in Re OOIDA Risk Retention Group, Inc., Certain Underwriters at Lloyds, and George Odom

COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 02-15-00238-CV
IN RE OOIDA RISK RETENTION RELATORS
GROUP, INC., CERTAIN
UNDERWRITERS AT LLOYDS,
AND GEORGE ODOM
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ORIGINAL PROCEEDING
TRIAL COURT NO. C2013333
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OPINION
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Relators OOIDA Risk Retention Group, Inc., Certain Underwriters at
Lloyds, and George Odom seek a writ of mandamus to compel the trial court to
vacate its order denying their motion to appoint an impartial umpire and to vacate
its order denying their motion for summary judgment. For the reasons set out
below, we conditionally grant relief on the order denying Relators’ motion to
appoint an impartial umpire but deny Relators’ petition on the order denying their
motion for summary judgment.
Background
Ricky Lee Wells, the real party in interest, had commercial automobile
insurance for his Peterbilt truck with Relators.1 Condition 12 of the policy, entitled
“Appraisal,” provided:
In case the Insured and Underwriters shall fail to agree as to the
amount of loss or damage each shall on the written demand of
either, select a competent and disinterested appraiser within fifteen
(15) days of receipt of such written demand. The selected
appraisers shall first attempt to agree between themselves on an
agreed actual cash value, loss or damage taking into account the
terms and conditions of the Policy. If the two appraisers fail to agree
then they shall select a competent and impartial umpire, and failing
for fifteen (15) days to agree upon such umpire, then on the request
of the Insured or the Underwriters such umpire shall be selected by
a judge of a court of record in the County and State in which the
appraisal is pending. The appraisers shall then submit their
differences only to the umpire. The award in writing of any two of
the three parties involved (i.e. the two appraisers and the umpire)
when filed with Underwriters, shall determine the sound actual cash
value and the amount of loss or damage. Each appraiser shall be
paid by the party selecting him and the expenses of the umpire shall
be paid by the parties equally.
Wells’s truck caught fire on March 4, 2013, and was damaged. Wells
reported his claim on the same date. On March 28, 2013, a representative of
Relators left Wells a telephone message that he was sending Wells a copy of
Condition 12. Relators sent Wells a settlement offer on March 29, 2013, and, on
April 5, 2013, sent him settlement paperwork that specifically mentioned
1
The insurance policy was with Certain Underwriters at Lloyds, one of the
Relators. For the sake of simplicity, when referring to any one of the Relators,
we use the term “Relators.”
2
compliance with Condition 12 and provided him with the full text of the appraisal
clause.
On April 24, 2013, Wells’s fiancée emailed Relators and asked them to
send the paperwork for the settlement valuation of $21,000. The email
exchanges between Relators and Wells’s fiancée show that Relators were going
to pay Wells $21,000 but were also going to subtract from that amount the truck’s
salvage value of $7,186. Wells’s fiancée responded that they did not want to
retain the truck for salvage but wanted, instead, the $21,000. Relators agreed,
provided nothing had been removed or swapped from the truck. Wells’s fiancée
assured Relators nothing had been removed. In an April 24, 2013 telephone
conversation between Relators and Wells’s fiancée, she confirmed receiving the
Condition 12 paperwork but expressed uncertainty about how it worked.
Relators responded that it worked “exactly how it’s spelled out in the policy” and
summarized it for her.2
2
[Relators]: Well, the first thing that has to happen is you notify the
insurance company in writing of your selected disinterested
appraiser, you know. Not a truck salesman at Peterbilt or
something, but it has to be a licensed appraiser, and you get that
information from him and send it in to the insurance company. The
insurance company will then provide that information to the selected
appraiser of the insurance company.
[Wells’s fiancée]: Okay. And so will you get a new appraisal or are
you going with the appraisal that you already received?
[Relators]: No. They’ll do a new appraisal too.
[Wells’s fiancée]: Okay.
3
However, on April 26, 2013, Relators emailed Wells’s fiancée to inform her
that they had determined that certain items had been removed or swapped from
the truck, and on April 30, 2013, Relators informed Wells’s fiancée that because
the drive wheels and tires had been swapped, they were reducing the salvage
bid by $2,000. Relators sent Wells revised settlement paperwork on the same
date. Wells’s fiancée emailed Relators and refused the settlement because of
the dispute over the tires. She maintained the setoff for the tires should be only
$276, not $2,000. Relators informed Wells’s fiancée that if she was not happy
with the offer, she could use the appraisal clause. In an April 30, 2013 email, she
wrote that $20,724 was their final offer. A representative of Relators
acknowledged telling Wells’s fiancée at some point that Relators had made their
final offer and that Wells needed to get an attorney or use Condition 12, but the
representative himself expressed confusion over how Condition 12 worked
exactly.
[Relators]: It will be re-evaluated –
[Wells’s fiancée]: And then what happens?
[Relators]: It will be re-evaluated by both, your appraiser, the
insurance company’s appraiser. If the two of them don’t agree on a
price, then it’ll go to an umpire. And then you and the insurance
company will split the cost of the umpire. You’ll be responsible for
your appraiser fees. The insurance company will be responsible for
theirs. And then if it goes to an umpire, then the umpire will be split
between you and the insurance company.
4
In early June 2013, Relators received a notice of attorney representation
from Wells’s attorney. Wells’s attorney’s paralegal followed up with an email to
Relators on June 19, 2013, and spoke with Relators. Relators sent the revised
settlement paperwork to Wells’s attorney on July 2, 2013. On July 23, 2013,
Wells’s attorney’s paralegal communicated Wells’s counsel’s demand for
$40,000 to Relators. On the same date, Relators spoke with Wells’s attorney
and requested documentation supporting the $40,000 demand. On August 13,
2013, Relators emailed Wells’s attorney’s paralegal to inquire about the status of
the documentation they previously requested. Relators followed up again on
August 22, 2013. Wells filed suit against Relators on September 17, 2013.
Thereafter, nearly five months later, on February 6, 2014, Relators emailed
Wells’s attorney regarding the settlement negotiations. On February 14, 2014,
Wells’s attorney responded by making a demand for $125,000. Relators rejected
the demand on February 19, 2014, and requested compliance with the appraisal
requirement in Condition 12 of the policy.
In response, for the purpose of appointing an appraiser, Wells’s attorney
asked Relators for the location of the truck. Relators informed Wells’s attorney
that because Wells had indicated he did not intend to keep the truck, a salvage
company had taken it and dismantled it; however, Relators further informed
Wells’s attorney that there were photographs of the truck as well as
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specifications clearly showing the equipment on the truck and the condition of the
vehicle.
On March 7, 2014, despite expressing some reservations, Wells’s attorney
selected an appraiser. Wells’s attorney wrote: “It is my understanding from
speaking with our appraiser that a traditional appraisal will not be possible
without the physical tractor present to be appraised; however, our appraiser will
attempt to provide a valuation of the vehicle based on the information that you
provided.”
On April 28, 2014, Wells’s appraiser completed a “Total Loss Evaluation
Worksheet.” Wells’s appraiser made no complaint about his inability to
personally inspect the vehicle and listed his estimate at $26,807.94. On May 6,
2014, Wells’s appraiser completed his “Truck Appraiser’s Report” and, again,
made no complaint about his inability to personally inspect the truck. Within the
report, Wells’s appraiser indicated that he had spoken with Relators’ appraiser
and that they had agreed to settle the claim. Wells’s appraiser took his estimate
of $26,807.94, subtracted $2,000 for the wheels and tires, and then reported that
Relators were willing to settle for $24,807.94.
After a couple months of inactivity, on May 28, 2014, Wells’s attorney sent
a revised settlement demand of $100,000. Relators did not respond.
However, on June 27, 2014, Relators emailed Wells’s attorney and stated
that their understanding was that the two appraisers had reached an agreement
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that the loss of the value of the truck was $23,888.34. Relators offered Wells
$5,000 to resolve the remainder of his claims. On June 30, 2014, Wells’s
attorney responded by asking Relators to make the check payable to Wells but
asserted they were not releasing all of their claims. On July 8, 2014, Relators
forwarded to Wells’s attorney settlement paperwork and a settlement check in
the amount of $23,888.34 made payable to Wells.
Thereafter, on August 27, 2014, Relators filed their “First Amended Answer
and Counterclaims.” Relators argued that Wells had not, before bringing suit,
performed a condition precedent to the contract. Specifically, Relators alleged
Wells did not comply with Condition 12 of the insurance policy before bringing his
suit.3 On the same date, Relators filed a “No-Evidence Motion for Summary
Judgment” as to all of Wells’s claims.
On September 18, 2014, Wells informed Relators that the check for
$23,888.34 was in the wrong amount and appeared to suggest that the check
should have been for $24,807.94. On February 19, 2015, the parties discussed
filing a motion to appoint an umpire. On March 13, 2015, Relators filed their
“Motion to Appoint Impartial Umpire to Appraise Vehicle.”
On March 16, 2015, Wells filed his “Third Amended Original Petition” and,
for the first time, argued that Relators had waived their right to invoke the
appraisal clause in Condition 12. Wells maintained that an impasse had
3
As shown here, the first time noncompliance with Condition 12 arose in
the trial court was when Relators alleged noncompliance by Wells.
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occurred when he filed suit on September 17, 2013, and that, by waiting until
February 19, 2014, Relators had waived their right to request an appraiser under
the appraisal clause. Wells also complained about the destruction of the truck.
In his April 21, 2015 “Objection and Response to Defendants’ Motion to Appoint
Impartial Umpire to Appraise Vehicle,” Wells made the same argument.
The trial court conducted a hearing on Relators’ motion to appoint an
umpire and motion for summary judgment on April 23, 2015. On May 18, 2015,
the trial court signed an order denying Relators’ motion to appoint an umpire. On
June 3, 2015, the trial court signed an order denying Relators’ motion for
summary judgment on Wells’s claim for breach of contract.
Standard of Review
Mandamus is an extraordinary remedy that will issue only if (1) the trial
court clearly abused its discretion and (2) the party requesting mandamus relief
has no adequate remedy by appeal. In re Prudential Ins. Co. of Am., 148 S.W.3d
124, 135–36 (Tex. 2004) (orig. proceeding). A trial court clearly abuses its
discretion when it reaches a decision so arbitrary and unreasonable as to amount
to a clear and prejudicial error of law or if it clearly fails to correctly analyze or
apply the law. In re Olshan Found. Repair Co., 328 S.W.3d 883, 888 (Tex. 2010)
(orig. proceeding); Walker v. Packer, 827 S.W.2d 833, 839 (Tex. 1992) (orig.
proceeding). We may not substitute our judgment for that of the trial court unless
the relator establishes that the trial court could reasonably have reached only
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one decision and that the trial court’s decision is arbitrary and unreasonable.
In re Sanders, 153 S.W.3d 54, 56 (Tex. 2004) (orig. proceeding); Walker, 827
S.W.2d at 839–40. We give deference to a trial court’s factual determinations
that are supported by evidence, but we review the trial court’s legal
determinations de novo. In re Labatt Food Serv., L.P., 279 S.W.3d 640, 643
(Tex. 2009) (orig. proceeding). We determine the adequacy of an appellate
remedy by balancing the benefits of mandamus review against its detriments.
Prudential Ins. Co. of Am., 148 S.W.3d at 136. In evaluating benefits and
detriments, we consider whether mandamus will preserve important substantive
and procedural rights from impairment or loss. Id.
Absence of Reporter’s Record of April 23, 2015 Hearing
Wells contends that the court should deny Relator’s petition because the
record is incomplete for want of the reporter’s record of the April 23, 2015
hearing. We disagree. Where the trial court heard no evidence, the absence of
a reporter’s record of the hearing is not fatal. See Otis Elevator Co. v. Parmelee,
850 S.W.2d 179, 181 (Tex. 1993). Parties are not required to obtain
transcriptions of non-evidentiary hearings to preserve error. See id. The order
denying the motion to appoint an umpire recites that the trial court considered
“the motion, response, reply, arguments of counsel, and other matters of record.’’
The order does not recite that the trial court heard any evidence. The order
denying the motion for summary judgment, the hearing on which was heard at
9
the same time as the motion to appoint an umpire, recites as well that the trial
court considered “the motion, response, reply, arguments of counsel, and other
matters of record.” We would not expect oral testimony at a hearing on a motion
for summary judgment. See Tex. R. Civ. P. 166a(c). Finally, on August 12,
2015, Relators filed a statement in compliance with rule 52.7(a)(2) of the Texas
Rules of Appellate Procedure in which they asserted that no testimony was
adduced in connection with the matter complained of. Tex. R. App. P. 52.7(a)(2).
We hold the absence of a reporter’s record of the April 23, 2015 hearing is not
dispositive of this proceeding. See Otis Elevator Co., 850 S.W.2d at 181.
Whether Relators Waived Condition 12 (The Appraisal Provision)
Appraisal provisions can be enforced by mandamus. In re Universal
Underwriters of Tex. Ins. Co., 345 S.W.3d 404, 405, 412 (Tex. 2011) (orig.
proceeding). In their first issue, Relators argue the trial court abused its
discretion by failing to enforce the appraisal clause in the insurance policy by
denying their motion to appoint an impartial umpire. Relators argue that the only
way Wells could avoid the appraisal clause is to establish waiver and that Wells
failed to establish waiver. For the reasons given below, we agree.
Wells maintains Relators waived the appraisal clause by destroying the
truck, which he asserts was an act inconsistent with the clause. See Am. Cent.
Ins. Co. v. Terry, 26 S.W.2d 162, 166 (Tex. 1930) (stating that waiver can be
established by conduct of the insurer, including, “(a) Parol waiver; (b) refusal to
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arbitrate; (c) denial of liability; (d) failure to demand arbitration or appraisal; (e)
acts inconsistent with intention to arbitrate; (f) appointment of prejudiced
appraiser; and (g) improper conduct during appraisement”). Relators respond
that the destruction of the truck had no bearing on the parties’ willingness to
negotiate or on the appraisers’ ability to make their appraisals. We agree with
Relators. Wells’s attorney, when informed of the destruction of the truck,
nevertheless proceeded with the appraisal process, and Wells’s own appraiser
never complained that the truck’s destruction impeded his ability to make an
appraisal. At most, the destruction of the truck merely complicated the appraisal
process.
Wells next argues the parties reached the point of impasse when he filed
suit on September 17, 2013, and that, by waiting until February 19, 2014, before
invoking the appraisal clause, Relators waived it. Relators disagree and argue
that the point of impasse, if any, occurred in February 2014 when Wells more
than tripled his demand. Relators also emphasize that Wells thereafter actually
engaged in the appraisal process for more than a year before raising the waiver
argument for the first time in his March 16, 2015 “Third Amended Original
Petition.”
The Texas Supreme Court has held that to establish waiver of an appraisal
clause, a party must show that (1) an impasse was reached as to settlement
negotiations; (2) an unreasonable amount of time passed after the parties
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reached an impasse, and (3) the party suffered prejudice due to the delay.
Universal Underwriters of Tex. Ins. Co., 345 S.W.3d at 408, 411–12. “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.” Id. at 408. An impasse occurs when the parties mutually
understand that neither will negotiate further. Id. at 409.
We disagree that Wells’s filing suit in September 2013 signaled an
impasse. See Terra Indus., Inc. v. Commonwealth Ins. Co. of Am., 981 F. Supp.
581, 603 (N.D. Iowa 1997) (“Before Terra filed suit, the IRI defendants had no
notice that an impasse had been reached, because only the filing of Terra’s suit
demonstrated Terra’s unilateral conclusion that the parties were at an impasse
when the IRI defendants still anticipated further discussions.”); see also Universal
Underwriters of Tex. Ins. Co., 345 S.W.3d at 409 (citing Terra Indus., Inc., 981 F.
Supp. at 603). Merely fling suit does not inherently signal that the parties have
mutually concluded that all future settlement negotiations would be futile.
Additionally, Wells subsequently engaged in settlement negotiations in
February 2014. Wells’s own conduct belies his assertion that the parties had
reached an impasse earlier. See Terra Indus., Inc., 981 F. Supp. at 603.
(observing that the parties “continuing indications of a willingness to seek
agreement on amount-of-loss issues made any delay by the IRI defendants in
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demanding an appraisal, instead of demanding appraisal immediately after suit
was filed, reasonable under the circumstances”).
When Relators responded by invoking the appraisal clause on February
19, 2014, Wells never balked on the basis of waiver; just the opposite, Wells
complied with the appraisal clause by appointing his own appraiser. Wells even
made a settlement demand of $100,000 on May 28, 2014, independent of the
appraisal-clause process. See id. at 604 (“On the undisputed facts that the
parties attempted to continue negotiations immediately before and even after suit
was filed, and the absence of any evidence of prejudice to Terra from the delay,
the court concludes that there was no waiver of appraisal in this case.”). Wells’s
own conduct contradicted his assertion that the parties mutually concluded that
they had reached an impasse in September 2013 when he filed suit.
Further, waiver cannot be invoked unless Wells can establish prejudice
from any resulting delay. Universal Underwriters of Tex. Ins. Co., 345 S.W.3d at
411. The only evidence of “prejudice” Wells has produced is that “by the time
that [Relators] attempted to invoke the appraisal clause [Wells] only had pictures
to conduct their appraisal.” The prejudice required, however, is prejudice
following impasse and prior to invocation of the appraisal process, i.e., prejudice
caused by the insurer’s unreasonable delay in invoking the process. See id. at
408, 411–12. Wells has produced no evidence that the destruction of the truck
was the result of any such delay. To the contrary, the only evidence on this point
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is that Wells did not want the salvage and elected not to retain the truck on April
24, 2013, and that the truck was thereafter released to a salvage company, all of
which occurred long prior to any “impasse” reached between the parties. Wells’s
appraiser, moreover, was in fact able to place a value on the vehicle with
reference to the pictures and specifications provided to him. As to other
allegations in Wells’s response about loss of use and income during the time he
contends that Relators unreasonably delayed, Wells has provided no evidence
and, as noted by the Supreme Court in Universal Underwriters, Wells could have
avoided any prejudice by invoking the appraisal process himself at any time. Id.
at 411.
For all the above reasons, we hold there was no unreasonable delay and
no prejudice and, thus, no waiver of the appraisal process by Relators. We
sustain Relators’ first issue and hold that the trial court abused its discretion by
denying their motion to appoint an umpire in compliance with the appraisal
provision.4
4
Condition 12 has no trigger defining when a party must invoke it or risk
waiving it. As a practical matter, it appears either party could invoke the
appraisal clause at the moment that serves its purposes best. Wells never
invoked the appraisal clause, sought to proceed on his suit without invoking it,
and, further, wanted to prevent Relators from invoking it. Relators, for their part,
invoked the appraisal clause only when confronted with a demand for $125,000.
While Universal Underwriters shows that despite the absence of a trigger, under
certain circumstances, a party can waive an appraisal clause, see id. at 408,
411–412, we conclude that on the circumstances here, there was no wavier.
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The Denial of the Motion for Summary Judgment
In their second issue, Relators contend the trial court abused its discretion
by allowing Wells’s breach of contract claim to proceed without requiring Wells to
comply with the policy’s appraisal clause as a condition precedent to his suit.
Relators are complaining about the trial court’s denial of their motion for
summary judgment on Wells’s breach of contract claim.
As with the first issue, whether Wells had to comply with the appraisal
clause would depend on whether Relators had waived it. Once again, Wells
argues Relators waived it. Relators essentially take the position that if they win
on their first issue, that is, that there was no waiver, it would necessarily follow
that they should win on their second issue as well. However, we do not reach
the merits of their motion for summary judgment because we conclude that the
trial court’s order denying Relator’s motion for summary judgment is not
reviewable at this juncture of the case.
Mandamus is generally unavailable when a trial court denies summary
judgment, no matter how meritorious the motion. In re United Servs. Auto. Ass’n,
307 S.W.3d 299, 314 (Tex. 2010) (orig. proceeding) (quoting In re McAllen Med.
Ctr., Inc., 275 S.W.3d 458, 465 (Tex. 2008) (orig. proceeding)). Only
extraordinary circumstances will justify granting mandamus relief when a trial
court erroneously denies a motion for summary judgment. Id. The extraordinary
circumstances in United Services Automobile Ass’n were: (1) a previous trial by
15
a trial court without jurisdiction, (2) an appeal to an appellate court and then to
the supreme court to get that error corrected, and (3) a proposed second trial on
a claim barred by limitations. Id. In granting mandamus relief based on
extraordinary circumstances in that case, the supreme court noted: “Two wasted
trials are not ‘[t]he most efficient use of the state’s judicial resources.’” Id.
(quoting CSR Ltd. V. Link, 925 S.W.2d 591, 596 (Tex. 1996) (orig. proceeding)5).
Relators have made no comparable showing of extraordinary circumstances.
Expressing no opinion on the merits of the trial court’s order denying Relators’
motion for summary judgment, we hold that mandamus does not lie to review
such an order.
Appraisal will set the amount of loss conclusively, and may dispose of
Plaintiff’s breach of contract claims entirely. See James v. Prop. Cas. & Ins. Co.
of Hartford, No. H-10-1998, 2011 WL 4067880, at *2 n.7 (S.D. Tex. Sept. 12,
2011) (citing In re Allstate Cty. Mut. Ins. Co., 85 S.W.3d 193, 196 (Tex. 2002)
(orig. proceeding) (noting that “if the appraisal determines that the vehicle’s full
value is what the insurance company offered, there would be no breach of
contract,” and concluding that “[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”)).
5
See Raymond Overseas Holding, Ltd. v. Curry, 955 S.W.2d 470, 471
(Tex. App.—Fort Worth 1997, orig. proceeding) (op. on reh’g) (recognizing CSR
Ltd. was superseded by statute allowing interlocutory appeals of orders granting
or denying special appearances).
16
Appraisal may obviate the need for further litigation, with all of the burdens
and costs of pretrial discovery and the like; “and if not, then in due season what
remains to be litigated can proceed with efficient focus by the parties upon the
specific issues remaining.” James, 2011 WL 4067880, at *2 n.7 (citing Liberty
Nat’l Fire Ins. Co. v. Akin, 927 S.W.2d 627, 629 (Tex. 1996) (orig. proceeding)).
We overrule Relators’ second issue.
Conclusion
Accordingly, we sustain Relators’ first issue; conditionally grant the
mandamus relief requested by Relators in their first issue; direct the trial court to
vacate its order denying Relators’ motion to appoint an umpire; and direct the
trial court to grant Relators’ motion and appoint an umpire in accordance with
Condition 12 of the insurance policy. We are confident the trial court will comply,
and the writ will issue only if it fails to do so. We have overruled Relators’ second
issue; therefore, their petition is otherwise denied.
/s/ Anne Gardner
ANNE GARDNER
JUSTICE
PANEL: LIVINGSTON, C.J.; GARDNER and MEIER, JJ.
DELIVERED: September 4, 2015
17