm Lloyds v. Johnson,
290 S.W.3d 886, 888-89 (Tex. 2009) (internal quotations & footnotes omitted). The
Johnson court further explained the appraisal process as follows:
First, appraisal is intended to take place before suit is filed; this
Court and others have held it is a condition precedent to suit. Appraisals
In re Certain Underwriters at Lloyds Page 8
require no attorneys, no lawsuits, no pleadings, no subpoenas, and no
hearings. It would be a rare case in which appraisal could not be
completed with less time and expense than it would take to file motions
contesting it. Allowing litigation about the scope of appraisal before the
appraisal takes place would mark a dramatic change in Texas insurance
practice, and surely encourage much more of the same.
Second, in most cases appraisal can be structured in a way that
decides the amount of loss without deciding any liability questions. As
already noted, when an indivisible injury to property may have several
causes, appraisers can assess the amount of damage and leave causation
up to the courts. When divisible losses are involved, appraisers can
decide the cost to repair each without deciding who must pay for it.
When an insurer denies coverage, appraisers can still set the amount of
loss in case the insurer turns out to be wrong. And when the parties
disagree whether there has been any loss at all, nothing prevents the
appraisers from finding “$0” if that is how much damage they find.
Third, the scant precedent involving disputes about the scope of
appraisal suggests that appraisals generally resolve such disputes. The
final appraisal award here may substantiate State Farm’s claims that only
the ridgeline suffered hail damage, or reach some in-between figure that
proves acceptable to all concerned. Litigating the scope of appraisal is
wasteful and unnecessary if the appraisal itself can settle this controversy.
Finally, even if an appraisal award is flawed, that can be easily
remedied by disregarding it later. Thus, when insureds objected to
appraisal procedures that were allegedly “inaccurate, unreliable, and
biased,” we held in 2002 that the appraisal should go forward and the
results could be challenged later if the insureds were dissatisfied. If an
appraisal is not an honest assessment of necessary repairs, that can be
proved at trial and the award set aside.
Id. at 894-95. In addition, the supreme court has recently stated the following:
Appraisal clauses, commonly found in homeowners, automobile, and property
policies in Texas, provide a means to resolve disputes about the amount of loss
for a covered claim. These clauses are generally enforceable, absent illegality or
waiver.[3] Appraisals can provide a less expensive, more efficient alternative to
3 In Scottish Union & National Insurance Company v. Clancy, the supreme court enforced an
appraisal clause and stated that:
In re Certain Underwriters at Lloyds Page 9
litigation, and we recently held that they should generally go forward without
preemptive intervention by the courts.
In re Universal Underwriters of Tex. Ins. Co., 2011 Tex. LEXIS 357, at **6-7 (internal
citations & quotation marks omitted). Furthermore, “[w]hile trial courts have some
discretion as to the timing of an appraisal, they have no discretion to ignore a valid
appraisal clause entirely.” Johnson, 290 S.W.3d at 888 (citing In re Allstate County Mut.
Ins. Co., 85 S.W.3d 193, 196 (Tex. 2002)).
2. Waiver of the Appraisal Clause
Though appraisals have proceeded for well over a century with little judicial
involvement, in rare cases, a court may conclude that a party has waived its right to
enforce the appraisal provision. See In re Universal Underwriters of Tex. Ins. Co., 2011 Tex.
LEXIS 357, at *7 (citing Del. Underwriters v. Brock, 109 Tex. 425, 211 S.W. 779, 780-81 (Tex.
1919) (finding waiver due to insurer’s selection of a biased arbitrator, which violated the
underlying insurance policy); Am. Cent. Ins. Co. v. Bass, 90 Tex. 380, 38 S.W. 1119, 1119-
20 (Tex. 1897) (same); Scottish Union, 8 S.W.at 632 (finding no waiver)).
“[To] constitute waiver the acts relied on must be such as are reasonably
calculated to induce the assured to believe that a compliance by him with
the terms and requirements of the policy is not desired, or would be of no
effect if performed. The acts relied on must amount to a denial of liability,
or a refusal to pay the loss.”
However injudicious it may be for parties to bind themselves by such agreement, it
seems to be well settled that, having done so, they cannot disregard it . . . . In the absence
of fraud, accident, or mistake, the parties having agreed that the amount of loss shall be
determined in a particular way, we are constrained to hold that such stipulation is valid.
71 Tex. 5, 8 S.W. 630, 631 (Tex. 1888). The Scottish Union court also drew a distinction between appraisal
provisions and arbitration clauses—noting that while arbitration determines the rights and liability of the
parties, appraisal merely “binds the parties to have the extent or amount of the loss determined in a
particular way.” Id.; see In re Allstate County Mut. Ins. Co., 85 S.W.3d 193, 195 (Tex. 2002).
In re Certain Underwriters at Lloyds Page 10
Id. (quoting Scottish Union, 8 S.W. at 632). Or, in other words, “’[w]aiver requires intent,
either the intentional relinquishment of a known right or intentional conduct
inconsistent with claiming that right.’” Id. at *8 (quoting In re Gen. Elec. Capital Corp.,
203 S.W.3d 314, 316 (Tex. 2006)).
3. Delay, Impasse, and Waiver
“[W]hile the time period may be instructive in interpreting the parties’
intentions, it alone is not the standard by which courts determine the reasonableness of
a delay.” Id. at *10. Reasonableness of a delay is measured from the point of impasse.
Id. at *11.
An impasse is not the same as a disagreement about the amount of loss.
Ongoing negotiations, even when the parties disagree, do not trigger a
party’s obligation to demand appraisal. Nor does an insurer’s offer of
money to cover damages necessarily indicate a refusal to negotiate
further, or to recognize additional damages upon reinspection.
Id. at *12 (citing Scottish Union, 8 S.W. at 632.).
In determining the “point of impasse” in insurance negotiations, Texas courts,
including the supreme court, have looked to a federal district court case from Iowa. Id.;
see Laas v. State Farm Mut. Auto Ins. Co., No. 14-98-00488-CV, 2000 Tex. App. LEXIS 5332,
at **16-18 (Tex. App.—Houston [14th Dist.] Aug. 10, 2000, no pet.) (not designated for
publication); see also Terra Indus., Inc. v. Commonwealth Ins. Co. of Am., 981 F. Supp. 581
(N.D. Iowa 1997). The Terra court looked to see at what point an insurer waived its
appraisal right and formulated the following factors to consider:
In deciding whether a demand for appraisal was made within a
reasonable time, and consequently has not been waived even if suit was
filed before the demand was made, courts have considered the timeliness
In re Certain Underwriters at Lloyds Page 11
of the demand in light of the circumstances as they existed at the time the
demand was made. Pertinent circumstances include (1) the time between
the breakdown of good faith negotiations concerning the amount of the
loss suffered by the insured and the appraisal demand; and (2) whether
there would be any prejudice to the other party resulting from the delay in
demanding an appraisal.
981 F. Supp. at 602 (citation omitted).4 Moreover, the supreme court noted that “[u]sing
the point of ‘impasse,’ rather than the first sign of disagreement, corresponds with our
definition of waiver as an ‘intentional relinquishment of a known right or intentional
conduct inconsistent with claiming that right.’” In re Universal Underwriters of Tex. Ins.
Co., 2011 Tex. LEXIS at *14 (quoting In re Gen. Elec. Capital Corp., 203 S.W.3d at 316). “In
other words, both parties must be aware that further negotiations would be futile, ‘or
would be of no effect if performed.’” Id. (quoting Scottish Union, 8 S.W. at 632). “If one
party genuinely believes negotiations to be ongoing, it cannot have intended to
relinquish its right to appraisal (unless it expressly waives it).” Id.
4. Prejudice
The supreme court further emphasized that delay alone is not enough to prove
waiver; a party must also demonstrate prejudice. Id. at **18-23. “If the insured has
suffered no prejudice due to delay, it makes little sense to prohibit appraisal when it can
provide a more efficient and cost-effective alternative to litigation.” Id. at *19. “Of
4 As noted by the supreme court in Universal Underwriters of Texas Insurance Company, the dispute
in Terra involved two-and-a-half years of negotiations and an “evident dispute.” 2011 Tex. LEXIS 357, at
*13 (citing Terra Indus., Inc. v. Commonwealth Ins. Co. of Am., 981 F. Supp. 581, 603 (N.D. Iowa 1997)). The
Terra court found that the insurer “had no notice that an impasse had been reached, because only the
filing of [the insured]’s suit demonstrated [the insured]’s unilateral conclusion that the parties were at an
impasse.” Id. (citing Terra Indus., Inc., 981 F. Supp. at 603).
In re Certain Underwriters at Lloyds Page 12
course, prejudice to a party may arise in any number of ways that demonstrate harm to
a party’s legal rights or financial position.” Id. However, the supreme court noted 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. This could short-circuit potential litigation and should be
pursued before resorting to the courts.
Id. at *23 (emphasis added). In sum, “[i]n order to establish waiver, therefore, a party
must show that an impasse was reached, and that any failure to demand appraisal
within a reasonable time prejudiced the opposing party.” Id. at *22.
B. Discussion
In the present case, the trial court, at the June 15, 2011 hearing, concluded that an
impasse had occurred shortly after the relator’s December 2008 letter, even though the
letter stated that the Andersons could submit additional information for further
consideration. In arriving at its conclusion, the trial court cited the allegations
contained in Mittie’s affidavit, which provided that relator told her that there was
nothing more that could be done and that the file was closed. The trial court also
indicated that the delay and the fact that the Andersons had already made some repairs
to the property demonstrated sufficient prejudice. The trial court subsequently signed
the order denying relator’s motion to reconsider enforcing the appraisal clause.
In this original proceeding, relator specifically argues that the Andersons “failed
to show the existence of a known impasse, as Underwriters always showed a
willingness to review new information”; that the Andersons “failed to show that
Underwriters unreasonably delayed in invoking appraisal once Underwriters became
In re Certain Underwriters at Lloyds Page 13
aware of any impasse”; and that the trial court’s finding of waiver “eviscerate[s] not just
the insurance contract’s appraisal clause, but also its anti-waiver clause.”
In arguing that the parties were at an impasse in December 2008, the Andersons
relied on Mittie’s affidavit wherein she stated that she was told by relator that the claim
was closed and would not be reopened. Mittie’s statements are undermined by the
letter sent by relator on December 5, 2008, to the Andersons, which did not specifically
state that the claim was closed and, instead, invited the Andersons to submit additional
information to support a re-evaluation and further negotiation of the claim. Relator
concluded that it was responsible for replacing a storm door on the Andersons’
property, rather than denying liability altogether. The damage sustained to the
Andersons’ property was less than the deductible associated with the Andersons’
homeowner’s policy, which did not warrant a payment from relator. But, the December
5, 2008 letter indicates that relator was willing to re-consider the claim in light of new
information provided by the Andersons, which was never provided. A review of the
record supports a finding that, in December 2008, the parties merely disagreed about
the amount of loss. See id. at *12 (noting that an impasse is not the same as a
disagreement about the amount of loss); see also Scottish Union, 8 S.W. at 632.
The first indication by either of the parties of an impasse, or the point when
further negotiations were futile, was when the Andersons filed suit, approximately two
years after the parties last communicated. See Universal Underwriters of Tex. Ins. Co.,
2011 Tex. LEXIS 357, at *14 (defining impasse as the point when both parties are “aware
that further negotiations would be futile, ‘or would be of no effect if performed’”)
In re Certain Underwriters at Lloyds Page 14
(quoting Scottish Union, 8 S.W. at 632); see also Beverly Farm Found. v. NLRB, 144 F.3d
1048, 1052 (7th Cir. 1998) (“The touch-stone for determining whether a genuine
‘impasse’ or ‘deadlock’ existed . . . is the absence of any realistic possibility that
continuation of the negotiations would have been fruitful.”); Terra Indus., Inc., 981 F.
Supp. at 603. Less than two weeks after the Andersons unilaterally indicated that an
impasse had been reached by filing suit without giving the required notice, relator
invoked its right to appraisal. See id. (citing Keesling v. W. Fire Ins. Co., 10 Wash. App.
841, 520 P.2d 622, 627 (Wash Ct. App. 1974) (finding no waiver where, “insofar as the
record shows, until the insured filed suit, the frame of mind of both parties welcomed
additional communications and negotiations rather than confrontation”)). Based on the
record before us, we find that relator did not unreasonably delay in the invocation of its
appraisal rights once it became aware that the parties were, indeed, at an impasse.
Moreover, there is no more than a scintilla of evidence in the record
demonstrating any prejudice on the Andersons. In her affidavit, Mittie merely states
that money was taken from the couple’s savings account to make repairs to the
property. We do not know what repairs were made, nor do we know the amount of
money expended to make the repairs. Rather, we are left to speculate about the extent
of the repairs. Such speculation cannot possibly serve to adequately prove prejudice,
especially in light of the supreme court’s repeated endorsement of the appraisal process
to handle disagreements about the amount of loss. See Jelinek v. Casas, 328 S.W.3d 526,
532 (Tex. 2010) (“’When the evidence offered to prove a vital fact is so weak as to do no
more than create a mere surmise or suspicion of its existence, the evidence is no more
In re Certain Underwriters at Lloyds Page 15
than a scintilla and, in legal effect, is no evidence.’”) (quoting Kindred v. Con/Chem, Inc.,
650 S.W.2d 61, 63 (Tex. 1983)); see also In re Universal Underwriters of Tex. Ins. Co., 2011
Tex. LEXIS 357, at **6-7; Johnson, 290 S.W.3d at 888-95; Scottish Union, 8 S.W. at 631-32.
In any event, the Andersons rely heavily on the decision in In re Acadia Insurance
Company in advancing their main waiver arguments—that waiver requires a fact
determination by the trial court and that mandamus is unavailable to resolve disputed
factual issues presented to the trial court. See 279 S.W.3d 777 (Tex. App.—Amarillo
2007, no pet.) (noting that the determination of whether a right has been waived is a
question of fact for the trier of fact)5; see also Rodriguez v. Classical Custom Homes, Inc., 176
S.W.3d 928, 932 (Tex. App.—Dallas 2005, no pet.) (same). However, an analysis of the
Andersons’ waiver argument necessarily requires that we examine and interpret the
terms of the insurance policy, which constitutes a question of law for the courts to
5 In Acadia Insurance Company, the insurer denied all liability on the basis that the property
damage predated the inception of the insurance policy. 279 S.W.3d 777, 778-79 (Tex. App.—Amarillo
2007, no pet.). When the insured sued, the insurer invoked the policy’s appraisal clause. Id. at 779. The
Amarillo Court of Appeals denied a writ of mandamus and held that the trial court did not abuse its
discretion in denying appraisal because the insurer “intentionally and unequivocally relinquished the
right [to an appraisal] so that it could challenge coverage and, thus, waived that right.” Id. at 780.
This case, however, is factually distinguishable from Acadia Insurance Company—a case where the
insurer denied all coverage for the claims under the policy. In State Farm Lloyds v. Johnson, the supreme
court stated that an insurer may dispute the extent of coverage and deny certain claims without waiving
the right to appraisal. See 290 S.W.3d 886, 893-95 (Tex. 2009) (holding that an insurer could not “avoid
appraisal . . . merely because there might be a causation question that exceeds the scope of appraisal”;
noting that appraisers can “decide the cost to repair each [loss] without deciding who must pay for it”;
and “unless ‘the amount of loss’ will never be needed (a difficult prediction when litigation has yet to
begin), appraisals should generally go forward without preemptive intervention by the courts”). Here,
relator did not deny coverage. They admitted that they were responsible for repairing a storm door;
however, because the damages were determined to be less in value than the deductible, no payment was
made. In other words, relator did not challenge liability in this matter, nor did they deny coverage for all
claims. They invited the Andersons to provide additional information to warrant a re-inspection and
possibly a payment, if the value of the repairs needed exceeded the deductible. At its very core, this is a
dispute about the amount of loss, which is different from the fact scenario in Acadia Insurance Company.
In re Certain Underwriters at Lloyds Page 16
decide. See Utica Nat’l Ins. Co. v. Am. Indem. Co., 141 S.W.3d 198, 202 (Tex. 2004)
(holding that insurance policies are controlled by rules of interpretation and
construction generally applicable to contracts); see also MCI Telecomms. Corp. v. Tex.
Utils. Elec. Co., 995 S.W.2d 647, 650-51 (Tex. 1999) (stating that the interpretation of an
unambiguous contract is a question of law, which is reviewed de novo).
The principles courts use when interpreting an insurance policy are well
established. See Gilbert Tex. Constr., L.P. v. Underwriters at Lloyd’s London, 327 S.W.3d
118, 126 (Tex. 2010). Those principles include construing the policy according to
general rules of contract construction to ascertain the parties’ intent. Id. We examine
the language of the policy because we presume that the language of the contract reflects
the intentions of the parties, and we review the entire agreement and seek to harmonize
and give effect to all provisions so that none will be meaningless. Id. Courts strive to
honor the parties’ agreement and not remake their contract by reading additional
provisions into it. Id.; see Nat’l Union Fire Ins. Co. of Pittsburgh, PA v. Crocker, 246 S.W.3d
603, 606 (Tex. 2008).
At the outset, we note that the parties contracted for an appraisal if they
disagreed about the damaged property’s value. The underlying policy contains several
paragraphs which are relevant to the Andersons’ waiver argument. First, paragraph 12
establishes that all of the provisions of the policy are conditions precedent before filing
suit against relator. See Hohenberg Bros. v. George E. Gibbons & Co., 537 S.W.2d 1, 3 (Tex.
1976) (“Conditions precedent to an obligation to perform are those acts or events, which
occur subsequently to the making of a contract, that must occur before there is a right to
In re Certain Underwriters at Lloyds Page 17
immediate performance and before there is a breach of contractual duty.”). As such, the
Andersons are not allowed to bring suit against relator unless all of the other policy
provisions, including the appraisal provision, have been satisfied. Second, paragraph
18 of the policy strictly prohibits a waiver finding unless the policy otherwise provides
for the waiver of a provision. The parties do not direct us to any provisions that
contradict paragraph 18 and expressly allow for the waiver of appraisal.
When interpreting a contract, a court cannot use parol evidence to alter the terms
of the agreement. See Nat’l Union Fire Ins. Co. v. CBI Indus., 907 S.W.2d 517, 520 (Tex.
1995) (“Parol evidence is not admissible for the purpose of creating an ambiguity. Only
where a contract is first determined to be ambiguous may the courts consider the
parties’ interpretation . . . and admit extraneous evidence to determine the true meaning
of the instrument.”). Mittie’s conclusory affidavit constituted parol evidence which had
the effect of altering the terms of the policy to which the parties had agreed.
However, the Andersons contend that we may not consider the anti-waiver
provision of the policy because it was not presented to the trial court. We are not
persuaded by this argument. The record reflects that the policy was before the trial
court and presumably was considered by the trial court when the appraisal issue was
considered. Perhaps more importantly, the resolution of this issue necessarily requires
us to examine and interpret the language of the policy in its entirety. And, as noted
above, our review of the policy is de novo, and we are to construe the policy so that no
terms of the agreement are rendered meaningless or superfluous. See MCI Telecomms.
Corp., 995 S.W.2d at 650-51; see also Gilbert Tex. Constr., L.P., 327 S.W.3d at 126. We do
In re Certain Underwriters at Lloyds Page 18
not believe that the trial court had the discretion to ignore the provisions of the policy
that the parties had agreed to and, instead, use Mittie’s affidavit to alter the terms of the
agreement.
Based on the unambiguous language of the policy, the issue of waiver is
immaterial because the underlying homeowner’s insurance policy does not allow for it.
Moreover, the record neither demonstrates that relator unreasonably delayed in the
invocation of its right to appraisal, nor that the Andersons were prejudiced by any
perceived delay in the invocation of appraisal. As a result, we reject the Andersons’
argument that the trial court’s waiver finding precludes mandamus.
Based on the foregoing, we conclude that relator has shown that the trial court
clearly abused its discretion by: (1) failing to enforce the appraisal clause of the
underlying homeowner’s insurance policy; and (2) concluding that relator had waived
this right. See In re Slavonic Mut. Fire Ins. Ass’n, 308 S.W.3d 556, 559 (Tex. App.—
Houston [14th Dist.] 2010, no pet.) (“Where an insurance contract mandates appraisal to
resolve the parties’ dispute regarding the value of a loss, and the appraisal provision
has not been waived, a trial court abuses its discretion and misapplies the law by
refusing to enforce the appraisal provision.”) (citing Scottish Union, 18 S.W. at 440). The
parties do not dispute whether relator has an adequate remedy at law, and, according
to the supreme court, “’mandamus relief is appropriate to enforce an appraisal clause
because denying the appraisal would vitiate the insurer’s right to defend its breach of
contract claim.’” In re Universal Underwriters of Tex. Ins. Co., 2011 Tex. LEXIS 357, at *23
(quoting In re Allstate County Mut. Ins. Co., 85 S.W.3d at 196 (holding that refusal to
In re Certain Underwriters at Lloyds Page 19
order appraisal would “den[y] the development of proof going to the heart of a party’s
case and cannot be remedied by appeal”)). Because we have concluded that the
appraisal provision has not been waived by relator, we hold that relator is entitled to
mandamus relief on this issue.6 Accordingly, this issue is sustained, and we direct the
trial court to grant relator’s motion to compel appraisal.
IV. THE DISCOVERY DISPUTE
In its second issue, relator complains about the Andersons’ discovery requests.
Specifically, relator contends that the “trial court erred in compelling responses to this
discovery that was overly broad, unduly burdensome, and abusive on its face” and that
other courts have held that discovery requests that are substantially similar to those in
this case to be overbroad. The Andersons counter that the trial court did not abuse its
discretion in refusing relator’s global objections and requiring relator to answer or
object to each interrogatory and request for production separately.
6 We acknowledge that, in the trial court, relator argued that this case should be abated during
the appraisal process. The trial court denied abatement. In their prayer, relator does not request that the
case be abated for appraisal. Nevertheless, we have found instances where cases were abated until
conditions precedent in an insurance policy were satisfied. See In re Slavonic Mut. Fire Ins. Ass’n, 308
S.W.3d 556, 565 (Tex. App.—Houston [14th Dist.] 2010, orig. proceeding) (citing Lidawi v. Progressive
County Mut. Ins. Co., 112 S.W.3d 725, 735 (Tex. App.—Houston [14th Dist.] 2003, no pet.)); see Vanguard
Underwriters Ins. Co. v. Smith, 999 S.W.2d 448, 451 (Tex. App.—Amarillo 1999, orig. proceeding)
(concluding that the insurer was “clearly entitled to have the appraisal procedure followed and the
underlying suit abated until the completion of that procedure”); In re Foremost County Mut. Ins. Co., 172
S.W.3d 128, 135 (Tex. App.—Beaumont 2005, orig. proceeding) (relying on In re Prudential to grant
mandamus relief and order abatement of the case where the insured failed to comply with a condition
precedent requiring the insured to submit to an examination under oath). However, in Universal
Underwriters, the supreme court noted that: “The trial court’s failure to grant the motion to abate is not
subject to mandamus, and the proceedings need not be abated while the appraisal goes forward.” 2011
Tex. LEXIS 357, at *24 n.5 (citing In re Allstate County Mut. Ins. Co., 85 S.W.3d 193, 196 (Tex. 2002)).
Therefore, based on the Universal Underwriters case, it appears as if relator would not have been entitled
to an abatement of the case so that the appraisal process can occur even if it had requested abatement in
its petition for writ of mandamus. See id.
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As the party seeking relief, relator has the burden of providing this Court with a
record sufficient to establish its right to mandamus relief. See Walker, 827 S.W.2d at 837;
see also In re Rendon, No. 04-07-00742-CV, 2007 Tex. App. LEXIS 8970, at *2 (Tex. App.—
San Antonio Nov. 14, 2007, orig. proceeding) (mem. op.) (per curiam). Mandamus will
not lie absent a ruling by the trial court that is being challenged. See TEX. R. APP. P.
52.3(k)(1)(A) (requiring that the appendix contain a certified or sworn copy of any order
complained of, or any other document showing the matter complained of in the
mandamus petition); Axelson, Inc. v. McIlhany, 798 S.W.2d 550, 556 (Tex. 1990) (stating
that for mandamus to lie, the respondent “must have explicitly denied motions
intended to compel the deposition”); see also In re S. Ins. Co., No. 14-11-00604-CV, 2011
Tex. App. LEXIS 6678, at *1 (Tex. App.—Houston [14th Dist.] Aug. 23, 2011, orig.
proceeding) (mem. op.) (per curiam); In re Rendon, 2007 Tex. App. LEXIS 8970, at *2
(denying mandamus because the “record submitted by Rendon is devoid of any
discovery orders or rulings made by the trial court”); In re Baldridge, No. 14-06-00647-
CV, 2006 Tex. App. LEXIS 6824, at *1 (Tex. App.—Houston [14th Dist.] Aug. 1, 2006,
orig. proceeding) (mem. op.) (per curiam) (denying mandamus because relators failed
to provide the court of appeals a written order). However, mandamus relief may be
based on an oral ruling only if the ruling is a “clear, specific, and enforceable order that
is adequately shown by the record.” See In re Bledsoe, 41 S.W.3d 807, 811 (Tex. App.—
Fort Worth 2001, orig. proceeding); see also In re S. Ins. Co., 2011 Tex. App. LEXIS 6678,
at *2.
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Here, relator tried to avoid answering the Andersons’ discovery by simply
arguing that it had provided the Andersons with the entire claim file. In any event,
relator has not directed us to any written or oral ruling where the trial court overruled
relator’s objections and ordered it to produce specific pieces of information. At the June
15, 2011 hearing, it appears as if the trial court ordered relator to provide specific
objections or answers to each and every interrogatory and request for production rather
than allowing relator to lodge generic, global objections. The trial court’s “oral ruling”
does not clearly and specifically compel “responses to discovery without any limitation
on relevance, burdensome, or abusiveness.” Because we do not have a clear and
specific ruling from the trial court as to particular portions of the Andersons’ discovery
requests, we cannot say that, based on the current state of the record, that relator has
established its entitlement to mandamus relief with respect to its discovery issue. See
TEX. R. APP. P. 52.3(k)(1)(A); Axelson, Inc., 798 S.W.2d at 556; see also In re S. Ins. Co., 2011
Tex. App. LEXIS 6678, at *1; In re Rendon, 2007 Tex. App. LEXIS 8970, at *2; In re
Baldridge, 2006 Tex. App. LEXIS 6824, at *1.
And, to the extent that an argument can be made that the trial court’s purported
oral ruling with regard to the discovery dispute was clear and specific enough to
warrant further analysis, we note that the trial court has broad discretion to schedule
and define the scope of discovery in cases, see In re Colonial Pipeline Co., 968 S.W.2d 938,
941 (Tex. 1998) (orig. proceeding), and that the trial court’s statements appear to only
require relator to provide responses to the discovery in compliance with the rules. See
TEX. R. CIV. P. 193.1, 193.2, 196.2(b) (providing that parties must respond to discovery
In re Certain Underwriters at Lloyds Page 22
requests and that objections must be specific to the request made and must be made in
good faith). Thus, we cannot say that relator has established a clear abuse of discretion
on the part of the trial court with respect to the discovery dispute. Accordingly, we
overrule relator’s second issue and deny the portion of relator’s petition for writ of
mandamus pertaining to discovery.
V. CONCLUSION
In sum, we conditionally grant the petition for writ of mandamus with respect to
the appraisal issue. The portion of the petition that corresponds to relator’s discovery
issue is denied. We are confident the trial court will vacate its order denying appraisal
and proceed in compliance with this opinion. The writ will issue only if the trial court
fails to take appropriate action in accordance with this opinion. The stay of proceedings
in the trial court is lifted.
AL SCOGGINS
Justice
Before Chief Justice Gray,
Justice Davis, and
Justice Scoggins
Conditionally granted, in part, denied, in part
Opinion delivered and filed October 12, 2011
[OT06]
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