






Becker v. State







COURT OF APPEALS
EIGHTH DISTRICT OF TEXAS
EL PASO, TEXAS

)
                                                                              )                   )
IN RE:                                                                 )                        No. 08-05-00054-CV
)
STATE FARM LLOYDS, INC.,                         )                 AN ORIGINAL PROCEEDING
)
                                    Relator.                            )                             IN MANDAMUS
)


O P I N I O N

            Relator, State Farm Lloyds, Inc., seeks a writ of mandamus directing the trial court to enforce
a contractual appraisal provision.  We conditionally grant relief.
FACTUAL SUMMARY
            A fire damaged the home of Ruby Johnson, the Real Party in Interest, and many of her
belongings.  She immediately notified her insurance company, State Farm.  The policy included
coverage for damage or loss to personal property and coverage for loss of use of the home while the
home is “wholly or partially untenantable.”  Johnson made a claim for living expenses under her loss
of use coverage and claimed damages to personal items which had been destroyed or damaged in the
fire.  Johnson did not accept State Farm’s offers related to her personal property and living expenses. 
Consequently, State Farm invoked the policy’s appraisal provision through a letter written to
Johnson’s attorney on May 30, 2003.  The appraisal provision provides:
If you and we fail to agree on the actual cash value, amount of loss, or cost of repair
or replacement, either can make a written demand for appraisal.  Each will then select
a competent, independent appraiser and notify the other of the appraiser’s identity
within 20 days of receipt of the written demand.  The two appraisers will choose an
umpire.  If they cannot agree upon an umpire within 15 days, you or we may request
that the choice be made by a judge of a district court of a judicial district where the
loss occurred.  The two appraisers will then set the amount of loss, stating separately
the actual cash value and loss to each item.  If you or we request that they do so, the
appraisers will also set:
 
a.  the full replacement cost of the dwelling.
 
b.  the full replacement cost of any other building upon which loss is
claimed.  
 
c.  the full cost of repair or replacement of loss to such building,
without deduction for depreciation.
 
If the appraisers fail to agree, they will submit their differences to the umpire.  An
itemized decision agreed to by any two of these three and filed with us will set the
amount of the loss.  Such award shall be binding on you and us.  

The policy further provides that “[n]o action can be brought against [State Farm] unless there has
been compliance with the policy provisions.”  
            State Farm notified Johnson’s attorney of its competent, independent appraiser’s identity  by
letter dated June 6, 2003.  Johnson, through her attorney, informed State Farm of her appraiser’s
identity but she reserved the right to object to the appraisal process based on a belief that State Farm
had waived its right to an appraisal because it had not complied with the policy provisions.  The
person identified as Johnson’s appraiser told State Farm representatives that she knew nothing about
the matter and had not been retained by Johnson.  By letter dated June 25, 2003, State Farm
requested that Johnson’s attorney identify her appraiser and it further requested clarification on
Johnson’s waiver claim.  Johnson’s attorney did not respond until September 3, 2003 when he made
it clear that Johnson would not participate in the appraisal process.  Johnson had filed a breach of
contract suit against State Farm approximately one week earlier, but she did not serve State Farm
until October 8, 2003.  In that suit, she alleged State Farm breached the insurance contract by “failing
to compensate Plaintiff for the damaged and destroyed personal items and failing to pay for
Plaintiff’s loss of use of her home . . . .”



             On February 5, 2004, State Farm filed its motion to sever the breach of contract claim,
enforce the policy’s appraisal provision, and abate the proceedings until the appraisal process had
been completed.  The Honorable Linda Chew, Judge of the 327th District Court of El Paso County,
heard State Farm’s motion on June 16, 2004.  At the hearing, Johnson argued that State Farm had
waived its right to enforce the appraisal provision but she did not offer any evidence in support of
her assertions.  The court subsequently signed an order denying relief on November 16, 2004.  State
Farm now seeks mandamus relief from the court’s refusal to enforce the appraisal provision.
CONTRACTUAL APPRAISAL PROVISION
            State Farm contends that it is entitled to mandamus relief because (1) the trial court had no
discretion to deny State Farm’s request to enforce the insurance policy’s appraisal provision and (2)
State Farm has no adequate remedy at law.
Standard of Review
            Mandamus will lie only to correct a clear abuse of discretion.  Walker v. Packer, 827 S.W.2d
833, 840 (Tex. 1992)(orig. proceeding).  Moreover, there must be no other adequate remedy at law.
Id.  An appellate court rarely interferes with a trial court’s exercise of discretion.  A clear abuse of
discretion warranting correction by mandamus occurs when a court issues a decision which is
without basis or guiding principles of law.  See Johnson v. Fourth Court of Appeals, 700 S.W.2d
916, 917 (Tex. 1985)(orig. proceeding).  With respect to resolution of factual issues or matters
committed to the trial court’s discretion, the reviewing court may not substitute its judgment for that
of the trial court.  Walker, 827 S.W.2d at 839-40.  The relator must therefore establish that the trial
court could reasonably have reached only one decision.  Id.  With respect to a trial court’s
determination of the legal principles controlling its ruling, the standard is much less deferential.  A
clear failure by the trial court to analyze or apply the law correctly will constitute an abuse of
discretion, and may result in appellate reversal by extraordinary writ.  Walker, 827 S.W.2d at 840.
            An appellate court will deny mandamus relief if another remedy, usually appeal, is available
and adequate.  Street v. Second Court of Appeals, 715 S.W.2d 638, 639-40 (Tex. 1986)(orig.
proceeding).  Mandamus will not issue where there is “a clear and adequate remedy at law, such as
a normal appeal.”  Walker, 827 S.W.2d at 840, quoting State v. Walker, 679 S.W.2d 484, 485 (Tex.
1984).
Denial of State Farm’s Request to Enforce
Contractual Appraisal Provision
            The Supreme Court recently upheld the enforceability of an appraisal provision found in an
automobile insurance policy.  See In re Allstate County Mutual Insurance Company, 85 S.W.3d 193,
195 (Tex. 2002).  As in the instant case, the parties there contracted for an appraisal if they disagreed
about the damaged property’s value.  Id. at 196.  The trial court concluded that the appraisal
provision was an arbitration agreement and refused to enforce it.  Id. at 195.  The Supreme Court,
noting that Texas courts had drawn a distinction between appraisal and arbitration provisions for
over a hundred years, rejected the trial court’s conclusion and held that the court abused its discretion
by refusing to enforce the provision.  Id. at 196.  The Court also determined that Allstate did not have
an adequate remedy by appeal because denying the appraisal would vitiate Allstate’s ability to defend
the breach of contract claim since the parties had agreed as to the method by which to determine
whether a breach had occurred.


  Id.  For example, if the appraisal determined that the vehicle’s full
value was what the insurance company offered, there would be no breach of contract.  Id. 
Other courts have upheld similar appraisal provisions.  See In re Clarendon Insurance Company,
No. 2-04-305-CV, 2004 WL 2984916 (Tex.App.--Fort Worth December 23, 2004, orig.
proceeding)(not reported); Vanguard Underwriters Insurance Company v. Smith, 999 S.W.2d 448,
451 (Tex.App.--Amarillo 1999, orig. proceeding).  Absent some compelling reason to not enforce
the appraisal provision, the trial court had no discretion to refuse State Farm’s request to enforce the
appraisal provision.
            Johnson does not argue that appraisal provisions are generally unenforceable or that State
Farm failed to comply with the appraisal provision.  Instead, she contends that State Farm waived
its right to invoke the appraisal provision because it did not comply with other provisions in the
contract.  More specifically, she argues that State Farm failed to (1) request a sworn proof of loss
from Johnson;


 (2) notify her in writing whether the claim would be paid or had been denied or
whether more information was needed;


 and (3) failed to give its reason for denying the claim or its
reason for requiring more time to process the claim.



            In support of her argument, Johnson directs us to Black v. Victoria Lloyds Insurance
Company, 797 S.W.2d 20 (Tex. 1990) and In re Clarendon.  In Black, the Supreme Court held that
summary judgment was improper because a material issue of fact existed as to whether statements
made on an insurance card varied with the written terms of a provision in the policy excluding
coverage for permissive personal use of a vehicle.  Id. at 26.  Consequently, a fact issue existed as
to whether the insurer had waived its right to enforce that particular provision as written in the
policy.  Id. at 26.  Because Black does not hold that an insurer’s failure to comply with one provision
in an insurance policy waives its right to enforce a separate provision, the opinion is inapplicable.
            In Clarendon, a homeowner filed a claim under his homeowner’s insurance policy for water
and mold damage to his home.  The insurer enlisted the help of a third-party claims administrator,
which in turn, employed the services of an adjustor.  Upon learning that the homeowner was a
homebuilder, the adjustor agreed to allow him to do his own repairs.  The adjustor did not prepare
any paperwork affixing the amount of the loss.  Instead, the homeowner was to submit invoices for
the repair work and the insurer planned to reimburse him monthly.  After paying the homeowner
more than $260,000 over a four month period, the insurer became concerned about the manner
in which the claims were being handled by the third-party administrator.  The insurer hired a new
third-party claims administrator who retained another firm to examine the validity of the
homeowner’s claims.  The insurer stopped making payments to the homeowner because he would
not allow anyone to enter his home to videotape or photograph the repairs.  The homeowner had a
duty under the contract to provide the insurer with access to the damaged property.  The homeowner
subsequently made a policy limits settlement demand to the insurer and filed suit five days later. 
During the discovery period, the insurer sent the homeowner a demand for an appraisal based on a
provision in the policy.  Because the homeowner opposed the appraisal, the insurer filed a motion
to dismiss or abate the suit.  The trial court denied the motion and struck the insured’s demand for
an appraisal.  The insurer sought mandamus relief.
            The homeowner argued that the insurer had waived its right to an appraisal or was estopped
from seeking an appraisal because its conduct was inconsistent with a demand for an appraisal and
because it breached the insurance contract by failing to remit timely payments.  Clarendon, 2004
WL 2984916 at *3.  The Fort Worth Court of Appeals rejected this argument, holding that the
insurer’s payment of the invoices for four months and its attempts to examine the repairs performed
by the homeowner did not constitute a waiver of the demand-for-appraisal provision.  Id.  It relied
upon Scottish Union & National Insurance Company v. Clancey, 18 S.W. 439, 440, 83 Tex. 113,
114 (1892), in which the Supreme Court considered the issue of waiver as it applies to a demand for
a appraisal.  Although Scottish Union was decided more than a century ago, the Court’s observations
are instructive.  In that case, the insured’s property was destroyed by fire.  The insured filed suit in
a matter of weeks after the loss and the insurance company pled that the suit had been prematurely
brought because the loss was not payable until 60 days after proof of loss had been furnished. 
Further, the insurance company demanded an appraisal pursuant to the contract.  The insured alleged
that the insurance company had waived proof of loss and appraisal by making a partial adjustment
of the damage.  A jury rendered a verdict in favor of the insured.  In considering the waiver issue,
the Supreme Court stated:
It is a well-known principle in this class of cases that the acts relied on as constituting
a waiver should be such as 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.  It cannot be said, in the face of the proof showing
that proof of loss was insisted on by the company, and that it was endeavoring to
ascertain the amount of damages done by the fire to the goods of the appellee, that
this indicated an intention or desire to dispense with the very requirements inserted
in the policy for the purpose of enabling the company to arrive at this loss.  The facts
in this case show that there was no waiver of the stipulations in the policy relating to
proof of loss and appraisement of the property.  They show, on the other hand, that
appellants, through their agents and adjuster, were endeavoring to ascertain the
amount of damage, while the appellee declined to comply with the conditions in the
policy, on which alone his right to recover depends.

Id. at 440-41 [Emphasis added].  Rather than supporting Johnson’s argument, Clarendon undercuts
it.
            Waiver is the intentional relinquishment of a known right.   Labrado v. County of El Paso,
132 S.W.3d 581, 594 (Tex.App.--El Paso 2004, no pet.); Sedona Contracting, Inc. v. Ford, Powell
& Carson, Inc., 995 S.W.2d 192, 195 (Tex.App.--San Antonio 1999, pet. denied).  It is an
affirmative defense and the party asserting it bears the burden of proof.  See Labrado, 132 S.W.3d
at 594.  In order to defeat State Farm’s motion to enforce the appraisal provision on the ground of
waiver, Johnson had the burden to show that State Farm’s alleged failure to comply with these other
policy provisions constituted an intentional relinquishment of its right to seek an appraisal, or as
stated in Scottish Union, evidenced an intent to dispense with the policy’s requirements which would
enable State Farm to arrive at the amount of loss.  Johnson did not offer any evidence to establish
her assertions that State Farm failed to comply with any of the policy provisions or that it
intentionally relinquished its right to enforce the appraisal provision.  For this reason alone, the trial
court had no discretion to refuse State Farm’s request to enforce the appraisal provision.  Even
assuming that Johnson had introduced some evidence to support her assertions, State Farm’s alleged
failure to request a sworn proof of loss from Johnson, notify her in writing whether the claim would
be paid or had been denied or whether more information was needed, and its alleged failure to give
its reason for denying the claim or its reason for requiring more time to process the claim does not
evidence an intent to dispense with the policy’s requirements which would enable State Farm to
arrive at the amount of loss.  To the contrary, the record shows that State Farm was undertaking to
ascertain the amount of loss.  The trial court abused its discretion by refusing State Farm’s request
to enforce the appraisal provision.  Because State Farm does not have an adequate remedy at law,
we conditionally grant mandamus relief.
            Although the trial court’s denial of the motion to enforce the appraisal provision was
erroneous, the failure to abate the proceeding is not subject to mandamus review.  See In Re Allstate,
85 S.W.3d at 196.  The trial court has discretion whether to sever the breach of contract claim and
abate the proceedings while the appraisal is being done.  See id.; Guaranty Federal Savings Bank
v. Horseshoe Operating Co., 793 S.W.2d 652, 658 (Tex. 1990); Tex.R.Civ.P. 41.  The writ will
issue only if the trial court fails to comply with this opinion.


May 19, 2005                                                              
                                                                                    ANN CRAWFORD McCLURE, Justice

Before Panel No. 5
Before Barajas, C.J., McClure, and Ables, JJ.
(Ables, J., sitting by assignment)
