IN THE UNITED STATES DISTRICT COURT 

FOR THE NORTHERN DISTRICT OF TEXAS 

LUBBOCK DIVISION 

HART CHESNUTT, LLC, § 

§ 

§ 

§ 

§ 

§ 

§ 

§ 

§ 

§ 

Plaintiff, 

V. 

COVINGTON SPECIAL TY INSURANCE 

COMPANY, 

Defendant. 

No. 5:22-CV-110-H-BQ 

MEMORANDUM OPINION AND ORDER1 

Plaintiff Hart Chesnutt, LLC (Hart Chesnutt) filed a claim with its commercial insurance 

carrier, Defendant Covington Speciality Insurance Company (Covington), concerning alleged hail 

and wind damage to Hart Chesnutt's property. Pl.'s Original Pet. 3- 4, ECF No. 1-3. Covington 

refused to pay the claim because its adjuster found that the roof damage resulted from "deferred 

maintenance, wear and tear and improper installation," and any hail impacts were "cosmetic in 

nature." Pl. 's App. 6, ECF No. 17-1. Hart Chesnutt eventually filed suit against Covington, 

asserting claims for breach of contract and violations of the Texas Insurance Code and seeking a 

declaratory judgment as to its rights under the policy. Pl. 's Original Pet. 6- 7. 

Covington now asks the Court to (1) compel Hart Chesnutt to proceed with the appraisal 

process in accordance with the insurance policy, and (2) abate the case pending the appraisal's 

completion. Def. 's Mot. 2-4, ECF No. 11. Hart Chesnutt opposes Covington's requests, arguing 

that the dispute concerns the policy's coverage- not the amount of loss- and an appraisal is 

1 The Honorable James Wesley Hendrix, United States District Judge, originally referred this case to the undersigned 

for pretrial management. ECF No. 4. The parties, however, consented to proceed before a magistrate judge and Judge 

Hendrix has now transfe1Ted it for disposition, including trial. ECF No. 18. 

Case 5:22-cv-00110-BQ Document 19 Filed 08/17/22 Page 1 of 16 PageID 503
therefore inappropriate. Pl. 's Resp. 3-4, ECF No. 17. And, even if it must obtain an appraisal, 

Hart Chesnutt asserts the Court should not abate the litigation. Id at 8. 

Because the Cout1 concludes that Covington has properly invoked the contract's appraisal 

provision, it GRANTS Covington's Motion to Compel and ORDERS Hart Chesnutt to submit to 

the appraisal process. The Court DENIES Covington's Motion to Abate and will enter a separate 

order setting forth scheduling deadlines that accommodate the appraisal process. 

I. Background 

A. Origin of the Dispute 

Hai1 Chesnutt alleges that on May 20, 2020, its property located at 524 East 46th Street in 

Lubbock, Texas 79404 (Property) suffered wind and hail damage. Pl. 's Original Pet. 3. The 

Property was insured by Covington on the date of the purported damage. ECF No. 12, at 3 ~ 6. 

Hart Chesnutt submitted a claim for the damage, and Covington subsequently assigned an adjuster 

and engineer to inspect the Property. See Pl.' s Original Pet. 3. 

In a letter dated October 27, 2020, Covington advised Hart Chesnutt that the damage to the 

Property's metal roof was excluded from coverage because Covington determined the damage was 

the result of "deferred maintenance, wear and tear and improper installation," and any hail impacts 

were "cosmetic in nature." Pl. 's App. 6. As to damage incurred to property other than the roof 

(including metal siding and vents), Covington determined it owed Hart Chesnutt $0.00 because 

the total estimated repair costs did not exceed the policy's deductible. Id. at 7. 

Hart Chesnutt then retained a metallurgical engineer, as well as a causation and damages 

building consultant, who opined that hail caused the roof damage and Covington underpaid the 

claim by $188,765.61. Pl.'s Original Pet. 4. In response to Hart Chesnutt's written demand (which 

included the sum estimated by Hart Chesnutt's consultant), Covington hired a second engineer to 

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reinspect the Property. See Pl.'s App. 8-11. Ultimately, Covington did not alter its original 

assessment (id. at 12- 13), prompting Hart Chesnutt to file this action. Hart Chesnutt filed suit in 

the 99th Judicial District Court, Lubbock County, Texas, and Covington removed the case to this 

Court. ECF No. 1, at 1. 

B. Parties' Arguments 

Prior to filing the instant motion, counsel for Hart Chesnutt and Covington conferred in 

accordance with Fed. R. Civ. P. 26(£), and Covington made a written demand for appraisal under 

the insurance policy's terms. Def. 's Mot. 2; see ECF No. 12, at 2. Covington contends that an 

appraisal clause, once invoked, is mandatory. Def. 's Mot. 2 (citing Stale Farm Lloyds v. Johnson, 

290 S.W.3d 886, 895 (Tex. 2009)). Moreover, Covington asserts that, assuming it timely invoked 

the appraisal clause and otherwise complied with it, the Court lacks discretion to deny a motion to 

compel appraisal. Id. at 2-3 ( citing In re Allstate Cnty. Mui. Ins., 85 S.W.3d 193, 196 (Tex. 2002)). 

Covington classifies the dispute as one involving "the amount of loss - with current repair costs 

differing between the parties by nearly $200,000." Id. at 3. ln Covington's view, appraisal is 

therefore appropriate. See id. 

Consequently, Covington moves to abate this action pending an appraisal. Id. Covington 

alleges that under the policy's provisions, an appraisal is a condition precedent to suit; therefore, 

"the [p]olicy requires abatement ... and this Court should enforce the [p]olicy as written." Id. at 

4. Abatement also serves the interests of judicial economy, Covington argues, as "there is no 

further need for Court intervention or the expense of discovery'' in the event the appraisal 

successfully resolves the dispute between the parties. Id. 

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Hart Chesnutt, not surprisingly, disagrees with Covington' s assessment. Pl. ' s Resp. 3 .

2 It 

claims that this dispute involves more "than a straightforward disagreement over the appropriate 

cost of covered repairs and the 'amount of loss' - it centers squarely on the issue of coverage, 

which is not appropriate for appraisal." Id. at 4. That is, " [i]f, as [Ilart Chesnutt] contends, 

[Covington] failed to conduct . . . a full, fair and reasonable investigation of the claim, and that the 

damages are covered under the policy," Hart Chesnutt asserts it "is entitled to recover its full 

measure of contract damages .... " Id In support, Hart Chesnutt cites to Covington's statement 

of the nature of the case in the Joint Status Report: "Covington denies any liability for the causes 

of action asserted by [Hart Chesnutt] . . . . [T]he amount and coverage available for the claimed 

damage to the roof is in dispute. Covington asserts the damage to the roof to be unrelated to any 

storm event and cosmetic in nature." ECF No. 12, at 1-2. 

Hart Chesnutt further contends that Covington has waived its right to an appraisal. Pl.'s 

Resp. 5. According to Hart Chesnutt, " [w]aiver of an appraisal clause occurs if: (I) the parties 

previously reached an 'impasse'; (2) following the impasse, one party unreasonably delayed 

seeking appraisal; and (3) that party's delay was prejudicial." Id (quoting In re Universal 

Underwriters ofTex. Ins. Co., 345 S.W.3d 409, 407-12 (Tex. 2011)). Hart Chesnutt asserts that 

given the significant time lapse, the number of inspections conducted, and Covington's 

unwavering denial of payment, the patties have effectively reached an impasse. See id. at 6. Hart 

Chesnutt submits that the parties reached an impasse in October 2020- when Covington first 

denied its claim- and therefore Covington's July 2022 demand for an appraisal constitutes an 

unreasonable delay. Id Finally, Hart Chesnutt maintains it will be prejudiced by participating in 

2 Hart Chesnutt filed two copies of its Response, with the only appreciable difference being the addition of counsel's 

electronic signature. ECF Nos. 16, 17. The Court cites to the second-filed Response. ECF No. 17. 

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an appraisal, as it will incur additional expense and the appraisal process will result in further 

interruption of its effo1ts to obtain relief. Id. at 7-8. 

Even if the Court compels an appraisal, however, Hart Chesnutt alleges that abatement of 

the proceedings would be inappropriate. Id. at 8. In Hart Chesnutfs view, an "[a]ppraisal will not 

resolve the other issues, including [its] extra-contractual claims; thus, the litigation should be 

allowed to continue." Id. at 8-9. 

II. Appraisal Clauses and the Scope of Appraisals 

"Appraisals are a 'means of resolving disputes about the amount of loss for a covered 

claim."' Salas RealtyLLCv. Transp. Ins. Co.,425 F. Supp. 3d 751,754 (N.D. Tex. 2019) (quoting 

Johnson, 290 S. W.3d at 889). Insurance policies often contain appraisal clauses, which ·'arc 

generally enforceable, absent illegality or waiver.'' Universal Underwriters, 345 S.W.3d at 407. 

In Texas, appraisals are limited to determining the amount of loss- liability is an issue 

reserved for the courts. 3 Johnson, 290 S.W.3d at 889- 90. Although " [t]he line between liability 

and damage questions" is not always clear (id. at 890), the Texas Supreme Court has provided 

courts general guidance for making this determination. 

In Johnson, just as in the case at bar, the insured claimed a covered loss for hail damage to 

a roof. Id. at 887. The insurance company's "inspector concluded that hail had damaged only the 

ridgeline of roof," while the insured' s contractor "cone I uded the entire roof needed to be replaced." 

Id In accordance with her policy, the insured demanded an appraisal, but the insurance company 

3 Neither party specifically addresses the issue of what state's law applies in evaluating appraisal clauses, but they 

apparently agree that Texas substantive law governs this action. See Def.'s Mot. 2-3; Pl.'s Resp. 4-5; Pl.'s Original 

Pet. I. Because the parties have not made choice of law an issue before the Court, or offered a reason to conclude 

otherwise, the Court will similarly apply Texas law. See, e.g., Miller v. Ret. s:vs. Grp., Inc., No. H-09-834, 2012 WL 

13156988, at * 11 n. I 05 (S.D. Tex. Mar. 2, 2012), R. & R. adopted by 2012 WL 13156809 (S.D. Tex. Apr. 3, 2012) 

("Because neither party addresses choice of law, the cou11 assumes that the parties agree Texas law applies to the 

contract cause of action."). 

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refused, claiming that the parties disagreed as to the cause of the damage-not the amount of 

loss- and an appraisal was therefore inappropriate. Id. at 888. 

The Texas Supreme Court held that although determining the amount of hail damage 

necessarily required the appraiser to decide causation, appraisal was nevertheless warranted. See 

id. at 893, 895. In so holding, the court defined the scope of an appraisal, explaining that ·'when 

different causes are alleged for a single injury to property, causation is a liability question for the 

courts." Id. at 892. But "when different types of damage occur to different items of property," 

i.e., a divisible injury, "appraisers may have to decide the damage caused by each before the courts 

can decide liability." Id. Similarly, appraisers may distinguish between "loss due to a covered 

event" and that ''from a property 's pre-existing condition.'' Id. That is, "appraisers can decide the 

cost to repair each [damaged item] without deciding who must pay for it.'' Id. at 894. 

In the case of divisible damage , for example, appraisers can assess causation when 

evaluating a property that has sustained covered damages but also has pre-existing wear and tear 

(i.e., damage not covered by most insurance policies). Id. at 892- 93. The Texas Supreme Court 

reasoned that if appraisers could not "allocate damages between covered and excluded perils,'· 

appraisal clauses would be "largely inoperative. " Id. 

As particularly relevant to this case, the Texas Supreme Court also observed that the 

appraisal had not yet occurred. Id. at 894. The court explained that "unless the 'amount of loss' 

will never be needed (a difficult prediction when litigation has yet to begin), appraisals should 

generally go forward without preemptive intervention by the courts." Id. at 895. This is because 

a court can always review an appraisal and remedy any flaws should the appraisal exceed the scope 

of the appraiser's authority. Id. 

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III. Discussion 

A. Appraisal is Appropriate 

Hai1 Chesnutt apparently does not dispute that the policy supplies the parties with a right 

to demand appraisal. See Pl.' s Resp. 1- 9. Thus, the Court considers only whether compelling 

Hart Chesnutt to participate in the appraisal process at this juncture is appropriate. See .Johnson, 

290 S.W.3d at 895; see also Def.'s Mot. 3 ("There is a dispute as to the amount of loss ... . "); 

Pl. 's Resp. 4 (Covington "has made its position clear from the inception of this claim-they 

concluded that the damage to [Hart Chesnutt's] roof is not covered under the [p]olicy, regardless 

of any amount to repair or replace it."). The Court concludes that there is an amount-of-loss 

dispute, and appraisal is therefore required. 

Covington determined that the Property's metal siding and vents sustained hail damage. 

Pl. 's App. 6. But Covington declined to pay for the alleged damage to the Property's roof because 

it found the damage resulted from uncovered events, including (1) "deferred maintenance," 

(2) "wear and tear," (3) "improper installation," and (4) hail impacts that were "cosmetic in 

nature." Id. The amount of covered loss is at least pa11ially in dispute because Covington 

acknowledges that the Property's roof (as well as the metal siding and vents) sustained hail 

impacts-it merely disagrees with the extent of damage. See, e.g., Mattox v. Sofeco Ins. Co. qf" 

Ind., No. 1: 16-CV-1037-LY, 2016 WL 10519944, at *2 (W.D. Tex. Nov. 28, 2016) (expressing 

doubt as to whether "a disagreement over causation truly exist[ ed], given the fact that [insurer] . .. 

stated that it believe[d] at least some of the damage in question was caused by hail"). 

Nevertheless, Hart Chesnutt contends that the bases for Covington's denial of its claim 

"center[] squarely on the issue of coverage." Pl. 's Resp. 4 (emphasis omitted). In Johnson. 

however, the Texas Supreme Court expressly held that an appraiser may allocate damage between 

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a covered peril and those that are not, such as wear and tear. 290 S. W.3d at 892- 93 ( citing Gu(f' 

Ins. Co. of Dall. v. Pappas, 73 S.W.2d 145, 146-47 (Tex. Civ. App.-San Antonio 1934, writ 

ref d)). The fact that an appraiser may have to differentiate damage caused by hail versus wearand-tear or improper installation is not a reason to decline requiring an appraisal. See id. at 895; 

TMM Inv., Ltd. v. Oh. Cas. Ins. Co., 730 F.3d 466,473,475 (5th Cir. 2013) (upholding an appraisal 

attributing roof damage "to improper installation" and damage to a skylight "to rocks thrown from 

below," explaining that "[t]o the extent ... appraisers merely distinguish[] damage caused by preexisting conditions from damage caused by [a] storm, they ... act[] within their authority"). That 

is, Hart Chesnutt "cannot avoid appraisal at this point merely because there might be a causation 

question that exceeds the scope of appraisal.'' Johnson, 290 S.W.3d at 893. Should the appraisal 

be flawed in some way, e.g., by determining causation, the Court can remedy that at a later date. 

Id. at 895. 

Ultimately, "someone must determine the amount of loss." Id. (internal quotation marks 

omitted). Where, as here, an appraisal has not yet occurred, the Court concludes that it should "go 

forward without preemptive intervention," as provided by the express terms of the pol icy. Id. ; see. 

e.g., TMM Inv., 730 F.3d at 4 75 (finding persuasive "the closeness of the facts in Johnson to those 

at bar-both involved roofs damaged in part by hailstorms," and reasoning that such fact 

"militate[ d] in favor of arriving at a holding similar to the one arrived at by the Johnson court"); 

Duncan, 2021 WL 2376609, at *3 ("In accordance with the express contractual language of the 

homeowners policy at issue, an appraisal shall take place to determine the amount of loss."); Tri 

Invs. , Inc. v. United Fire & Cas. Co. , No. 5: 18-CV-116, 2019 WL 13 114312, at *3- 4 (S.D. Tex. 

July 15, 2019) (granting insurer's motion to compel appraisal, where dispute involved both 

coverage and amount-of-loss and "nothing in the record establishe[ d] that the amount of loss was 

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unequivocally established"); Abbey on Preston H. O.A. v. Admiral Ins. Co., No. 3: 13-CV-O 102-N, 

2013 WL 12143827, at *l (N.D. Tex. May 30, 2013) (compelling appraisal that insurer demanded 

during Rule 26(f) conference, where although insured argued the parties disagreed "only whether 

[insurer] covered the loss or not," court found there was "'still a disagreement as to 'the amount of 

loss,' [thereby] implicating the appraisal provision"). The parties may then litigate causation 

issues, if necessary. See Johnson, 290 S.W.3d at 892,894; In Re S Ins. Co. , No. 09-11-00022-

CV, 201 1 WL 846205, at *l (Tex. App.-Beaumont Mar. 10, 2011, no pet.) ("[F]ollowing the 

Supreme Court's decision in Johnson, we conclude that under the circumstances the appraisal 

should be determined as an initial matter and the parties may then litigate causation questions."). 

B. Covington has not Waived its Right to Appraisal 

Having determined that the policy terms and applicable law provide for an appraisal, the 

Court must examine whether Covington has waived its right under the circumstances presented 

herein. To establish waiver of the right to appraisal, a party must demonstrate that: (1) the parties 

have reached an impasse; (2) after reaching an impasse, one party did not invoke appraisal within 

a reasonable time; and (3) the other party will suffer prejudice as a result of the delay. Universal 

Underwriters, 345 S.W.3d at 407- 12 (setting out elements of waiver); see JM Walker LLC v. 

Acadia Ins. Co., 356 F. App'x 744, 748 (5th Cir. 2009) (per curiam) (describing acts of waiver as 

"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" (internal 

quotation marks and citation omitted)). "'Waiver is an affirmative defense,' and the party alleging 

waiver 'bears the burden of proof."' Martinez v. Nationv.,ide Gen. Ins. Co., No. 3:19-CV-01541-

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X, 2020 WL 3606399, at *2 (N.D. Tex. July 2, 2020) (quoting JM Walker LLC, 356 f. App'x at 

748). 

"Waiver is ordinarily a question of fact, but where the facts are admitted or clearly 

established, it becomes a question of law. The trial court may determine whether an appraisal has 

been waived as a matter of law at the preliminary stages of litigation." Sanchez v. Prop. & Cas. 

Ins. Co. ofHartford, No. H-09-1736, 2010 WL 413687, at *4 (S.D. Tex. 2010) (internal quotation 

marks and citations omitted). 

The Court finds that Hart Chesnutt has not satisfied its burden of demonstrating each 

waiver element. As to the first element, the Texas Supreme Court defines an impasse as being "a 

mutual understanding that neither [party] will negotiate further'' or when ''both parties [become] 

... aware that further negotiations would be futile."' Universal Underwriters, 345 S. W.3d at 409-

10 ( emphasis added). "If one party genuinely believes negotiations to be ongoing, it cannot have 

intended to relinquish its right to appraisal (unless it expressly waives it)." Id. at 409. 

Hart Chesnutt maintains that "the parties reached an impasse when [Covington] made its 

original claim decision in October 2020." Pl. 's Resp. 6. However, Covington's October 27, 2020, 

letter ends with the following: "If you have available any information which has a bearing on the 

facts outlined above, please forward to our office for review and consideration." Pl. 's App. 7. 

Because this statement indicates Covington' s willingness to continue negotiations related to the 

storm damage, the October 2020 letter "did not mark a point of impasse." Vera v. Companion 

Prop. & Cas. Ins. Co., No. 5:15- CV- 73, 2015 WL 12777394, at *2 (S.D. Tex. Aug. 27, 2015). 

Even looking at the other events cited by Hart Chesnutt-Covington's March 11, 2022, 

affirmation of the October 2020 denial and Hart Chesnutt's filing of suit on April 7, 2022 (Pl. ' s 

Resp. 6)- the Court cannot conclude the parties have reached an impasse. Covington's March 

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2022 letter again stated, in bold letters. that it was willing to consider additional information 

bearing on the amount of loss. Pl. ' s App. 13. Hart Chesnutt contends that after Covington rejected 

its written demand for payment, it was "[l]eft with no other option·' but to file suit. Pl.'s Resp. 6. 

"However, the existence of a dispute and the development of an impasse are two different things.,. 

Vera, 2015 WL 12777394, at *2 (internal quotation marks and citation omitted). Hart Chesnutt 

has submitted no evidence showing that this lawsuit rendered further negotiations futi le. id.; see 

Martinez, 2020 WL 3606399, at *3 (finding insurer had not established impasse based on insured's 

filing of suit). 

Moreover, even if the parties have reached an impasse, Hart Chesnutt has failed to satisfy 

the second element, i.e., showing that Covington did not make its appraisal demand within a 

reasonable time. Hart Chesnutt alleges that Covington's "demand for appraisal was unreasonably 

delayed and only made in response to [Hart Chesnutt] filing suit." Pl.'s Resp. 6. Assuming, for 

the sake of analysis, that the parties reached an impasse on April 7, 2022-the day Hart Chesnutt 

filed suit- Covington made written demand within approximately three months. See ECr No. 12, 

at 2 ("Covington seeks to invoke the appraisal provision of the f p lolicy in an attempt to work to 

resolve the case without the need for further Court intervention," dated July 13, 2022.); Universal 

Underwriters, 345 S. W.3d at 408 (providing that "reasonableness must be measured from the point 

of impasse"). Further, Covington indicated in its Answer, filed in state court at the time Hart 

Chesnutt instituted this litigation, that invocation of the appraisal clause was an issue. See Def.'s 

Original Answer 4, ECF No. 1-6 ("Defendant specifically denies that all conditions precedent to 

recovery have been performed, waived or have occurred given Plaintiffs departure from the .. . 

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Case 5:22-cv-00110-BQ Document 19 Filed 08/17/22 Page 11 of 16 PageID 513
appraisal process under the insurance policy .. . .''). And notably, the appraisal clause does not 

contain a time limit fo r demanding appraisal. ECF No. 11-1, at 64.4 

" [W]hile the time period may be instructive in interpreting the parties' intentions, it alone 

1s not the standard by which courts determine the reasonableness of a delay." Universal 

Underwriters, 345 S.W.3d at 408. Based on the foregoi ng, the Court cannot conclude that Hart 

Chesnutt has demonstrated that Covington unreasonably delayed demanding appraisal. See. e.g , 

Martinez, 2020 WL 3606399, at *3 (determining insurer had not demonstrated insureds 

unreasonably delayed demanding an appraisal, where they " invoked appraisal within three to 

eleven months of' impasse, the policy did not contain a time limit for in\'ocation, and the parties 

continued negotiations after insureds filed suit); cf Dwyer v. Fid. Nat'/ Prop. & Cas. Ins. Co. , 565 

F.3d 284, 288 (5th Cir. 2009) (explaining that when considering delay, courts should focus on the 

party's "knowledge and action- when [the party] knew that the appraisal clause could be invoked 

[and] whether it reacted timely to the knowledge''- and concluding that insurer's motion to 

compel appraisal filed five weeks after learning that insureds disputed only the amount-of-loss was 

not unreasonable delay); Maffox, 2016 WL 10519944, at *3 (finding that insurer's appraisal 

demand made one month after reaching impasse was not unreasonable delay). 

Finally, and most significantly, Hart Chesnutt has not shown that it will be prejudiced by 

the appraisal process. Hart Chesnutt asserts that it " has already spent more than $9,000 to complete 

an independent investigation of its damages by a metallurgist after [Covington] wrongfully denied 

its claim." Pl.'s Resp. 8. According to Hart Chesnutt, it "will incur additional expense for 

appraisal, the process will result in months of additional delay, and potentially damage or reduce 

·

1 Because Covington d id not attach a separately paginated appendix as required by Local Rule 7.1 (i), page citations 

refer to the electronic page number assigned by the Court's electron ic fil ing system. 

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[its] legal rights.'· Id Hart Chesnutt also argues that Covington is using the appraisal process ·'to 

manipulate the litigation process to gain an unfair tactical advantage:· Id 

The Court observes initially that the $9,000 expense Hart Chesnutt reports was incurred 

prior to any impasse. "However, the prejudice required to find a waiver must be following impasse 

and prior to invocation of the appraisal process; the prejudice must be caused by the unreasonable 

delay.'' Engdorfv. Allstate Vehicle & Prop. Ins. Co., No. 4:18-CV-4280, 2019 WL 7905458, at 

*3 (S.D. Tex. Dec. 6, 2019) ( emphasis added); see Trilnvs., 2019 WL 13114312, at *6 ("Prejudice 

is the harm caused by the insurer's delay in invoking the appraisal.fi)/lowing an impasse."). 

Further, "it is difficult to see how prejudice could ever be shown when the policy, like the 

one here, gives both sides the same opportunity to demand appraisal.'' Universal Underwriters, 

345 S. W.3d at 412. If Hart Chesnutt truly sensed the parties had reached an impasse in October 

2020- or even April 2022 when it filed suit-it could have invoked the appraisal clause and 

avoided any alleged prejudice. Id. Indeed, as Hart Chesnutt avers, " [ m ]any benefits of appraisal 

are lost or diminished if the appraisal is sought after the parties have already engaged in litigation.'' 

Pl.'s Resp. 7; see Universal Underwriters, 345 S.W.3d at 412 (opining that a party can ·'shortcircuit potential litigation" by demanding appraisal and this option "should be pursued before 

resorting to the courts"). Thus, Hart Chesnutt has failed to demonstrate that it is prejudiced, either 

legally or financially, by any purpo11ed delay in Covington' s appraisal demand. See, e.g., Tri lnvs. , 

2019 WL 1311431 2, at *6- 7 (finding no prejudice where insured could have invoked appraisal 

clause and "fail[ed] to identify any expenses and fees that it incurred but would not have had to 

incur had appraisal been invoked'' immediately upon impasse); Mattox, 2016 WL 10519944, at * 3 

( determining insureds had not shown prejudice, where they "had the opportunity to demand 

appraisal as soon as they disagreed with [insurer's] assessment of damages to their [rental] 

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property," and they could pursue claim for lost rental income in spite of appraisal process); SPJST 

Lodge #I 54 v. Century Surety Co., No. 4: l 5-cv-710-O, 2015 WL 12699508, at *2 (N.D. Tex. Nov. 

23, 2015) (reasoning that insureds' failure to demand appraisal "militate[ d) against a finding of 

prejudice"); Vera, 2015 WL 12777394, at *3 (rejecting insurcd's prejudice argument, where 

insured did not invoke appraisal clause and insurer demanded appraisal before discovery 

commenced, thus minimizing expense to insured). 

In sum, Hart Chesnutt has failed to demonstrate that Covington engaged in conduct 

evincing '•intent, either the intentional relinquishment of a known right or intentional conduct 

inconsistent with claiming that right" such that the Court can conclude Covington waived its right 

to invoke appraisal. Universal Underwriters, 345 S.W.3d at 407; see JM Walker LLC, 356 F. 

App'x at 748 ("Waiver is the intentional relinquishment of a known right."). The Court therefore 

concludes that Hart Chesnutt must submit to the appraisal process in accordance with the insurance 

policy's terms. 

C. The Court, in its discretion, will not require abatement 

Covington asks the Court to abate this action pending the appraisal process, both because 

appraisal is a condition precedent to filing suit and for reasons of judicial economy. Def.'s Mot. 

3- 4. Hart Chesnutt opposes that request, arguing appraisal will not resolve all issues between the 

parties, including its ·'extra-contractual claims." Pl.' s Resp. 8. 

As Covington notes, the insurance policy in this case contains a "no action" clause: ·'No 

one may bring legal action against us under this [policy] unless ... [t )here has been full compliance 

with all of the terms of this" policy. ECF No. 11-1, at 71. In cases where the insurance policy 

contains a " no action" clause, courts typically abate the litigation. See Johnson v. Liberty Mut. 

Fire ins. Co., No. 4:14-CV-604, 2015 WL 11170153, at *2 (E.D. Tex. Oct. 30, 20 15) ("In the case 

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of an insurer trying to enforce a condition precedent ... a proper remedy is abatement- or a stay 

of the proceedings-rather than barring the claim." (alteration in original) (citation omitted)). On 

the other hand, " [fjederal district courts sitting in diversity and applying Texas law have, in most 

cases, declined to abate litigation pending appraisal where questions of coverage remain," as in 

the case at bar. Carter v. Underwriter.1· at Lloyd's, London, No. 7:17-cv-00127-O, 2018 WL 

10483854, at *2 (N.D. Tex. July 27, 2018) (citing cases in support). Ultimately, courts retain 

discretion to abate proceedings pending appraisal. See Allstate Cnty. M11t. Ins. , 85 S. W.3d at 196 

("While the trial court has no discretion to deny the appraisal, the court does have some discretion 

as to the timing of the appraisal.'"). 

Initially, the Court observes that the fact Hart Chesnutt failed to demand appraisal prior to 

filing suit does not, standing alone, require abatement. Abbey on Preston, 2013 WL 12143827, at 

* 1. Hart Chesnutt filed suit before Covington invoked the appraisal clause-a provision that "is 

required only if one side requests it" and that "does not apply to every coverage situation.'' Id. 

That is, "the part of the policy that requires that 'all conditions be met' does not necessarily mean 

that the appraisal process need be completed for a policyholder to file suit." Id. 

Moreover, Hart Chesnutt raises several extra-contractual claims that are not gov~rned by 

the appraisal clause. See Pl.'s Original Pet. 4-7. And, as discussed above, the parties dispute 

coverage in addition to the amount-of-loss. See id. '"Thus, the pai1ies dispute [Covington's] 

liability no matter the result of the appraisal. " Abbey on Preston, 2013 WL 12143827, at* I 

( declining to abate case despite compelling appraisal). For these reasons, the Court DENIES 

Covington's Motion to Abate. See, e.g., Devonshire Real Estate & Asset Mgmt .. LP v. Am. Ins. 

Co., No. 3:12-CV-2199-B, 2013 WL 12124308, at *5 (N.D. Tex. Mar. 26, 2013) (denying 

insurer's motion to abate where the amount-of-loss was only ''one issue in dispute between the 

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Case 5:22-cv-00110-BQ Document 19 Filed 08/17/22 Page 15 of 16 PageID 517
pa11ies" and "appraisal [ would] not resolve the other issues''). The Court will, however, set dates 

in the scheduling order that reflect the pa11ies' need to complete the appraisal process. 

IV. Conclusion 

Haii Chesnutt must comply with the terms of its policy with Covington. The Court 

therefore GRANTS Covington's Motion to Compel Appraisal and ORDERS Hart Chesnutt to 

submit to the appraisal process in accordance with the policy's terms. The Court DENIES 

Covington's Motion to Abate proceedings and will enter an order setting forth scheduling 

deadlines in accordance with Fed. R. Civ. P. 16 that accommodate the appraisal process. The 

Court directs the parties to immediately begin the appraisal process and complete it as 

expeditiously as possible. The parties shall file a joint notice thirty (30) days from the date of 

this Order advising the Court of the status of the appraisal. 

SO ORDERED. 

Dated: Augustl..1, 2022. 

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