# No. 14-15-00922-CV

In the Court of Appeals For the Fourteenth Judicial District of Texas Houston, Texas

IN RE: AMERICAN RISK IN SURANCE COMPANY, INC.

Original Proceeding from Cause No. 14-DCV-213947 In the 268th District Court of Fort Bend County, Texas Honorable Brady G. Ellio t, Presiding Judge

R ESPONSE TO P ETITION FOR W RIT OF M ANDAMUS

H AWASH M EADE G ASTON N EESE & C ICACK LLP Jeremy Gaston Bar No. 24012685 2118 Smith Street Houston, Texas 77010 713.658.9001 713.658-9011 (Fax) Counsel for Real Party in Interest Hussam Barazi ACCEPTED 14-15-00922-CV FOURTEENTH COURT OF APPEALS

HOUSTON, TEXAS 11/12/2015 11:16:53 PM CHRISTOPHER PRINE

CLERKi I DENTITY OF P ARTIES AND C OUNSEL Real party in interest Hussam Ba razi certifies that the followi ng is a complete list of the counsel and parties to the judgment from which this mandamus is taken: Relator/Defendant: American Risk Insurance Company (“ARIC”) Counsel for Relator/Defendant: Spence E. Dunn State Bar No. 00797848 4669 Southwest Freeway, Suite 700 Houston, Texas 77027 Telephone: 713-559-0705 Facsimile: 713-481-8768 sdunn@americanriskins.com Kevin F. Risley State Bar No. 16941200 Andrew L. Johnson State Bar No. 24060025 George Arnold State Bar No. 00783559 Thompson, Coe, Cousins & Irons, LLP One Riverway, Suite 1400 Houston, Texas 77056 Telephone: 713-403-8210 Facsimile: 713-403-8299 garnold@thompsoncoe.com krisley@thompsonecoe.com ajohnson@thompsoncoe.com Real Party in Interest/Plaintiff: Hussam Barazi Counsel for Real Party in Interest/Plaintiff: B RASHER L AW F IRM , PLLC Clint Brasherii clint@brasherattorney.com State Bar. No. 24009915 Joe Muckleroy joe@brasherattorney.com State Bar No. 24065801 P.O. Box 2237 Beaumont, Texas 77704 (409) 832-3737 (409) 832-3838 (facsimile)
H AWASH M EADE G ASTON N EESE & C ICACK LLP Jeremy Gaston jgaston@hmgnc.com State Bar No. 24012685 2118 Smith Street Houston, TX 77002 (713) 658-9001 (713) 658-9011 (facsimile)iii T ABLE OF C ONTENTS I DENTITY OF P ARTIES AND C OUNSEL

.............................................................. ............ i T ABLE OF C ONTENTS

.............................................................. .................................. iii I NDEX OF A UTHORITIES

.............................................................. ............................... iv S TATEMENT ON O RAL A RGUMENT

.............................................................. .............. vi I NTRODUCTION & I SSUE P RESENTED

.............................................................. ............. 1 S TATEMENT OF F ACTS

.............................................................. ................................... 2 S UMMARY OF A RGUMENT

.............................................................. ............................. 4 S TANDARD OF R EVIEW

.............................................................. .................................. 4 A RGUMENT

.............................................................. ................................................... 5 I. ARI cannot invoke appraisal because it wholly denied coverage. .................... 5 II. Appraisal is inapplicable becau se the amount of loss is not dis puted. .............. 7 III. ARI waived its right to apprai sal by its unreasonable delay. .. .......................... 9 IV. ARI’s prior breach of contract e xcuses Barazi from appraisal. . ..................... 13 V. ARI’s nonwaiver argument should be rejected for several reasons . ............... 15 C ERTIFICATE OF C OMPLIANCE

.............................................................. .................... 19 C ERTIFICATE OF S ERVICE

.............................................................. ............................ 20iv I NDEX OF A UTHORITIES Cases Boone v. Safeco Ins. Co. , Civ.A.H-09-1613, 2010 WL 230331 1 (S.D. Tex. June 7, 2010) ..... ...................... 9 Canadian Helicopters, Ltd. v. Wittig, 876 S.W.2d 304 (Tex. 1994) ( orig. proceeding) ................. ................................... 4 Cleaver v. Cleaver , 140 S.W.3d 771, 774 (Tex. App. —Tyler 2004, no pet.) ........... .......................... 17 Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238 (T ex. 1985) .................................... .............................................. 4 Hooks v. Fourth Court of Appeals , 808 S.W.2d 56 (Tex. 1991) (orig. proceeding) .................. ................................... 4 In re Acadia Ins. Co. , 279 S.W.3d 777 (Tex. App.—Ama rillo 2007, no pet. h.) (orig. pro ceeding) ............................................ ........................................... 5, 9, 16 In re Allstate , 85 S.W.3d 193 (Tex. 2002) (orig. proceeding) .................. ................................... 6 In re Bank of Am., N.A., 01-02-00867-CV, 2003 WL 22310800 (Tex. App.—Houston [1st Dist.] Oct. 9, 2003, no pet.) (ori g. proceeding) ............................. ............................................. 16 In re GuideOne Nat’l Ins. Co ., No. 07-15-00281-CV, 2015 WL 57664 96 (Tex. App. Sept. 29, 2015, no pet. h.) (orig. pro ceeding) ............................................ ....................................................... 6 In re Guideone Nat’l Ins. Co ., No. 05-15-00981-CV, 2015 WL 5050233 (Tex. App.—Dallas Aug. 27, 2015, no. pet. h.) (orig . proceeding) ............................... ................................................16 In re Pub. Serv. Mut. Ins. Co ., No. 03-13-00003-CV, 2013 WL 692441 (Tex. App.—Austin Feb. 21, 2 013, mandamus denied) (o rig. proceeding) ........................... ......................................... 6 In re Security Nat. Ins. Co ., 14-10-00009-CV, 2010 WL 1609247 (Tex. App.—Houston [14th Dist.] 2010, no pet.) (orig . proceeding) ................................... ............................................ 7, 16v In re Texas Windstorm Ins. Ass’n , No. 14-13-00632-CV, 2013 WL 48069 96 (Tex. App.—Houston [14th Di st.] Sept. 10, 2013, no pet.) (orig. proceeding) ................... ......................................... 6 In re Universal Underwriters of Texas Ins. Co ., 345 S.W.3d 404 (Tex. 2011) ( orig. proceeding) ................. ................... 5, 6, 9, 10 Mustang Pipeline Co. v. Driver Pipeline Co., 134 S.W.3d 195 (T ex. 2004) .................................... ...................................... 14-15 Perry Homes v. Cull , 258 S.W.3d 580 (T ex. 2008) .................................... ..................................... 10, 11 Sanchez v. Prop. and Cas. Ins. Co. of Hartford , Civ. A. H-09-1736, 2010 WL 413687 (S.D. Tex. Jan. 27, 2010) ... ...................... 9 Southland Lloyds Ins. Co. v. Cantu , 399 S.W.3d 558 (Tex. App.—San Antonio 2011, pet. denied) ...... ...................... 9 State Farm Lloyds v. Johnson , 290 S.W.3d 886 (T ex. 2009) .................................... ...................................... 6, 12 Straus v. Kirby Court Corp ., 909 S.W.2d 105 (Tex. App.—Houston [14th Dist.] 1995, writ denie d) .............. 16 Walker v. Packer, 827 S.W.2d 833 (Tex. 1992) ( orig. proceeding) ................. ................................... 4

Rules T EX

. R. A PP

. P. 9.4 ........................................................ ........................................... 19vi S TATEMENT ON O RAL A RGUMENT Real party in interest Hussam Barazi does not believe oral arg ument would significantly aid the Court’s decisional process because the fa cts and legal arguments are adequately presented by th e parties’ briefs and record.1 I NTRODUCTION & I SSUE P RESENTED In 2012, the roof of Barazi’s home suffered $17,805.63 in hail damage. His insurer, American Risk Insurance Co. (“ARI”), wholly denied cov erage, claiming no hail had hit the home. ARI and Barazi then litigated the ma tter for eighteen months. During litigation, ARI ultimately admitted that hail h ad, in fact, hit Barazi’s home. On the eve of trial, how ever, ARI sought to invoke the i nsurance policy’s appraisal provision, which provides a mechanism for determining the amount of a loss when that amount is disputed. But here, although ARI disp uted coverage , it did not dispute the amount of loss. In addition, ARI had waited tw o and a half years after denying coverage t o invoke appraisal. At issue is whether the trial court committed a clear abuse of discretion or legal error in denying ARI’s request for appraisal.2 S TATEMENT OF F ACTS On February 4, 2013, real party in interest Hassam Barazi repo rted a hail claim to his insurance company, relator American Risk Insurance Company (“ARI”). S upplemental Record (“Supp. R.”) Tab 3 at 423. ARI initially ac cepted coverage but said “no payment w ill be issued because the Actual Cash Value of repairs is below your deduc tible.” R. Tab 1D at 117. Barazi hired Don Foreman to ins pect the property and prepare a damage report. R. Tab 1E; id . at 136. Foreman found substantial hail damage to the roof.
Id . Foreman concluded that the hail damage totaled $17,805.63. Id . After r eceiving this estimate, ARI’s adjuster c onducted a re-inspection with Fo reman. R. Tab 1F. On May 10, 2013, ARI o rdered a weather report (Supp. R. Tab 3 a t 424) requesting information as to whether any ha il one inch or larger had hit t he home during the policy period. Supp. R. Tab 3 at 454. After the re-inspection and after receiving a hail report from Weather Guidance , ARI wholly denied any covera ge for Barazi’s claim. Meanwhile, ARI’s adjuster did not write an estimate of damage, stating “We have not prepared an estimate at this time. Should your [insura nce] company elect to provide coverage and replace the roof, please advise and we will submit estimate

. ” R. Tab 1F at 138. In particular, on May 13, 2013, ARI sent Barazi a letter denyi ng coverage and claiming that no hail events hit Barazi’s property since th e inception of his policy:3 “The investigation into the facts and circumstances of your claim has been completed and a final coverage decision has been reached. . . The fact that there were no hail events from the inception of your policy to the date you reported the damage reveals that the damage to your roof occurred outside the period of effectiveness of your policy with American Risk Insurance
. Because the damages to your property occurred outside the window of effectiveness of this policy, we are unable to satisfy a claim...Before reaching this decision, we conducted a thorough investigation and considered all information you provided.” R. Tab 1H at 168 (emphasis added). Yet ARI ultimately admitted that hail which was one inch or la rger had hit Barazi’s property during the policy period. See Supp. R. Tab 3 at 464. By itself, this showed that ARI’s denial le tter (claiming “no hail events” ) was false. Now, two and a half years after ARI’s original denial of coverage and after determining that its basis for denying coverage was wrong, ARI wants an appraisal. ARI’s request was on the eve of trial, as the pretrial conferen ce in this matter was set for tomorrow (November 13, 2015), with trial to start the n ext week. ARI’s request for appraisal was also disingenuous because, as e xplained below, the amount of damage here is not disputed. In addition, ARI’s request for contractual appraisal was impr oper because ARI had wholly denie d coverage and because ARI had unreasonably delayed seeking appraisal. For th ese and other reasons discussed below, the district court did not commit any clear abuse of discretion or legal error in denying ARI’s request.4 S UMMARY OF A RGUMENT Because ARI wholly denied coverage for Barazi’s loss, ARI cann ot invoke appraisal under the parties’ insurance contract. Appraisal al so is inapplicable because the parties do not dispute the amount of Barazi’s loss. Separately, ARI waived any right to invoke appraisal by its unr easonable delay of over two and a half yea rs in seeking appraisal, which prejudiced Barazi by, among other things, forcing him to litigate a disputed coverage claim for more than eighteen months. In addition, ARI’s material breach of the ins urance policy (denying coverage on a basis that ARI ultimately admitted to be invalid) also precludes ARI from invoking appraisal. ARI argues that it can’t be deemed to have waived appraisal bec ause its policy has a “non-waiver” provision, but ARI did not present that argu ment below, and it has also been recently rejected on the merits by another court of appeals. S TANDARD OF R EVIEW Mandamus is appropriate only to correct a clear abuse of discre tion or legal violation when there is no othe r adequate remedy at law. See Walker v. Packer, 827 S.W.2d 833, 839 (Tex. 1992) (orig. proceeding). This is a heav y burden. See Canadian Helicopters, Ltd. v. Wittig, 876 S.W.2d 304, 305 (Tex. 1994, orig. proceeding). To establish an abuse of discretion, the complain ing party must demonstrate that the trial court acted unreasonably, arbitraril y, or without reference to guiding rules and principles. See Downer v. Aquamar ine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex. 1985). A n appellate court may not res olve factual5 disputes in an original mandamus proceeding. See Hooks v. Fourth Court of Appeals , 808 S.W.2d 56, 60 (Tex. 1991) (orig. proceeding). A RGUMENT I. ARI cannot invoke appraisal b ecause it wholly denied coverag e. ARI lost its right to invoke appraisal when it wholly denied B arazi’s claim.
See In re Acadia Ins. Co. , 279 S.W.3d 777, 780 (Tex. A pp.—Amarillo 2007, no pet. h.) (orig. proceeding). In that case, the policyholder claimed hail damage to his property. Id. at 778. Acadia denied the claim for the same reason ARI denied coverage here: that the hail dama ge allegedly pre-dated the inc eption date of the policy. Id. at 778-79. The policyholder filed a lawsuit, and the insurer s ubsequently sought appraisal, which the trial court denied. Id. The appellate court denied mandamus relief because Acadia’s decision to deny coverage waiv ed its right to appraisal. Id. at 780; see also In re Universal U nderwriters of Texas Ins. Co. , 345 S.W.3d 404, 407 (Tex. 2011) (orig. proceeding) (stating that wa iver can also be shown by an insurer’s “denial of liability” or “refusal to pay the loss”). Here, ARI denied liability for Barazi’s claim and refused to pay the loss when it denied coverage in its May 13, 2013 letter. ARI tries to avoid this result by relying on cases where the i nsurer estimated that the insured’s damages were below a deductible. 1 But those cases are not

1 See In re Pub. Serv. Mut. Ins. Co ., No. 03-13-00003-CV, 20 13 WL 692441, at *6 (Tex. App.—Austin Feb. 21, 2013, mandamus denied) (orig. proceeding) (“PSMIC stated that it6 applicable to situations where c overage was wholly denied, as h ere. To be sure, ARI originally stated that Barazi’s damages were below his deductib le, but ARI changed its position, wholly denied coverage, and stated that a “final coverage decision has been reached.” R. Tab 1H at 168 ARI cites other cases for the proposition that denying appraisal is an abuse of discretion when an insurance polic y includes an appraisal claus e. But none of those cases addressed situations like th e present where coverage is w holly denied. In one case, the issue was whether appraisal was unenforceable as a fo rm of arbitration, see In re Allstate , 85 S.W.3d 193 (Tex. 2002) (orig. proceeding); in another, the issue was the scope of appraisal where coverage had not been complete ly denied, see State Farm Lloyds v. Johnson , 290 S.W.3d 886, 891 (Tex. 2009) (orig. proceeding), and in the others, the insurer als o did not deny liability/coverage

. See In re Univ.
Underwriters , 345 S.W.3d at 410 (Tex. 2011) (orig. proceeding) (“Universal never denied liability for the loss.”); In re Security Nat. Ins. Co ., 14-10-00009-CV, 2010 WL 1609247, *6 (Tex. App.—Houston [14th Dist.] 2010, no pet.) ( orig. proceeding)

was unable to issue payment because the cost to repair the roof damage was less than Shree Deep’s $5,000 deductible.”); In re Texas Windstorm Ins. Ass’n , No. 14-13-00632-CV, 2013 WL 4806996, at *2 (Tex. App. —Houston [14th Dist.] Sept. 10 , 2013, no pet.) (orig. proceeding) (“[T]he record shows t hat TWIA also disputed the am ount of loss, which it Fdetermined did not exceed the deductible.”); In re GuideOne Nat’l Ins. Co ., No. 07-15- 00281-CV, 2015 WL 5766496, at *1 (Tex. App. Sept. 29, 2015, no pet. h.) (orig. proceeding) (“GuideOne advised th at the adjusted loss was below the deductible and so notified TopDog.”).7 (not designated for publication) (insured “has not identified o r specified any portion of coverage [the insurer] has denied”). Indeed, it is ironic t hat ARI cites In re Security National Insurance , as that case recognizes the v ery principle that Barazi relies upon here: “De nying coverage under an insurance policy w aives the right of the insurer to request apprai sal . . . .” 2010 WL 1609247 at * 6

. 2 II. Appraisal is inapplicable because the amount of loss is not disputed. Under the parties’ policy, appr aisal may be invoked by either party “If you and we fail to agree on the actual cash value, amount of loss, or cost of repair or replacement.” R. Tab 1A at 25-26. The purpose of appraisal is to “set the amount of loss” if the parties disagree. Id. ARI argues that the parties disagree on the amount of loss, but ARI has admitted th at there is no such disagreemen t. In particular, after ARI told Barazi that his loss did not mee t his deductible, Barazi hired Don Forman, an independent roofing expert, 3 to estimate his hail damage. R. Tab 1E. Then, during the litigation of this matter , Larry Simmons testified on April 29, 2015 as ARI’s corporate representative. Through Simmons’ testimony, ARI admitted that (a) ARI had Foreman’s estimate bef ore ARI’s May 13, 2013 denial letter (R. Tab 6 at 233-242, pp. 105:11-16; 106:10- 107:7); and (b) ARI

2 ARI argues that appraisal is warranted because the parties rea ched an “impasse” in negotiating the value of a claim. But whether the parties reac hed any impasse is irrelevant once ARI lost its right to invoke appraisal.
3 Relator mistakenly refers to Fo reman as a “public adjuster.” Foreman is an independent roofing contractor and provided his service to Barazi for $647. 00. R. Tab 1E at 136.8 did not disagree with Foreman’s e stimate (R. Tab 6 at 233-242, pp.114:21-23; 117:7- 16). Indeed, ARI specifically denied that it had any dispute w ith Foreman’s $17,805.63 estimate and rejected any suggestion that his price s were excessive or that his estimate was overbro ad. R. Tab 6 at 233-242, pp.114:21 -23; 117:7-16. ARI stated that the issue was coverage, not scope or price. Id . Because the issue was not the amount of loss, appraisal is simply inapplicable. ARI argues that there is no evidence in the mandamus record pr oving that ARI agrees with Foreman’s estimate. But as cited above, there is s uch evidence in the record. What ARI really means is that Simmons’ deposition (cit ed above) was not yet on file with the trial court before the court denied ARI’s request for appraisal. That is true, but the substance of Simmons’ deposition testimony ( i.e ., Simmons’ admission that ARI did not dispute the amount of damages) was on file with the trial court in the form of correspon dence from Barazi’s counsel to AR I’s counsel, which ARI attached to its very own moti on to compel appraisal, and th at correspondence stated that: I [trial counsel for Barazi] am in receipt of your [counsel for ARI’s] correspondence dated October 7, 2015 requesting appraisal. Not only is the request not timely and made after expiration of the demand, it is made late in respect to when ARI was aware of the dispute for the amount of loss. In addition, Mr. Simmons testified that he received and was aware of Mr. Foreman’s estimate prior to the time that ARI denied the claim. (Simmons deposition, page 106:19 through 107:23). Mr. Simmons was asked in his deposition if he disagreed with the scope or price of Mr. Foreman’s estimate. He admitted he did9 not. (Simmons deposition, page 114, line 21-23, page 117, lines 7-16). Therefore, there is no dispute as to the amount of loss. The only remaining dispute is regarding the coverage position ARI made in respect to the claim. Since there is no dispute as to the amount of loss, it is not appropriate to seek appr aisal of this matter. R. Tab 1J at 170 (emphasis added) . Notably, ARI made no attemp t to rebut the substance of this correspondence in ARI’s motion to compel appr aisal. See R. Tab
1 at 1-7. III. ARI waived its right to appraisal by its unreasonable dela y. An insurer must demand appraisal within a reasonable time afte r any negotiation impasse is reached; ot herwise, the right is waived. See Boone v. Safeco
Ins. Co. , Civ.A.H-09-1613, 2010 WL 2303311 , at *11-12 (S.D. Tex. June 7 , 2010); In re Universal Underwriters of Texas Ins. Co ., 345 S.W.3d 404, 408 (Tex. 2011) (orig. proceeding); Southland Lloyds Ins. Co. v. Cantu , 399 S.W.3d 558 at 578 (Tex. App.—San Antonio 2011, pet denied); In re Acadia Ins. Co. , 279 S.W.3d 777,780 (Tex. App.—Amarillo, pet. denied , no pet. h.) (orig. proceeding ). An impasse is reached when the in surer becomes aware that its i nsured disagrees with the damages found by the insurer and further neg otiations would be futile. In re Universal Underwriters , 345 S.W.3d at 408-12. Impasse is also reached when an insurer denies or otherwise refuses to pay a claim. Sanchez v. Prop. and Cas. Ins. Co. of Hartford , CIV. A. H-09-1736, 2010 WL 413687, at *5 (S.D. Tex. Jan. 27, 2010) (impasse establishe d by adjuster’s verbal declin ation to pay).10 To show waiver by delay, Barazi m ust show the delay was unreaso nable and prejudiced him. In re Universal Underwriters , 345 S.W.3d at 408-12. Here, the parties reached an impasse on May 13, 2013 when ARI denied cove rage, stating “a final coverage decis ion has been reached.” R. Tab 1H. A year then passed without any negotiations or discussions on the claim. On April 14, 201 4, Barazi filed suit against ARI. ARI answered and vi gorously defended itself, stan ding behind its denial. Discovery is now complet e. The case never was mediate d. In the trial court, ARI claimed an impasse was not reached unt il October 13,
2015 . R. Tab 1 at 4 ¶ 20. But throughout this litigation, ARI has maintained its denial of coverage. Indeed, ARI corporate representative Simmo ns testified that ARI’s denial of the claim was f air and reasonable. R. Tab 6 at 240-241. Having denied the claim over two and a half years ago and having maint ained that denial throughout this litigation, ARI cannot claim the parties “just” reached an impasse last month. In sum, ARI’s two-and-a-half year delay, coming after all disc overy has been completed and the case is ready for trial, is an unreasonable d elay. And there is no doubt that this delay prejudiced Barazi: Prejudice to a party “may arise in any number of ways that dem onstrate harm to a party’s legal rights or financial positions.” In re Universal Underwriters of Texas
Ins. Co ., 345 S.W.3d 404, 411 (Tex. 2011). In particular, litigation c onduct and11 participating in the litigation process is enough to establish prejudice for waiver. Perry Homes v. Cull , 258 S.W.3d 580, 597 (Tex. 2008). Here, Barazi would be prejudice d if this matter were sent to a ppraisal at this late date. For one, over the co urse of the litigation, ARI has actively participated in the litigation process, includi ng taking depositions, filing mo tions, and participating in discovery. See Perry Homes , 258 S.W. 3d at 595 (taking depositions, filing motions, and participating in d iscovery invokes the litigation process and is sufficient to show prejudice for waiver of right to invoke an a lternative dispute resolution). Hundreds of pages of documents have been exchanged, numerous m otions filed, jury charges drafted, witn esses scheduled, experts retai ned, depositions taken, and trial scheduled to begin ne xt week. ARI has substantially invoked the litigation process and taken advantage of t he material made available to i t before invoking appraisal. There is no question ARI has enjoyed the benefits o f extensive discovery and only now wishes to invoke appr aisal after discovery is conc luded and on the eleventh hour. Appraisal would also financially burden Barazi. See Perry Homes , 258 S.W.3d at 597. Months after ARI made its final coverage decisi on, Barazi had to seek and hire legal counsel to prosecute his action against ARI . As a direct result of ARI’s coverage denial, Barazi faced legal fees, expert fees, pr ofessional fees, and associated costs with prosecuting this action. Any recovery Ba razi obtains must be12 used to pay attorneys, professi onals, experts, and other litiga tion costs, a substantial portion of which have already been incurred. Had ARI invoked a ppraisal in a timely fashion, the majority of these expenses could have been avoided . Instead, financial prejudice to Barazi because of A RI’s delay is self-evident. Appraisal would also prejudice Barazi’s legal position because an appraisal would not encompass his entire claim against ARI. Id. (prejudice shown by harm to party’s legal position). In accordance with the policy lang uage as well as Texas jurisprudence, an appraisal onl y covers the amount of physical damage to a building caused by an event. See State Farm Lloyds v. Johnson , 290 S.W.3d 886, 888-89 (Tex. 2009). Appraisal would not address ARI’s bad faith claim s handling practices or the coverage questions that AR I has put in issue before the court to decide. ARI wishes to invoke appraisal knowing that an appraisal will not a ward certain damages caused by ARI’s delay, including the cost of preparing expert e valuations of those damages (as Barazi had to hire m ultiple experts to prepare his complete legal case against ARI, including an estimat or to value damages, an expert with respect to ARI’s claims handling process, a n attorney’s fee expert, and a meteorological service). In sum, ARI waived any right to appraisal through its unreason able two-anda-half year delay, including 18 months of substantially partici pating in the litigation
process.13 IV. ARI’s prior breach of contrac t excuses Barazi from appraisa l. On May 13, 2015, ARI denied cove rage for this claim. ARI’s le tter states the basis for the denial as follows: “We acquired a forensic meteor ologist weather report for the period of effectiveness of your policy. The report rev ealed that there were no hail events at the location of your property from the incept ion of your policy to the date you reported the damage to your roof for consideration .” R. Tab 1H at
168. ARI’s denial letter claiming “ no hail events” is false in two ways. First, ARIC concedes that there was at least one hail event at the property during the policy period. On September 28, 2015, ARI filed Defendant’s Motion for Leave to Designate Responsible Third Party seeking leave to designate Weather Guidance as a Responsible Third Party

. Supp. R. Tab 1 at 272. Weather Guidance was the entity that prepared a hail report fo r ARIC on May 10, 2013. In ARI’s motion for leave, ARI states that “a careful examination of the weather report sh ows in the image for January 9, 2012, that the 1.0-1. 5 inch diameter hail actually t ook place at the event location.” Supp. R. Tab 1 at 273. ARI thus knows that a hail e vent with 1.0-1.5 inch hail hit the property, yet it continues to maintain denial unde r the false premise of “no hail events.” In addition to the Weather Guidance report (which shows hail at the location during the policy period), ARI r eceived other hail information from Barazi which depicted additional hail events. See Supp. R. Tab 2 at 383. Because ARI had this14 information before it issued its denial letter, ARI should have known Barazi’s claim was valid even before ARI denied the claim. Second, ARI denied the claim on the basis that its Weather Guid ance report reflected “no hail events.” But that report did not state that “no hail events” occurred. R. Tab 1G at 164. Rather, as e xplained in a swo rn statement b y Weather Guidance meteorologist Robert White, when ARI requested the hail report, ARI instructed White not to consider any hail events below one inch in diameter . Supp. R. Tab 3 at 454. Accordingly, White’s report did not consider hail bel ow one inch in size.
Id . And from Barazi, ARI received information from a different w eather service identifying several dates where h ail 0.5-0.7 inches in size imp acted the property. Supp. R. Tab 2 at 383. This data, combined with the fact that ARI knew White only considered one inch or larger ha il, demonstrates the falsity of ARI’s statement of “no hail events.” “It is a fundamental principle of contract law that when one pa rty to a contract commits a material breach of that contract, the other party is discharged or excused from further performance.” Mustang Pipeline Co. v. Driver Pipeline Co., 134 S.W.3d 195, 196 (Tex.2004). Whether a party’s breach of contrac t is so material as to render the contract unenforceable is ordinarily a question o f fact to be determined based on several fa ctors, including: (a) the extent to which the in jured party will be deprived of the benefit which he reasonably expected; (b) the extent to which the injured party can be adequately compensated15 for the part of that benefit of which he will be deprived; (c) the extent to which the party failing to perform or to offer to perform will suffer fo rfeiture; (d) the likelihood that the party failing to perform or to offer to perform will cure his failure, taking account of the circumstances including any reasonable assurances; [and] (e) the extent to which the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing.
Id. at 199. Considering these factors, ARI’s denial of Barazi’s claim was a material breach. It deprived Barazi of the primary benefit of his homeo wner’s insurance— and has continued to do so for o ver two and a half years. Bara zi was forced to hire counsel and initiate a lawsuit in order to seek recovery of a v alid claim. And from May 13, 2013 until the present, ARI has maintained its denial o f the claim even though they (1) had the Weather Guidance report before the deni al and (2) admit that a “careful examination” of the report demonstrates a cover ed hail event at Barazi’s property. ARI’s ongoing de nial of coverage is a breac h of its duty of good faith and fair dealing and, at a minimum, constitutes a materia l breach of the insurance policy. Barazi thus is excused from further performa nce, including any duty to participate in an appraisal. V. ARI’s nonwaiver argument shou ld be rejected for several reas ons. ARI argues that it cannot be held to have waived appraisal bec ause of a nonwaiver provision in its insurance policy. As a threshold m atter, this argument should be rejected because ARI did not make it below. See R. Tab 1 at 1-7; In re16 Bank of Am., N.A ., 01-02-00867-CV, 2003 WL 22310800, at *2 (Tex. App.— Houston [1st Dist.] Oct. 9, 2003, no pet.) (orig. proceeding) ( not designated for publication) (“Equity is generally not served by issuing an ext raordinary writ against a trial court on a ground that was never presented to the court and that the court thus had no opportunity to address. Mor eover, the standard of review on mandamus is whether the trial court clearly abused its discretion. It would be hard to conclude, without circumstances that were highly unusual or that made a t rial court’s ruling void, that a trial court could a buse its discretion in making a ruling for a reason that was never presente d to the court.”). Second, as one appellate court recently held, a non-waiver clau se does not prevent a finding that an insurer has foregone its right to app raisal where, as here, appraisal was merely a contractual option for the insurer ( i.e ., as opposed to a required condition) because foregoing a mere option does not ac tually constitute a change or waiver of any policy provision. See In re Guideone Nat’l Ins. Co ., No. 05-15-00981-CV, 2015 WL 5050233, a t *1 (Tex. App.—Dallas Aug. 2 7, 2015, no. pet. h.) (orig. proceeding) (not designated for publication). Third, as this Court has held, a contractual nonwaiver provisi on can, itself, be waived. See Straus v. Kirby Court Corp ., 909 S.W.2d 105, 108 (Tex. App.— Houston [14th Dist.] 1995, writ denied). As such, ARI is incor rect that such a provision necessarily precludes any finding of waiver.17 Finally, although cases like In re Acadia Ins. Co. and In re Security National
Insurance speak in terms of “waiver,” the same result can be reached wit hout that term by noting that in cases where an insurer wholly denies cov erage, the insurer is essentially taking the most extreme position that the parties’ contract simply does not apply to any aspect of the claimed loss. But an insurer can’t take the position that a contract absolutely doesn’t cover a given situation whil e simultaneously claiming it does cover some aspect of it. At a minimum, such i nconsistent positions should be treated as an estoppel when invoked to the detriment of the insured, as here. See Cleaver v. Cleaver , 140 S.W.3d 771, 774 (Tex. App.—Tyler 2004, no pet.) (“Judicial estoppel is a common law principle that preclu des a party from asserting a position in a legal proceeding inconsistent with a position taken by that party in the same or a prior litigation.”).
C ONCLUSION ARI’s desire for appraisal on the eve of trial was a delay tact ic that should be rejected. ARI lost its right to invoke appraisal when it wholl y denied coverage. ARI also lost its right after unreasonably delaying for more than t wo and half years. In addition, ARI cannot invoke apprai sal after its representative confirmed there was no dispute as to the amount of loss. Finally, ARI cannot seek to enforce a contract provision after its own prior material breach. For these reaso ns, the Court should deny the petition. In the alternative, if the Court determines that the any eviden ce relevant to the18 appraisal issue was not adequatel y before the trial court, the Court should remand for the trial court to consider such evidence before making any final ruling on relator’s petition. Respectfully submitted, H AWASH M EADE G ASTON N EESE & C ICACK LLP /s/ Jeremy Gaston Jeremy Gaston Texas SBN 24012685 jgaston@hmgllp.com 2118 Smith Street Houston, Texas 77002 (713) 658-9001 (713) 658-9011 (Fax) Counsel for Real Party in Interest Hussam Barazi19 C ERTIFICATE OF C OMPLIANCE This brief complies with the length limitation of T EX

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/s/ Jerem y Gaston Jeremy Gaston20 C ERTIFICATE OF S ERVICE I hereby certify that a true and correct copy of the foregoing brief was served by e-filing and e-service on Nove mber 12, 2015 to the following : Spence E. Dunn State Bar No. 00797848 4669 Southwest Freeway, Suite 700 Houston, Texas 77027 Telephone: 713-559-0705 Facsimile: 713-481-8768 sdunn@americanriskins.com Kevin F. Risley State Bar No. 16941200 Andrew L. Johnson State Bar No. 24060025 George Arnold State Bar No. 00783559 Thompson, Coe, Cousins & Irons, LLP One Riverway, Suite 1400 Houston, Texas 77056 Telephone: 713-403-8210 Facsimile: 713-403-8299 garnold@thompsoncoe.com krisley@thompsonecoe.com ajohnson@thompsoncoe.com

/s/ Jerem y Gaston Jeremy Gaston