           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                    Fifth Circuit

                                                 FILED
                                                                         December 18, 2009

                                     No. 09-10562                      Charles R. Fulbruge III
                                   Summary Calendar                            Clerk



JM WALKER LLC,

                                                   Plaintiff–Appellant,
v.

ACADIA INSURANCE COMPANY,

                                                   Defendant–Appellee.




                   Appeal from the United States District Court
                        for the Northern District of Texas
                             USDC No. 4:07-CV-00531


Before GARZA, CLEMENT, and OWEN, Circuit Judges.
PER CURIAM:*
       JM Walker LLC (Walker) appeals the district court’s grant of summary
judgment on its breach of contract claim and claims under the Texas Insurance
Code. We affirm.




       *
         Pursuant to 5TH CIR . R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR .
R. 47.5.4.
                                   No. 09-10562

                                         I
      This case arises out of a dispute over insurance coverage for hail damage.
Acadia Insurance Company (Acadia) provided Walker insurance coverage for five
buildings in North Richland Hills, Texas. In April 2007, the roofs of the buildings
sustained damage from a hailstorm. Walker subsequently submitted a claim to
Acadia, but Acadia denied coverage after its adjuster John Avent determined that
the roofs did not need to be replaced and that the damage did not exceed the
$5,000 deductible. Walker then requested further inspection. Avent contacted
Jim Koontz, and Koontz inspected the roofs in June 2007. Koontz too found that
the roofs had not been damaged from the storm, and thus Acadia sent Walker
another letter declining its claim.    Walker’s attorney responded by sending
Acadia a demand letter. Acadia replied with a letter explaining that, since there
was a coverage dispute, it was invoking its contractual right to appraisal.
      Before an appraisal was conducted, Walker sued Acadia. After the case
was removed to federal court, Acadia filed a Motion to Abate Proceedings, or in
the alternative, Motion to Compel Appraisal. The district court compelled the
parties to submit to the appraisal process. Acadia selected Pete Gillespie as its
appraiser, and Walker selected Travis Austin. The parties selected John LaFleur
as the umpire. Both Gillespie and Austin found that the roofs of four of the
buildings needed to be removed and replaced, although they disputed the
replacement cost. LaFleur agreed that the roofs needed to be replaced and found
that a fifth roof needed repairs. He determined the cost of replacement and
repair to be $423,053.96, and Acadia tendered Walker a check for this amount.
      Based upon its payment of the appraisal award, Acadia filed a motion for
summary judgment on all of Walker’s claims. The district judge granted the
motion and dismissed Walker’s claims.        Walker now raises three issues on
appeal. It contends that summary judgment was inappropriate on its contractual
claim since there are factual issues as to whether the appraisal should be set

                                        2
                                          No. 09-10562

aside on the ground of mistake or fraud. Walker also contends that there are
disputed issues of material fact as to its extra-contractual claims.                   Finally,
Walker argues that the magistrate judge erred in ordering Walker to submit to
the appraisal process.


                                                II
        We review the grant of a motion for summary judgment de novo, applying
the same standard as the district court.1 Summary judgment is appropriate
when the competent summary judgment evidence demonstrates that there are
no genuine issues of material fact and the moving party is entitled to judgment
as a matter of law.2
                                                A
        Under Texas law, “appraisal awards made pursuant to the provisions of an
insurance contract are binding and enforceable, and every reasonable
presumption will be indulged to sustain an appraisal award.” 3 The results of an
otherwise binding appraisal may be disregarded in three situations: “(1) when the
award was made without authority; (2) when the award was made as a result of
fraud, accident, or mistake; or (3) when the award was not in compliance with the
requirements of the policy.” 4 Walker argues that the second exception applies
here.
        Walker first contends that the appraisal was made as a result of mistake
because LaFleur made his decision using an incorrect measure of square footage



        1
            Threadgill v. Prudential Sec. Group, Inc., 145 F.3d 286, 292 (5th Cir. 1998).
        2
            Brumfield v. Hollins, 551 F.3d 322, 326 (5th Cir. 2008).
        3
        Franco v. Slavonic Mut. Fire Ins. Ass’n, 154 S.W.3d 777, 786 (Tex. App.—Houston
2004, no pet.).
        4
            Id.

                                                3
                                     No. 09-10562

for the roof on one of the buildings. Walker asserts that LaFleur incorrectly used
Gillespie’s measurement of the size of the roof, resulting in a measurement of
62,900 square feet, instead of the actual size of the roof, which it avers is 77,015
square feet. In support of this argument, Walker submitted a sworn affidavit of
an expert attesting that the size of the roof was 77,015 square feet. Walker
contends that this affidavit creates a genuine issue of material fact as to whether
the appraisal should be set aside on the ground of mistake.
      A court may set aside an award on the ground of mistake only “upon a
showing that the award does not speak the intention of the appraisers.” 5 Here,
Walker has provided no evidence that the award did not speak to LaFleur’s
intent.       An umpire often must choose between two competing values, and
LaFleur’s decision to go with Gillespie’s measurement, rather than Austin’s, does
not mean his award was premised on a mistake.
      Walker next contends that the appraisal should be set aside on the ground
of fraud. Specifically, Walker asserts that there are issues of material fact as to
whether Gillespie fraudulently misrepresented the roof size to LaFleur and
whether LaFleur relied on that statement in making the appraisal. Walker cites
an excerpt from LaFleur’s deposition to support this argument. In the deposition,
LaFleur states that he relied on a diagram containing measurements in
determining the roof size. LaFleur explains that Gillespie gave him the diagram
and states that “[Gillespie] said that Mr. Austin and he had agreed on those
measurements.”
      To establish fraud, a party must show: (1) a material misrepresentation,
(2) that the misrepresentation was false, (3) that the misrepresentation was
either known to be false when made or was asserted without knowledge of its
truth, (4) that the misrepresentation was intended to be acted upon, (5) that the


          5
      Providence Wash. Ins. Co. v. Farmers Elevator Co., 141 S.W.2d 1024, 1026 (Tex. Civ.
App.—Amarillo 1940, no writ).

                                           4
                                               No. 09-10562

misrepresentation was relied upon, and (6) that the misrepresentation caused
injury.6 Here, Walker has provided no evidence of a material misrepresentation.
A discrepancy among measurements alone does not create a factual issue as to
whether one set of measurements is false. Moreover, Austin’s deposition suggests
that he agreed with LaFleur and Gillespie’s measurements. When asked why he
disagreed with the award, Austin stated that he disagreed with “[t]he dollar
amount on the roof per square . . . It’s just based on dollars really.” He further
explained that he would have put the dollar amount at about $6.30 a square foot.
Austin made no mention of a disagreement in the size of the roof, and when
asked if he thought the appraisal award was the result of fraud, he said “no.”
          As such, Walker has failed to establish that there are genuine issues of
material fact as to its contract claims.                The district court properly granted
summary judgment on this issue.
                                                    B
          Walker next contends that the district court improperly dismissed its
claims for violation of the common law and statutory duty of good faith and fair
dealing. An insurer commits an unfair or deceptive act when it “fail[s] to attempt
in good faith to effectuate a prompt, fair, and equitable settlement” of a claim in
which its liability “has become reasonably clear.” 7 In addition to this statutory
violation, an insurer breaches its common law duty of good faith and fair dealing
“by denying or delaying payment of a claim if the insurer knew or should have
known it was reasonably clear the claim was covered.” 8 “[A] bona fide dispute




          6
        Formosa Plastics Corp. USA v. Presidio Eng’rs and Contractors, Inc., 960 S.W.2d 41,
47 (Tex. 1998).
          7
           T   EX . INS .   CODE § 541.060(a)(2).
          8
              Tex. Mut. Ins. Co. v. Ruttiger, 265 S.W.3d 651, 661 (Tex. App.—Houston 2008, pet.
filed).

                                                    5
                                            No. 09-10562

about the insurer’s liability on the contract does not rise to the level of bad faith.”9
Instead, the insured must show “that the insurer had no reasonable basis for
denying or delaying payment of the claim.”10
      Walker argues that Acadia’s initial decision to deny coverage based on
Avent’s and Koontz’s inspections of the roof violated the duty of good faith and
fair dealing since a finding of no hail damage to the roofs was unreasonable,
given the later appraisers’ agreement that the roofs needed to be replaced. But
Walker provided no evidence to suggest that Acadia’s reliance on the reports of
Avent and Koontz was unreasonable or that Avent and Koontz were biased in
favor of Acadia. There was a bona fide dispute over whether the roofs required
replacement.         The later appraisers’ determination that the roofs needed
replacement does not show that Acadia’s initial decision to deny coverage, based
on two adjusters’ reports, was in bad faith. Because Walker provided no evidence
that Acadia acted in bad faith, the district court correctly granted summary
judgment on these claims.


                                                III
      Walker did not object to the magistrate judge’s order compelling appraisal
under the contract, and thus we would normally follow the rule of Douglass v.
United Services Automobile Association 11 and review this claim on appeal for
plain error. But the magistrate judge did not warn Walker of the consequences
of failing to object, and thus we cannot treat its argument as waived and must
proceed under the typical standard of review.12 Whether a contracting party


       9
           Trans. Ins. Co. v. Moriel, 879 S.W.2d 10, 17 (Tex. 1994).
       10
            Id. at 18.
       11
            79 F.3d 1415 (5th Cir. 1996).
       12
            See United States v. Young, 585 F.3d 199 (5th Cir. 2009).

                                                 6
                                         No. 09-10562

waived an appraisal provision is a question of law that we review de novo.13 We
review factual conclusions underlying a finding regarding waiver for clear error.14
      Waiver is the intentional relinquishment of a known right.15 Under Texas
law, waiver is an affirmative defense, and the party seeking to defeat appraisal
bears the burden of proof.16 Acts that tend to show waiver are those that “are
reasonably calculated to make the assured believe that a compliance on his part
with the stipulations providing the mode of proof of loss, and regulating the
appraisement of the damage done, is not desired, and that it would be of no effect
if observed by him.”17
      Walker argues that Acadia waived its right to invoke the contract’s
appraisal clause through a letter dated July 13, 2007. The relevant portion of the
letter states:
      [The] inspection found the gravel roof had not been damaged by the
      recent hail event. They also found that the metal roofs have
      indentions but that they do not affect the roofs from either an
      aesthetic or performance standpoint. They further state that the
      indentions found show that the roofs most likely have been subjected
      to prior hail events.

      Based on the findings of Koontz & Associates, Inc., there is no roof
      damage resulting from this storm and therefore no further payments
      under the policy are due at this time.


      If you have any objective information to dispute these findings and
      coverage conclusion, please contact the office as soon as possible.



       13
            Dwyer v. Fidelity Nat’l Prop. & Cas. Ins. Co., 565 F.3d 284, 287 (5th Cir. 2009).
       14
            Id.
       15
            In re State Farm Lloyds, Inc., 170 S.W.3d 629, 634 (Tex. App.—El Paso 2005, no pet.).
       16
            Id.
       17
            Scottish Union & Nat’l Ins. Co. v. Clancey, 18 S.W. 439, 440-41 (Tex. 1892).

                                                7
                                     No. 09-10562

Walker contends that this letter shows that Acadia intended to relinquish its
right to appraisal. Acadia argues that the letter shows its continued willingness
to consider information submitted by Walker and shows no intent to relinquish
its appraisal rights.
      The statements in the July 13 letter alone do not show that Walker
intended to relinquish its right to appraisal. The letter did not purport to be the
final word in the coverage dispute. Rather, it invited Walker to submit evidence
disputing its findings. Moreover, when Walker’s attorney sent Acadia a letter
disputing the findings of Koontz, Acadia immediately followed up with a letter
explaining that there was a genuine coverage dispute and invoking the appraisal
clause. Because the evidence shows that Acadia did not intend to relinquish the
contractual right to appraisal, the magistrate judge correctly ordered an
appraisal on Walker’s claim.


                                 *        *     *
      For the foregoing reasons, the district court’s judgment is AFFIRMED.




                                          8
