In Re State Farm Lloyds v. the State of Texas

NUMBER 13-22-00545-CV
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI – EDINBURG
IN RE STATE FARM LLOYDS
On Petition for Writ of Mandamus.
MEMORANDUM OPINION
Before Chief Justice Contreras and Justices Benavides and Tijerina
Memorandum Opinion by Chief Justice Contreras1
Relator State Farm Lloyds has filed a petition for writ of mandamus asserting that
the trial court 2 abused its discretion by appointing an attorney as the umpire in a property
1 See TEX. R. APP. P. 52.8(d) (“When denying relief, the court may hand down an opinion but is not
required to do so. When granting relief, the court must hand down an opinion as in any other case.”); id. R.
47.1 (requiring the appellate courts to “hand down a written opinion that is as brief as practicable but that
addresses every issue raised and necessary to final disposition”); id. R. 47.4 (distinguishing opinions and
memorandum opinions).
2 This original proceeding arises from trial court cause number CL-22-2308-G in the County Court
at Law No. 7 of Hidalgo County, Texas, and the respondent is the Honorable Sergio Valdez. See id. R.
52.2.
damage dispute when the relevant insurance policy requires that an umpire must be an
engineer, architect, adjuster, public adjuster, or contractor. We conditionally grant the
petition for writ of mandamus.
I. BACKGROUND
Real party in interest Bernardo Vela filed an application with the trial court for the
appointment of an umpire regarding his insurance claims for property damage to his
residence. According to Vela’s application, Vela’s home was damaged by a hurricane on
July 25, 2020, and the parties disagreed regarding the full extent of the property damages
sustained to the residence. Vela thus requested the trial court to appoint an umpire under
the appraisal provision of his homeowner’s insurance policy. Vela alleged that he invoked
the appraisal provision, that he notified relator that he was selecting Leopoldo “Leo” Diaz
as his appraiser, and that relator subsequently selected Darrel Edwards as its appraiser.
Apparently the appraisers did not agree as to the damages, thus, Vela requested the trial
court to appoint a “competent and disinterested umpire in this appraisal.”
Relator filed a response to Vela’s application for the appointment of an umpire
including a general denial, a specific denial, and a special exception. Relator asserted
that the application was “procedurally improper” 3 under the terms of the insurance policy
and further argued that:
[Vela] recommends umpire candidates that lack the training and experience
to serve as umpire that the Policy requires. Accordingly, [relator] respectfully
requests that this Court appoint one of the umpire candidates
recommended in this response, as each possesses the training and
3 Relator contended that Vela failed to comply with the provisions of the insurance policy requiring
a party to provide “written notice of the intent to file” an application for the appointment of an umpire at least
ten days prior to filing the application. However, relator did not further pursue this issue in the trial court and
does not raise it in this original proceeding.
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experience required by the Policy. This will protect the integrity of the
appraisal process and ensure that [Vela] does not profit by intentionally
violating the Policy’s notice requirements or by engaging in forum shopping.
Relator provided the trial court with a proposed order suggesting three different umpires.
On August 10, 2022, the trial court held a hearing on Vela’s application for the
appointment of an umpire. Vela’s attorney did not appear, and the trial court informed
relator’s counsel that it would review the case and issue an appointment. On September
12, 2022, the trial court appointed Derek Salinas, an attorney, as umpire and set the case
for a status conference. On September 20, 2022, relator filed a motion for reconsideration
of the appointment on grounds that Salinas was not qualified to serve as an umpire under
the terms of the insurance policy. Relator advised the trial court that, “[t]he Policy requires
the umpire to be either an engineer or an architect, an adjuster or a public adjuster or a
contractor ‘with experience and training in the construction, repair, and estimating of the
type of property damage in dispute.’ Salinas is none of the above, but an attorney.” Vela
did not file a response to relator’s motion for reconsideration.
On September 28, 2022, the trial court held a hearing on relator’s motion for
reconsideration of the appointment. Vela’s attorney again did not appear. The trial court
took the issue under consideration. On September 29, 2022, the trial court denied
relator’s motion for reconsideration and ordered the umpire to file a status report or
appraisal award before the next scheduled status hearing, which was then set to occur
on December 1, 2022.
On November 8, 2022, relator filed this original proceeding. By one issue, relator
asserts that the trial court abused its discretion by appointing an umpire who is not
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qualified under the terms of Vela’s homeowner’s insurance policy. According to relator,
the policy requires that an umpire be either a licensed or certified engineer, architect,
adjuster or public adjuster, or a contractor “with experience and training in the
construction, repair, and estimating of the type of property damage in dispute.” Relator
contends that Salinas is an attorney who lacks the required subject matter expertise.
Relator further asserts that it lacks an adequate remedy by appeal to address this error.
In conjunction with its petition for writ of mandamus, relator also filed a motion for
temporary relief seeking to stay the trial court’s September 29, 2022 order pending the
resolution of this original proceeding.
On November 10, 2022, this Court granted relator’s motion for temporary relief and
requested Vela to file a response to the petition for writ of mandamus within ten days.
See TEX. R. APP. P. 52.4, 52.8, 52.10. Vela filed two motions for extension of time to file
his response to the petition for writ of mandamus: first until December 21, 2022, and then
again until January 3, 2023. This Court granted both motions for extension of time.
Nevertheless, Vela did not ultimately file a response to the petition for writ of mandamus.
II. MANDAMUS
Mandamus is an extraordinary and discretionary remedy. See In re Allstate Indem.
Co., 622 S.W.3d 870, 883 (Tex. 2021) (orig. proceeding); In re Garza, 544 S.W.3d 836,
840 (Tex. 2018) (orig. proceeding) (per curiam); In re Prudential Ins. Co. of Am., 148
S.W.3d 124, 138 (Tex. 2004) (orig. proceeding). The relator must show that (1) the trial
court abused its discretion, and (2) the relator lacks an adequate remedy on appeal. In re
USAA Gen. Indem. Co., 624 S.W.3d 782, 787 (Tex. 2021) (orig. proceeding); In re
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Prudential Ins. Co. of Am., 148 S.W.3d at 135–36; Walker v. Packer, 827 S.W.2d 833,
839–40 (Tex. 1992) (orig. proceeding). “The relator bears the burden of proving these two
requirements.” In re H.E.B. Grocery Co., 492 S.W.3d 300, 302 (Tex. 2016) (orig.
proceeding) (per curiam); Walker, 827 S.W.2d at 840.
Trial courts have no discretion to ignore a valid appraisal clause. See State Farm
Lloyds v. Johnson, 290 S.W.3d 886, 888 (Tex. 2009); In re Acceptance Indem. Ins., 562
S.W.3d 645, 649 (Tex. App.—San Antonio 2018, orig. proceeding); In re State Farm
Lloyds, 514 S.W.3d 789, 792 (Tex. App.—Houston [14th Dist.] 2017, orig. proceeding).
Thus, mandamus is available to remedy certain matters pertaining to the appraisal
process. See In re Universal Underwriters of Tex. Ins., 345 S.W.3d 404, 412 (Tex. 2011)
(orig. proceeding) (granting mandamus relief to enforce the right to appraisal); In re
Allstate Cnty. Mut. Ins., 84 S.W.3d 193, 196 (Tex. 2002) (orig. proceeding) (“A refusal to
enforce the appraisal process here will prevent the defendants from obtaining the
independent valuations that could counter at least the plaintiffs’ breach of contract
claim.”).
III. APPRAISAL
An insurance policy establishes the rights and obligations to which an insurer and
its insured have agreed. See In re Farmers Tex. Cnty. Mut. Ins., 621 S.W.3d 261, 270
(Tex. 2021) (orig. proceeding); USAA Tex. Lloyds Co. v. Menchaca, 545 S.W.3d 479, 488
(Tex. 2018). We interpret insurance policies pursuant to the same rules of construction
that apply to contracts in general. Pharr-San Juan-Alamo Indep. Sch. Dist. v. Tex. Pol.
Subdivisions Prop./Cas. Joint Self Ins. Fund, 642 S.W.3d 466, 473 (Tex. 2022); Richards
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v. State Farm Lloyds, 597 S.W.3d 492, 497 (Tex. 2020). Our primary goal is to effectuate
the parties’ intent as expressed in the insurance policy. Monroe Guar. Ins. v. BITCO Gen.
Ins., 640 S.W.3d 195, 198–99 (Tex. 2022). “We determine the parties’ intent through the
terms of the policy, giving words and phrases their ordinary meaning, informed by
context.” Dillon Gage Inc. of Dall. v. Certain Underwriters at Lloyds Subscribing to Pol’y
No. EE1701590, 636 S.W.3d 640, 643 (Tex. 2021).
“Appraisal clauses in Texas insurance policies have long provided a mechanism
to resolve disputes between policy holders and insurers about the amount of loss for a
covered claim.” Ortiz v. State Farm Lloyds, 589 S.W.3d 127, 131 (Tex. 2019). The Texas
Supreme Court has described the policies behind the appraisal process as follows:
Today, appraisal clauses are included in most property insurance policies.
Access to the appraisal process to resolve disputes is an important tool in
the insurance claim context, curbing costs and adding efficiency in resolving
insurance claims. This Court has reasoned that “[l]ike any other contractual
provision, appraisal clauses should be enforced.” “[I]n every property
damage claim, someone must determine the ‘amount of loss,’ as that is
what the insurer must pay.” Appraisal clauses are a means of determining
the amount of loss and resolving disputes about the amount of loss for a
covered claim.
....
We note that an insurer’s use of the policy’s appraisal process
represents a willingness to resolve a dispute outside of court—often without
admitting liability on the claim, or even specifically disclaiming liability—
similar to a settlement. An insurer’s payment under such circumstances
results from a calculated risk assessment that paying the appraisal value
will ultimately be less risky or costly than litigating the claims to determine
liability. As such, the payment in accordance with an appraisal is neither an
acknowledgment of liability nor a determination of liability under the
policy . . . .
Barbara Techs. Corp. v. State Farm Lloyds, 589 S.W.3d 806, 814, 820 (Tex. 2019)
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(citations omitted). The supreme court has described “the appraisal process as an
efficient and less costly alternative to litigation, requiring ‘no lawsuits, no pleadings, no
subpoenas, and no hearings.’” Ortiz, 589 S.W.3d at 131 (quoting Johnson, 290 S.W.3d
at 894).
IV. ANALYSIS
By one issue, relator asserts that the appraisal provision in Vela’s insurance policy
requires that an umpire be either a licensed or certified engineer, an architect, adjuster or
public adjuster, or a contractor “with experience and training in the construction, repair,
and estimating of the type of property damage in dispute.” Relator contends that the trial
court failed to follow the requirements in the appraisal provision when it appointed an
attorney as umpire. Relator further argues that it lacks an adequate remedy by appeal to
address this error. As noted previously, Vela has not favored us with argument or authority
to the contrary.
A. Appointment of Umpire
Section I of the insurance policy, titled “Conditions,” contains the appraisal clause
at issue in this original proceeding. This clause reads, in relevant part, as follows:
4. Appraisal. If you and we fail to agree on the amount or loss, either
party can demand that the amount of the loss be set by appraisal.
Only you or we may demand appraisal. A demand for appraisal must
be in writing. You must comply with SECTION I—CONDITIONS,
Your Duties After Loss before [making] a demand for appraisal. At
least 10 days before [demanding] appraisal, the party seeking
appraisal must provide the other with written, itemized
[documentation] of a specific dispute as to the amount of the loss,
identifying separately each item being [disputed].
a. Each party will select a competent, disinterested appraiser
and notify the other party of the [appraiser’s] identity within 20
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days of receipt of the written demand for appraisal.
b. The appraisers will then attempt to set the amount of the loss
of each item in dispute as specified by each party, and jointly
submit to each party a written report of agreement signed by
them. In all instances the written report of agreement will be
itemized and state separately the actual cash value,
replacement cost, and if applicable, the market value of each
item in dispute.
The written report of agreement will set the amount of the loss
of each item in dispute and will be binding upon you and us.
c. If the two appraisers fail to agree upon the amount of the loss
within 30 days, unless the [period] of time is extended by
mutual agreement, they will select a competent, disinterested
umpire and will submit their differences to the umpire. If the
appraisers are unable to agree upon an umpire within 15
days:
(1) you or we may make a written application for a judge
of a court of record in the same state and county (or
city if the city is not within a county) where the
residence premises is located to select an umpire;
(2) the party requesting the selection described in item
c.(1) must provide the other party:
(a) written notice of the intent to file, identifying the
specific location and identity of the court at least
10 days prior to submission of the written
application; and
(b) a copy of the written application; and
(3) a written report of agreement, as required in item b.,
signed by any two (appraisers or appraiser and umpire)
will set the amount of the loss of each item in dispute
and will be binding upon you and us. In all [instances]
the written report of agreement will be itemized and
state separately the actual cash value, replacement
cost, and if [applicable], the market value of each item
in dispute.
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d. To qualify as an appraiser or umpire for a loss to property
described in COVERAGE A—DWELLING, a person must be
one of the following and be licensed or certified as required by
the applicable jurisdiction:
(1) an engineer or architect with experience and training in
building construction, repair, estimating, or
investigation of the type of property damage in dispute;
(2) an adjuster or public adjuster with [experience] and
training in estimating the type of property damage in
dispute; or
(3) a contractor with experience and training in the
construction, repair, and estimating of the type of
properly damage in dispute.
e. A person may not serve as an appraiser or [umpire] if that
person, any employee of that person, that person’s employer,
or any employee of their employer:
(1) has performed services for either party with respect to
the claim at issue in the [appraisal]; or
(2) has a financial interest in the outcome of the claim at
issue in the appraisal.
Thus, the insurance policy expressly requires that “[t]o qualify as an . . . umpire,” a person
“must be” either an engineer or architect, an adjuster or public adjuster, or a contractor.
Further, in order to qualify as an umpire, a person must have “experience and training” in
their respective fields and must “be licensed or certified as required by the applicable
jurisdiction.”
There is no evidence in the record that Salinas meets the foregoing requirements
to serve as an umpire, and the record similarly lacks argument or authority in support of
such a proposition. See Johnson, 290 S.W.3d at 890 (“And the policy requires each party
to select a ‘competent, disinterested appraiser,’ not a lawyer or insurance expert.”). Giving
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the terms of the policy their ordinary meaning, we conclude that the trial court abused its
discretion in appointing Salinas, an attorney, to serve as an umpire in this dispute. See
Dillon Gage Inc. of Dall., 636 S.W.3d at 643.
B. Adequate Remedy by Appeal
Relator contends that it lacks an adequate remedy by appeal to address the trial
court’s abuse of discretion in appointing Salinas as umpire for this dispute. In determining
whether relator possesses an adequate appellate remedy, we weigh the benefits of
mandamus review against the detriments using a fact-specific analysis. In re Acad., Ltd.,
625 S.W.3d 19, 32 (Tex. 2021) (orig. proceeding). In Prudential, the seminal case
regarding the adequacy of an appellate remedy, the supreme court explained this inquiry
as follows:
The other requirement Prudential must meet is to show that it has no
adequate remedy by appeal. The operative word, “adequate”, has no
comprehensive definition; it is simply a proxy for the careful balance of
jurisprudential considerations that determine when appellate courts will use
original mandamus proceedings to review the actions of lower courts. These
considerations implicate both public and private interests. Mandamus
review of incidental, interlocutory rulings by the trial courts unduly interferes
with trial court proceedings, distracts appellate court attention to issues that
are unimportant both to the ultimate disposition of the case at hand and to
the uniform development of the law, and adds unproductively to the
expense and delay of civil litigation. 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. An appellate remedy is “adequate”
when any benefits to mandamus review are outweighed by the detriments.
When the benefits outweigh the detriments, appellate courts must consider
whether the appellate remedy is adequate.
In re Prudential Ins. Co. of Am., 148 S.W.3d at 135–36.
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Relator asserts that it lacks a remedy by appeal because a request to appoint an
umpire does not constitute a lawsuit and the resulting order is not a final judgment that is
subject to appeal. In unpublished memorandum opinions, our sister courts have agreed
with that proposition. See Lyndon S. Ins. v. W. Parnell, LLC, No. 05-19-01524-CV, 2021
WL 3073314, at *1 (Tex. App.—Dallas July 20, 2021, no pet.) (mem. op.) (dismissing an
appeal from an order appointing an umpire in an insurance coverage dispute); Tex. Mun.
League Joint Self-Insurance Fund v. Hous. Auth. of the City of Alice, No. 04-15-00069-
CV, 2015 WL 5964182, at *1–3 (Tex. App.—San Antonio Oct. 14, 2015, no pet.) (mem.
op.) (concluding that the selection of an umpire by a judge did not invoke the subject
matter jurisdiction of the court). As specified in the insurance policy at issue, “[a]ppraisal
is a non-judicial proceeding,” and Vela’s application for the appointment of an umpire is
not part of an ongoing lawsuit and does not itself include substantive claims or causes of
action. Thus, based on the record presented, the application in this case appears to fall
within the nature of an ancillary proceeding. See Marsh USA Inc. v. Cook, 354 S.W.3d
764, 775 (Tex. 2011) (noting that “ancillary” means “supplementary”) (cleaned up); see,
e.g., In re DePinho, 505 S.W.3d 621, 623 (Tex. 2016) (orig. proceeding) (per curiam)
(stating that pre-suit discovery is “not an end within itself” but instead is “in aid of a suit
which is anticipated” and “ancillary to the anticipated suit”) (cleaned up). Consistent with
this concept, relator has not identified, and we have not found, any cases that treat an
order appointing an umpire as a final, appealable judgment. Therefore, in accordance
with our standard of review for original proceedings, we examine whether the
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circumstances of the case render a remedy by appeal from a future final judgment to be
inadequate.
Relator asserts that requiring it to participate in an appraisal with an “incompetent”
umpire that it did not contractually agree to will result in extra costs and delay. Relator
contends that under the policy, it will incur costs in paying for the improper appraisal.
Relator argues that “the appraisal will result in an invalid and nonbinding award purporting
to set the amount of the loss for Vela’s insurance claim . . . which will inevitably require
the parties to litigate the validity of that award.” Relator contends that any award by an
unqualified umpire would be made “without authority” and would be unenforceable. See
Fisch v. Transcon. Ins., 356 S.W.2d 186, 189–90 (Tex. App.—Houston 1962, writ ref’d
n.r.e.) (“Since the umpire’s power to act is conditioned upon a disagreement between the
appraisers and the submission of their differences only to him, we are of the opinion that
the award, which was signed by only one appraiser and the umpire who had no authority
to act, is invalid.”); cf. Wells v. Am. States Preferred Ins., 919 S.W.2d 679, 685 (Tex.
App.—Dallas 1996, writ denied) (“Indeed, an appraiser’s acts in excess of the authority
conferred upon him by the appraisal agreement are not binding on the parties.”); see also
TMM Invs., Ltd. v. Ohio Cas. Ins., 730 F.3d 466, 470 (5th Cir. 2013). In this regard, we
note that an appraisal award may be set aside when the award was made: (1) without
authority; (2) by fraud, accident, or mistake; or (3) without complying with the policy
requirements. See Johnson, 290 S.W.3d at 888 & 895; see also In re Tex. Mun. League
Intergovernmental Risk Pool, No. 13-20-00486-CV, 2021 WL 743305, at *1 (Tex. App.—
Corpus Christi–Edinburg Feb. 25, 2021, orig. proceeding [mand. denied]) (mem. op.).
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Based on the specific facts and circumstances of this case, we conclude that
relator lacks an adequate remedy by appeal to address the trial court’s error in appointing
an individual as umpire who fails to meet the requirements delineated in the insurance
policy. See In re Universal Underwriters of Tex. Ins., 345 S.W.3d at 412; In re Allstate
Cnty. Mut. Ins., 84 S.W.3d at 196; see also In re Prudential Ins. Co. of Am., 148 S.W.3d
at 140 (noting that the supreme court has issued mandamus “to enforce contractual
rights” and has done so “to enforce the parties’ agreement to submit to an appraisal
process for determining the value of a vehicle claimed to be a total loss”). Absent
mandamus review, the trial court’s error will cause the parties and public to incur “time
and money utterly wasted enduring eventual reversal of improperly conducted
proceedings.” In re Prudential Ins. Co. of Am., 148 S.W.3d at 136. Stated otherwise, a
refusal to enforce the terms of the insurance policy regarding the requirements for an
umpire will impair the efficacy of the appraisal process insofar as an umpire who fails to
meet the policy’s requirements will lack the expertise necessary to obtain an appraisal
award reflecting the proper valuation of the property damages at issue. Further, allowing
the appointment of an unqualified umpire would engender additional litigation and would
affect relator’s ability to defend any claims for breach of contract that might be filed in the
future. See In re Auto Club Indem. Co., 580 S.W.3d 852, 857–58 (Tex. App.—Houston
[14th Dist.] 2019, orig. proceeding). We thus conclude that relator lacks an adequate
remedy by appeal.
C. Summary
The trial court abused its discretion by appointing an umpire in contradiction to the
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requirements delineated in the insurance policy, and relator lacks an adequate remedy
by appeal to address this error. We sustain the sole issue presented in this original
proceeding.
V. CONCLUSION
The Court, having examined and fully considered the petition for writ of mandamus
and the applicable law, is of the opinion that relator has met its burden to obtain relief.
Accordingly, we lift the stay previously imposed in this case. See TEX. R. APP. P. 52.10.
We conditionally grant the petition for writ of mandamus. We direct the trial court to vacate
its order appointing Salinas as umpire and to appoint an umpire in accordance with the
terms of the insurance policy. The writ will issue only if the trial court fails to comply.
DORI CONTRERAS
Chief Justice
Delivered and filed on the
15th day of February, 2023.
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