Texas Supreme Court Rules in Policy Appraisal Suits


On June 30, 2019, The Texas Supreme Court issued opinions in Barbara Technologies v. State Farm Lloyds and Ortiz v. State Farm Lloyds. The Court provided clarification of the interplay between insurance policy appraisal clauses and lawsuits involving breach of contract, bad faith, and Texas Insurance Code violations, including the Texas Prompt Payment of Claims Act (TPPCA).

In Barbara Technologies v. State Farm Lloyds, the Court confirmed that payment of an appraisal award bars the insured’s breach of contract and bad faith claims, but remanded the TPPCA claim for further proceedings. Specifically, the Court considered competing motions for summary judgment that presented the issue of whether an insured party can prevail on its claim for damages for delayed payment pursuant to the TPPCA, when it is undisputed that the insurer investigated the claim, rejected it, invoked the policy’s provision for an appraisal process during the lawsuit, and ultimately paid the insured in full in accordance with the appraisal. The Court held that the insurer’s payment based on the appraisal was neither an acknowledgment of liability under the policy nor an award of actual damages.

In Ortiz v. State Farm Lloyds, a divided Court remanded the TPPCA claim. The Court held that the insurer’s payment of the appraisal award bars the insured’s breach of contract claim based on failure to pay the amount of the covered loss. They further held that the payment of the appraisal award bars the insured’s common law and statutory bad faith claims to the extent the only actual damages being sought are lost policy benefits. The court held that the insured may proceed with his claim under the TPPCA.

These cases are significant for insurers and raise issues of timing and language in payment of claims, among other issues.