Adami v. Safeco Ins. Co. of Ind.
| Decision Date | 22 January 2018 |
| Docket Number | CASE NO. 4:17-CV-574 |
| Parties | DAROLD ADAMI v. SAFECO INSURANCE COMPANY OF INDIANA |
| Court | U.S. District Court — Eastern District of Texas |
MEMORANDUM OPINION AND ORDER
Pending before the Court are Defendant Safeco Insurance Company of Indiana's ("Safeco") Motion to Compel Appraisal and for Abatement (Dkt. #18) and Defendant's Motion to Strike Darold Adami's Surreply to Safeco's Motion to Compel Appraisal and to Abate Pending Appraisal (Dkt. #29). Having reviewed the motions and relevant pleadings, the Court finds that Defendant's motion to compel should be granted and Defendant's motion to strike should be denied.
In September 2016, Plaintiff Darold Adami ("Adami") noticed standing water next to the back right or northeast corner of his house (the "Property"). Adami discovered that there was a hairline crack in the Property's pool and had it fixed. After fixing the crack, Adami discovered that it did not cause the standing water and contacted a landscaping company who discovered a leak or a burst in the Property's underground sprinkler system. Adami hired someone to fix this leak. On November 15, 2016, Adami contacted Safeco to inform Safeco of the leak and the damage that arose from the leak, including a heaved foundation. The property was covered by an insurance policy issued, sold, and maintained by Safeco (the "Policy"). Two days later, an adjuster was assigned to the claim. On December 15, 2016, Safeco sent an engineer from Nelson Engineering to the Property to evaluate the damage and draft a report concerning the coverage of the damage. The engineer completed the report and delivered it to Safeco on January 3, 2017. Safeco reviewed it and provided the report to Adami on January 9, 2017. Adami noticed that the report did not include an estimate for foundation repair. In turn, Safeco fixed created supplemental estimate on March 7, 2017 that included foundational repairs. Adami believed the estimate was still low and requested a larger amount, which Safeco denied on May 9, 2017.
Based on these general facts, Adami sued Safeco on June 29, 2017 in the 59th Judicial District Court of Grayson County, Texas for breach of the duty of good faith and fair dealing and violations of the Texas Deceptive Trade Practice Act and Texas Insurance Code. On August 18, 2017, Safeco removed the case to the Eastern District of Texas. After the Court signed its Order and Advisory (Dkt. #6), Adami filed his Second Amended Complaint on September 20, 2017 (Dkt. #9). Safeco answered the Second Amended Complaint on October 10, 2017 (Dkt. #13). Adami filed his Third Amended Complaint on January 9, 2018 (Dkt. #34).
The relevant portion of the Policy states:
(Dkt. #18, Exhibit A at pp. 35-36). On October 20, 2017, Safeco sent a letter to Adami's counsel invoking the Policy's appraisal clause. Adami refused to engage in the appraisal process. Accordingly, on November 13, 2017, Safeco filed the present motion to compel (Dkt. #18). Adami responded to the motion on November 27, 2017 (Dkt. #22). Safeco filed a reply on December 4, 2017 (Dkt. #24) and Adami filed a sur-reply on December 11, 2017 (Dkt. #27). Further, Safeco filed the present motion to strike Adami's sur-reply on December 12, 2017 (Dkt. #29) and Adami filed a response to the motion to strike on December 26, 2017 (Dkt. #32).
"Appraisal clauses, a common component of insurance contracts, spell out how parties will resolve disputes concerning a property's value or the amount of a covered loss." In re Universal Underwriters of Tex. Ins. Co., 345 S.W.3d 404, 405 (Tex. 2011). "These clauses are generally enforceable, absent illegality or waiver." Id. at 407; TMM Invs., Ltd. v. Ohio Cas. Ins. Co., 730 F.3d 466, 471 (5th Cir. 2013). Once invoked, courts are discouraged from interfering with the appraisal process. See State Farm Lloyds v. Johnson, 290 S.W.3d 886, 895 (Tex. 2009). A valid appraisal does not "divest the courts of jurisdiction, but only binds the parties to have the extent or amount of the loss determined in a particular way." Id. at 889.
Safeco moves the Court to compel appraisal and to abate the case pending the outcome of the appraisal. Adami maintains that the Court should not compel appraisal, and even if itdetermines appraisal is necessary, the Court should not abate the proceedings. The Court will address each issue and then will discuss Safeco's motion to strike Adami's sur-reply.
Adami does not contest that the Policy contains the appraisal clause, but Adami does assert that Safeco may not invoke its right to seek appraisal because (A) it has not engaged in a good faith investigation and (B) it has waived its ability to seek an appraisal. The Court will address each argument in turn.
Adami maintains that, under the terms of the contract, there must be a disagreement as to the amount of loss as a condition precedent to invoke the appraisal process. Adami continues to explain that a disagreement must be a good faith disagreement. Adami contends that because Safeco did not engage in a good faith investigation of the claim there is not a good faith disagreement. Accordingly, Adami asserts that the condition precedent is not met and Safeco cannot invoke its right to appraisal. Safeco, without conceding that it did not engage in a good faith investigation, argues that there is no requirement that Safeco engage in a good faith investigation of the claim in order to assert its right for appraisal.
This case is similar to Dike v. Valley Forge Insurance Company. In that case, the plaintiff argued that the defendant could not demand an appraisal because it did not act appropriately under the "Claims Handling" section of the insurance policy and did not comply with the Texas Insurance Code. Dike v. Valley Forge Ins. Co., 797 F. Supp. 2d 777, 781-89 (S.D. Tex. 2011). The court held that when looking to the plain language of the policy, the "Claims Handling" section and the Texas Insurance Code were not conditions precedent to the appraisal process. Id. (). Adami argues that Safecoengaged in "bleak, pervasive inferior claims-handling" in this case, and thus Dike, and every other case Safeco cited, is inapposite. (Dkt. #27 at p. 2). However, when looking to the holding of Dike, the degree or severity of the alleged wrongdoing was not the deciding factor, or even a factor at all in the consideration. The plain language of the contract was the determining factor.
As such, the Court must determine whether a good faith investigation and a good faith disagreement are conditions precedent to the appraisal section of the Policy. The Court must apply the terms of the insurance contract as it is written. See RSR Corp. v. Int'l Ins. Co., 612 F.3d 851, 858 (5th Cir. 2010) ( .
"In order to determine whether a condition precedent exists, the intention of the parties must be ascertained; and that can be done only by looking at the entire contract." "In order to make performance specifically conditional, a term such as 'if', 'provided that', 'on condition that', or some similar phrase of conditional language must normally be included." "While there is no requirement that such phrases be utilized, their absence is probative of the parties['] intention that a promise be made, rather than a condition imposed."
Dike, 797 F. Supp. 2d at 783 (quoting Solar Applications Eng'g, Inc. v. T.A. Operating Corp., 327 S.W.3d 104, 109 (Tex. 2010)).
Here, the Policy states "[i]f you and we do not agree on the amount of the loss . . . then, on written demand of either, each shall select a competent and disinterested appraiser and notify the other of the appraiser selected within 20 days of such demand." (Dkt. #18, Exhibit A at p. 35). The appraisal clause is clear and unambiguous and grants both the insured and the insurer the right to demand an appraisal of the loss. See James v. Prop. & Cas. Ins. Co. of Hartford,No. CIV.A. H-10-1998, 2011 WL 4067880, at *1 (S.D. Tex. Sept. 12, 2011) (). "The appraisal clause does not use conditional language and [Adami]...
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