Hennessey v. Vanguard Ins. Co.

Decision Date06 February 1995
Docket NumberNo. 07-94-0058-CV,07-94-0058-CV
Citation895 S.W.2d 794
PartiesGerard HENNESSEY and Kathleen Hennessey, Appellants, v. VANGUARD INSURANCE COMPANY, Republic Insurance Company and Winterthur Reinsurance Corporation of America, Appellees.
CourtTexas Court of Appeals

Val J. Varley, Lubbock, for appellant.

Nelson & Nelson, Jack O. Nelson, Jr., J. Craig Johnston, Lubbock, for appellees.

Before REYNOLDS, C.J., and DODSON and BOYD, JJ.

BOYD, Justice.

Gerard and Kathleen Hennessey (Hennesseys) bring three points of error challenging a take-nothing summary judgment rendered in favor of appellees Vanguard Insurance Company (Vanguard), Republic Insurance Company (Republic), and Winterthur Reinsurance Corporation of America (Winterthur). For the reasons expressed herein, we affirm the judgment insofar as it renders a take-nothing judgment against Winterthur. However, we sever that portion concerning Vanguard and Republic and remand that portion to the trial court.

The Hennesseys were the insureds under a homeowners insurance policy issued by Vanguard. On July 27, 1990, a storm caused damage to the roof of the Hennessey's home. Vanguard conceded liability under the policy and determined the amount of the damage to the roof to be $2,520. The Hennesseys were of the opinion that a proper repair would require replacement of the entire roof at a cost of $18,700. Because of this dispute over the amount of Vanguard's liability under the policy, Vanguard sought to invoke a provision of the contract providing for an appraisal to determine the cost of the repair.

The appraisal process, as set out in the insurance contract, could be invoked by either party by written demand and required each to select a competent, independent appraiser. The appraisers were then to select an umpire. The two appraisers were to jointly determine the amount of the loss. In the event the appraisers could not agree, they were to submit their differences to the umpire. An agreement as to the amount of damage between any two of those three was to be determinative and "shall be binding on [the insured] and [the insurer]."

Vanguard and the Hennesseys each chose an appraiser. The appraisers then selected Sam Lewis of West Texas Roofing as the umpire. Vanguard's appraiser determined that the roof could be repaired on a piecemeal basis for $2,555, while the Hennesseys' appraiser was of the opinion that replacement was required and put the cost at $18,000. 1 Vanguard has not challenged the Hennesseys' Nevertheless, the Hennesseys brought suit against Vanguard, Republic, and Winterthur asserting claims for breach of contract, violation of the Texas Deceptive Trade Practices--Consumer Protection Act 2 (DTPA), and violations of the Texas Insurance Code. Appellees filed their answer including special exceptions. The record does not reflect that the trial court acted on appellees' special exceptions.

claim that the cost of a new roof was $18,000. The essence of the dispute is simply whether the roof was a total loss or could be repaired. In conformity with the appraisal provisions, the umpire, Lewis, was asked to make his determination of the amount of the damage. Lewis was of the opinion that the roof could be repaired for $800. Because this amount was less than the amount determined by Vanguard's appraiser, that appraiser joined with Lewis in setting the amount of the loss at $800. Since Vanguard had already paid the Hennesseys $2,520 for the damage to the roof, it considered the matter closed.

Appellees next filed a combined motion for summary judgment and supporting brief in which they contended that the appraisal process had been conducted in accordance with the terms of the policy, that appellants were bound by the result of the appraisal and, therefore, were estopped from challenging it. Appellees also asserted that Republic and Winterthur were not proper parties to the suit because neither of those entities issued the policy to appellants.

Appellants' response to the motion for summary judgment, which was also combined with its supporting brief in a single document, challenged the validity of the appraisal, asserted that they had "expressly reserved the right to not be bound by the Defendant's Appraisal Process," and that Republic and Winterthur were proper parties as to appellants' DTPA claims.

On November 8, 1993, the trial court granted the take-nothing summary judgment giving rise to this appeal. In determining the validity of appellants' challenge, we must bear in mind the rule that for a defendant to be entitled to summary judgment, it must disprove, as a matter of law, at least one of the essential elements of each of the plaintiffs' causes of action, Lear Siegler, Inc. v. Perez, 819 S.W.2d 470, 471 (Tex.1991), or must establish one or more of its defenses as a matter of law, Bryant v. Gulf Oil Corp., 694 S.W.2d 443, 445 (Tex.App.--Amarillo 1985, writ ref'd n.r.e.). In determining whether a defendant has met its burden, we must also apply the standards for reviewing summary judgments set out by our supreme court in Nixon v. Mr. Property Management, 690 S.W.2d 546 (Tex.1985). Those standards are:

1. The movant for summary judgment has the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law.

2. In deciding whether there is a disputed material fact issue precluding summary judgment, evidence favorable to the non-movant will be taken as true.

3. Every reasonable inference must be indulged in favor of the non-movant and any doubts resolved in its favor.

Id. at 549. A reviewing court must also keep in mind that the summary judgment procedure is designed solely to eliminate unmerited claims or untenable defenses. Cortinas v. Wilson, 851 S.W.2d 324, 326 (Tex.App.--Dallas 1993, no writ).

In their first and third points, appellants challenge appellees' affirmative defense of estoppel. In their first point, appellants argue that the summary judgment evidence shows that there are questions of fact concerning the validity of the appraisal. In their third point, appellants contend that there are genuine questions of fact concerning whether the provision of the insurance contract making the results of an appraisal binding had been modified.

Before addressing appellants' first point, we must note that we disagree with appellees' contention that appellants have failed to preserve their challenge to the validity of the appraisal. The parties' discussion of whether the validity of the appraisal was raised in appellants' original petition is inapposite. The effect of an appraisal award is to When addressing challenges to the validity of appraisal awards, Texas courts have recognized three situations where the results of an otherwise binding appraisal may be disregarded: (1) when the award was made without authority; (2) when the award was the result of fraud, accident or mistake; or (3) when the award was not made in substantial compliance with the terms of the contract. Providence Lloyds v. Crystal City I.S.D., 877 S.W.2d 872, 875 (Tex.App.--San Antonio 1994, no writ). Although every reasonable presumption will typically be made in favor of an appraisal award, Barnes v. Western Alliance Ins. Co., 844 S.W.2d 264, 267 (Tex.App.--Fort Worth 1992, writ dism'd w.o.j.), when reviewing a summary judgment proceeding, that rule must yield to the degree its application conflicts with the presumptions required to be made in favor of a non-movant. See Mays v. Foremost Ins. Co., 627 S.W.2d 230, 233 (Tex.App.--San Antonio 1981, no writ).

estop one party, here the plaintiff, from contesting the issue of damages in a suit on the insurance contract, leaving only the question of liability for the court. Scottish Union & Nat. Ins. Co. v. Clancy, 71 Tex. 5, 8 S.W. 630 (1888). As with other affirmative defenses, it is the defendant's burden to raise the issue of estoppel, Tex.R.Civ.P. 94, which it did. As noted above, appellees urged the preclusive effect of the appraisal award in their motion for summary judgment. In their response to the motion for summary judgment, appellants included their contention that the award was invalid, citing Providence Washington Ins. Co. v. Farmers Elevator Co., 141 S.W.2d 1024 (Tex.Civ.App.--Amarillo 1940, no writ). That being so, their challenge to the validity of the appraisal was properly preserved for our review.

In addition to the reasons for disregarding an appraisal award noted in Providence Lloyds, appellants cite this court's opinion in Providence Washington, 141 S.W.2d at 1026, as support for their contention that an award may be disregarded when "unjust or unfair." An examination of that authority, and the subsequent cases discussing the validity of appraisal awards, reveals that the more recent cases discussing awards made without authority or not in compliance with the terms of the appraisal agreement are inclusive of a broad range of factual scenarios contemplated by the quoted language from Providence Washington. Perusal of those authorities leads us to conclude that "unfairness" of the result is not an independent ground for disregarding an appraisal award.

The concern expressed in Providence Washington was not with the fairness of the award but rather the fairness and integrity of the appraisal process. The provision in the appraisal clause of the parties' contract requiring that the appraisers be "independent" makes applicable those cases discussing bias or prejudice on the part of the appraisers or in the appraisal process, and brings appellants' complaints within the third situation noted in Providence Lloyds, 877 S.W.2d at 875, i.e., a situation in which an award was not made impartially in substantial compliance with the requirements of the policy.

The gist of appellants' first point is that the great disparity between the appraisal award and their appraiser's determination of the...

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