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On February 13, 2018, Thompson, Coe, Cousins, & Iron, LLP obtained an appellate victory for client First Community Insurance in a first-party insurance lawsuit.  In Zhu v. First Community Insurance Co., No. 14-16-00226-CV, the insurer and plaintiff disputed the amount of loss caused to plaintiff’s home following a storm, and the insurer invoked the contractual appraisal process to resolve the dispute.  After the appraisal award was issued, the insurer tendered payment of the award to plaintiff.  The insurer moved for summary judgment on plaintiff’s contractual and extra-contractual claims arguing that payment of the appraisal award defeated such claims.  Plaintiff responded by arguing that the appraisal award was incomplete because it purported to exclude items from the award.

The trial court granted the insurer’s motion for summary judgment.  The Fourteenth Court of Appeals affirmed, holding that, if plaintiff believed the appraisal award was deficient, he had the burden of moving to set aside the award.  Because plaintiff did not argue the award should be set aside, the award was binding and set the amount of loss under the contract.  The Court held the insurer’s tender of the appraisal amount barred plaintiff’s breach-of-contract claim.  Additionally, the insurer’s tender of the amount defeated plaintiff’s extra-contractual claims under the Texas Insurance Code and Deceptive Trade Practices Act.

In its analysis, the Fourteenth Court relied on Mainali Corp. v. Covington Specialty Ins. Co., 872 F.3d 255 (5th Cir. 2017)—another appraisal case in which Thompson Coe prevailed.  In Mainali, the Fifth Circuit disapproved of precedent the plaintiffs’ bar was heavily using to argue claims should survive the payment of an appraisal award.  The Zhu Court echoed this disapproval.

Zhu and Mainali stand as strong support for the purpose of the appraisal process:  “[To] allow the insured and insurer to resolve disputes about damages with greater efficiency by eliminating the cost and delay of traditional litigation.”

First Community Insurance was represented by Andrew Johnson on appeal.

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Andrew L. Johnson

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