Court Opinion

ID: 9374120
Source: CourtListenerOpinion
Date Created: 2023-02-22 16:22:06.719501+00
Date Added: 2024-06-11T17:16:45.007832
License: Public Domain

NUMBER 13-22-00545-CV

                                   COURT OF APPEALS

                       THIRTEENTH DISTRICT OF TEXAS

                          CORPUS CHRISTI – EDINBURG

                                IN RE STATE FARM LLOYDS

                            On Petition for Writ of Mandamus.

                                MEMORANDUM OPINION

  Before Chief Justice Contreras and Justices Benavides and Tijerina
          Memorandum Opinion by Chief Justice Contreras1

        Relator State Farm Lloyds has filed a petition for writ of mandamus asserting that

the trial court 2 abused its discretion by appointing an attorney as the umpire in a property

        1 See TEX. R. APP. P. 52.8(d) (“When denying relief, the court may hand down an opinion but is not
required to do so. When granting relief, the court must hand down an opinion as in any other case.”); id. R.
47.1 (requiring the appellate courts to “hand down a written opinion that is as brief as practicable but that
addresses every issue raised and necessary to final disposition”); id. R. 47.4 (distinguishing opinions and
memorandum opinions).

       2 This original proceeding arises from trial court cause number CL-22-2308-G in the County Court

at Law No. 7 of Hidalgo County, Texas, and the respondent is the Honorable Sergio Valdez. See id. R.
52.2.
damage dispute when the relevant insurance policy requires that an umpire must be an

engineer, architect, adjuster, public adjuster, or contractor. We conditionally grant the

petition for writ of mandamus.

                                            I.       BACKGROUND

        Real party in interest Bernardo Vela filed an application with the trial court for the

appointment of an umpire regarding his insurance claims for property damage to his

residence. According to Vela’s application, Vela’s home was damaged by a hurricane on

July 25, 2020, and the parties disagreed regarding the full extent of the property damages

sustained to the residence. Vela thus requested the trial court to appoint an umpire under

the appraisal provision of his homeowner’s insurance policy. Vela alleged that he invoked

the appraisal provision, that he notified relator that he was selecting Leopoldo “Leo” Diaz

as his appraiser, and that relator subsequently selected Darrel Edwards as its appraiser.

Apparently the appraisers did not agree as to the damages, thus, Vela requested the trial

court to appoint a “competent and disinterested umpire in this appraisal.”

        Relator filed a response to Vela’s application for the appointment of an umpire

including a general denial, a specific denial, and a special exception. Relator asserted

that the application was “procedurally improper” 3 under the terms of the insurance policy

and further argued that:

        [Vela] recommends umpire candidates that lack the training and experience
        to serve as umpire that the Policy requires. Accordingly, [relator] respectfully
        requests that this Court appoint one of the umpire candidates
        recommended in this response, as each possesses the training and

        3  Relator contended that Vela failed to comply with the provisions of the insurance policy requiring
a party to provide “written notice of the intent to file” an application for the appointment of an umpire at least
ten days prior to filing the application. However, relator did not further pursue this issue in the trial court and
does not raise it in this original proceeding.

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       experience required by the Policy. This will protect the integrity of the
       appraisal process and ensure that [Vela] does not profit by intentionally
       violating the Policy’s notice requirements or by engaging in forum shopping.

Relator provided the trial court with a proposed order suggesting three different umpires.

       On August 10, 2022, the trial court held a hearing on Vela’s application for the

appointment of an umpire. Vela’s attorney did not appear, and the trial court informed

relator’s counsel that it would review the case and issue an appointment. On September

12, 2022, the trial court appointed Derek Salinas, an attorney, as umpire and set the case

for a status conference. On September 20, 2022, relator filed a motion for reconsideration

of the appointment on grounds that Salinas was not qualified to serve as an umpire under

the terms of the insurance policy. Relator advised the trial court that, “[t]he Policy requires

the umpire to be either an engineer or an architect, an adjuster or a public adjuster or a

contractor ‘with experience and training in the construction, repair, and estimating of the

type of property damage in dispute.’ Salinas is none of the above, but an attorney.” Vela

did not file a response to relator’s motion for reconsideration.

       On September 28, 2022, the trial court held a hearing on relator’s motion for

reconsideration of the appointment. Vela’s attorney again did not appear. The trial court

took the issue under consideration. On September 29, 2022, the trial court denied

relator’s motion for reconsideration and ordered the umpire to file a status report or

appraisal award before the next scheduled status hearing, which was then set to occur

on December 1, 2022.

       On November 8, 2022, relator filed this original proceeding. By one issue, relator

asserts that the trial court abused its discretion by appointing an umpire who is not

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qualified under the terms of Vela’s homeowner’s insurance policy. According to relator,

the policy requires that an umpire be either a licensed or certified engineer, architect,

adjuster or public adjuster, or a contractor “with experience and training in the

construction, repair, and estimating of the type of property damage in dispute.” Relator

contends that Salinas is an attorney who lacks the required subject matter expertise.

Relator further asserts that it lacks an adequate remedy by appeal to address this error.

In conjunction with its petition for writ of mandamus, relator also filed a motion for

temporary relief seeking to stay the trial court’s September 29, 2022 order pending the

resolution of this original proceeding.

       On November 10, 2022, this Court granted relator’s motion for temporary relief and

requested Vela to file a response to the petition for writ of mandamus within ten days.

See TEX. R. APP. P. 52.4, 52.8, 52.10. Vela filed two motions for extension of time to file

his response to the petition for writ of mandamus: first until December 21, 2022, and then

again until January 3, 2023. This Court granted both motions for extension of time.

Nevertheless, Vela did not ultimately file a response to the petition for writ of mandamus.

                                     II.   MANDAMUS

       Mandamus is an extraordinary and discretionary remedy. See In re Allstate Indem.

Co., 622 S.W.3d 870, 883 (Tex. 2021) (orig. proceeding); In re Garza, 544 S.W.3d 836,

840 (Tex. 2018) (orig. proceeding) (per curiam); In re Prudential Ins. Co. of Am., 148

S.W.3d 124, 138 (Tex. 2004) (orig. proceeding). The relator must show that (1) the trial

court abused its discretion, and (2) the relator lacks an adequate remedy on appeal. In re

USAA Gen. Indem. Co., 624 S.W.3d 782, 787 (Tex. 2021) (orig. proceeding); In re

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Prudential Ins. Co. of Am., 148 S.W.3d at 135–36; Walker v. Packer, 827 S.W.2d 833,

839–40 (Tex. 1992) (orig. proceeding). “The relator bears the burden of proving these two

requirements.” In re H.E.B. Grocery Co., 492 S.W.3d 300, 302 (Tex. 2016) (orig.

proceeding) (per curiam); Walker, 827 S.W.2d at 840.

       Trial courts have no discretion to ignore a valid appraisal clause. See State Farm

Lloyds v. Johnson, 290 S.W.3d 886, 888 (Tex. 2009); In re Acceptance Indem. Ins., 562

S.W.3d 645, 649 (Tex. App.—San Antonio 2018, orig. proceeding); In re State Farm

Lloyds, 514 S.W.3d 789, 792 (Tex. App.—Houston [14th Dist.] 2017, orig. proceeding).

Thus, mandamus is available to remedy certain matters pertaining to the appraisal

process. See In re Universal Underwriters of Tex. Ins., 345 S.W.3d 404, 412 (Tex. 2011)

(orig. proceeding) (granting mandamus relief to enforce the right to appraisal); In re

Allstate Cnty. Mut. Ins., 84 S.W.3d 193, 196 (Tex. 2002) (orig. proceeding) (“A refusal to

enforce the appraisal process here will prevent the defendants from obtaining the

independent valuations that could counter at least the plaintiffs’ breach of contract

claim.”).

                                    III.   APPRAISAL

       An insurance policy establishes the rights and obligations to which an insurer and

its insured have agreed. See In re Farmers Tex. Cnty. Mut. Ins., 621 S.W.3d 261, 270

(Tex. 2021) (orig. proceeding); USAA Tex. Lloyds Co. v. Menchaca, 545 S.W.3d 479, 488

(Tex. 2018). We interpret insurance policies pursuant to the same rules of construction

that apply to contracts in general. Pharr-San Juan-Alamo Indep. Sch. Dist. v. Tex. Pol.

Subdivisions Prop./Cas. Joint Self Ins. Fund, 642 S.W.3d 466, 473 (Tex. 2022); Richards

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v. State Farm Lloyds, 597 S.W.3d 492, 497 (Tex. 2020). Our primary goal is to effectuate

the parties’ intent as expressed in the insurance policy. Monroe Guar. Ins. v. BITCO Gen.

Ins., 640 S.W.3d 195, 198–99 (Tex. 2022). “We determine the parties’ intent through the

terms of the policy, giving words and phrases their ordinary meaning, informed by

context.” Dillon Gage Inc. of Dall. v. Certain Underwriters at Lloyds Subscribing to Pol’y

No. EE1701590, 636 S.W.3d 640, 643 (Tex. 2021).

      “Appraisal clauses in Texas insurance policies have long provided a mechanism

to resolve disputes between policy holders and insurers about the amount of loss for a

covered claim.” Ortiz v. State Farm Lloyds, 589 S.W.3d 127, 131 (Tex. 2019). The Texas

Supreme Court has described the policies behind the appraisal process as follows:

      Today, appraisal clauses are included in most property insurance policies.
      Access to the appraisal process to resolve disputes is an important tool in
      the insurance claim context, curbing costs and adding efficiency in resolving
      insurance claims. This Court has reasoned that “[l]ike any other contractual
      provision, appraisal clauses should be enforced.” “[I]n every property
      damage claim, someone must determine the ‘amount of loss,’ as that is
      what the insurer must pay.” Appraisal clauses are a means of determining
      the amount of loss and resolving disputes about the amount of loss for a
      covered claim.

             ....

               We note that an insurer’s use of the policy’s appraisal process
      represents a willingness to resolve a dispute outside of court—often without
      admitting liability on the claim, or even specifically disclaiming liability—
      similar to a settlement. An insurer’s payment under such circumstances
      results from a calculated risk assessment that paying the appraisal value
      will ultimately be less risky or costly than litigating the claims to determine
      liability. As such, the payment in accordance with an appraisal is neither an
      acknowledgment of liability nor a determination of liability under the
      policy . . . .

Barbara Techs. Corp. v. State Farm Lloyds, 589 S.W.3d 806, 814, 820 (Tex. 2019)

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(citations omitted). The supreme court has described “the appraisal process as an

efficient and less costly alternative to litigation, requiring ‘no lawsuits, no pleadings, no

subpoenas, and no hearings.’” Ortiz, 589 S.W.3d at 131 (quoting Johnson, 290 S.W.3d

at 894).

                                      IV.    ANALYSIS

       By one issue, relator asserts that the appraisal provision in Vela’s insurance policy

requires that an umpire be either a licensed or certified engineer, an architect, adjuster or

public adjuster, or a contractor “with experience and training in the construction, repair,

and estimating of the type of property damage in dispute.” Relator contends that the trial

court failed to follow the requirements in the appraisal provision when it appointed an

attorney as umpire. Relator further argues that it lacks an adequate remedy by appeal to

address this error. As noted previously, Vela has not favored us with argument or authority

to the contrary.

A.     Appointment of Umpire

       Section I of the insurance policy, titled “Conditions,” contains the appraisal clause

at issue in this original proceeding. This clause reads, in relevant part, as follows:

       4.     Appraisal. If you and we fail to agree on the amount or loss, either
              party can demand that the amount of the loss be set by appraisal.
              Only you or we may demand appraisal. A demand for appraisal must
              be in writing. You must comply with SECTION I—CONDITIONS,
              Your Duties After Loss before [making] a demand for appraisal. At
              least 10 days before [demanding] appraisal, the party seeking
              appraisal must provide the other with written, itemized
              [documentation] of a specific dispute as to the amount of the loss,
              identifying separately each item being [disputed].

              a.     Each party will select a competent, disinterested appraiser
                     and notify the other party of the [appraiser’s] identity within 20

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     days of receipt of the written demand for appraisal.

b.   The appraisers will then attempt to set the amount of the loss
     of each item in dispute as specified by each party, and jointly
     submit to each party a written report of agreement signed by
     them. In all instances the written report of agreement will be
     itemized and state separately the actual cash value,
     replacement cost, and if applicable, the market value of each
     item in dispute.

     The written report of agreement will set the amount of the loss
     of each item in dispute and will be binding upon you and us.

c.   If the two appraisers fail to agree upon the amount of the loss
     within 30 days, unless the [period] of time is extended by
     mutual agreement, they will select a competent, disinterested
     umpire and will submit their differences to the umpire. If the
     appraisers are unable to agree upon an umpire within 15
     days:

     (1)   you or we may make a written application for a judge
           of a court of record in the same state and county (or
           city if the city is not within a county) where the
           residence premises is located to select an umpire;

     (2)   the party requesting the selection described in item
           c.(1) must provide the other party:

           (a)    written notice of the intent to file, identifying the
                  specific location and identity of the court at least
                  10 days prior to submission of the written
                  application; and

           (b)    a copy of the written application; and

     (3)   a written report of agreement, as required in item b.,
           signed by any two (appraisers or appraiser and umpire)
           will set the amount of the loss of each item in dispute
           and will be binding upon you and us. In all [instances]
           the written report of agreement will be itemized and
           state separately the actual cash value, replacement
           cost, and if [applicable], the market value of each item
           in dispute.

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                 d.   To qualify as an appraiser or umpire for a loss to property
                      described in COVERAGE A—DWELLING, a person must be
                      one of the following and be licensed or certified as required by
                      the applicable jurisdiction:

                      (1)    an engineer or architect with experience and training in
                             building    construction,     repair,   estimating,   or
                             investigation of the type of property damage in dispute;

                      (2)    an adjuster or public adjuster with [experience] and
                             training in estimating the type of property damage in
                             dispute; or

                      (3)    a contractor with experience and training in the
                             construction, repair, and estimating of the type of
                             properly damage in dispute.

                 e.   A person may not serve as an appraiser or [umpire] if that
                      person, any employee of that person, that person’s employer,
                      or any employee of their employer:

                      (1)    has performed services for either party with respect to
                             the claim at issue in the [appraisal]; or

                      (2)    has a financial interest in the outcome of the claim at
                             issue in the appraisal.

Thus, the insurance policy expressly requires that “[t]o qualify as an . . . umpire,” a person

“must be” either an engineer or architect, an adjuster or public adjuster, or a contractor.

Further, in order to qualify as an umpire, a person must have “experience and training” in

their respective fields and must “be licensed or certified as required by the applicable

jurisdiction.”

       There is no evidence in the record that Salinas meets the foregoing requirements

to serve as an umpire, and the record similarly lacks argument or authority in support of

such a proposition. See Johnson, 290 S.W.3d at 890 (“And the policy requires each party

to select a ‘competent, disinterested appraiser,’ not a lawyer or insurance expert.”). Giving

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the terms of the policy their ordinary meaning, we conclude that the trial court abused its

discretion in appointing Salinas, an attorney, to serve as an umpire in this dispute. See

Dillon Gage Inc. of Dall., 636 S.W.3d at 643.

B.     Adequate Remedy by Appeal

       Relator contends that it lacks an adequate remedy by appeal to address the trial

court’s abuse of discretion in appointing Salinas as umpire for this dispute. In determining

whether relator possesses an adequate appellate remedy, we weigh the benefits of

mandamus review against the detriments using a fact-specific analysis. In re Acad., Ltd.,

625 S.W.3d 19, 32 (Tex. 2021) (orig. proceeding). In Prudential, the seminal case

regarding the adequacy of an appellate remedy, the supreme court explained this inquiry

as follows:

       The other requirement Prudential must meet is to show that it has no
       adequate remedy by appeal. The operative word, “adequate”, has no
       comprehensive definition; it is simply a proxy for the careful balance of
       jurisprudential considerations that determine when appellate courts will use
       original mandamus proceedings to review the actions of lower courts. These
       considerations implicate both public and private interests. Mandamus
       review of incidental, interlocutory rulings by the trial courts unduly interferes
       with trial court proceedings, distracts appellate court attention to issues that
       are unimportant both to the ultimate disposition of the case at hand and to
       the uniform development of the law, and adds unproductively to the
       expense and delay of civil litigation. Mandamus review of significant rulings
       in exceptional cases may be essential to preserve important substantive
       and procedural rights from impairment or loss, allow the appellate courts to
       give needed and helpful direction to the law that would otherwise prove
       elusive in appeals from final judgments, and spare private parties and the
       public the time and money utterly wasted enduring eventual reversal of
       improperly conducted proceedings. An appellate remedy is “adequate”
       when any benefits to mandamus review are outweighed by the detriments.
       When the benefits outweigh the detriments, appellate courts must consider
       whether the appellate remedy is adequate.

In re Prudential Ins. Co. of Am., 148 S.W.3d at 135–36.

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       Relator asserts that it lacks a remedy by appeal because a request to appoint an

umpire does not constitute a lawsuit and the resulting order is not a final judgment that is

subject to appeal. In unpublished memorandum opinions, our sister courts have agreed

with that proposition. See Lyndon S. Ins. v. W. Parnell, LLC, No. 05-19-01524-CV, 2021

WL 3073314, at *1 (Tex. App.—Dallas July 20, 2021, no pet.) (mem. op.) (dismissing an

appeal from an order appointing an umpire in an insurance coverage dispute); Tex. Mun.

League Joint Self-Insurance Fund v. Hous. Auth. of the City of Alice, No. 04-15-00069-

CV, 2015 WL 5964182, at *1–3 (Tex. App.—San Antonio Oct. 14, 2015, no pet.) (mem.

op.) (concluding that the selection of an umpire by a judge did not invoke the subject

matter jurisdiction of the court). As specified in the insurance policy at issue, “[a]ppraisal

is a non-judicial proceeding,” and Vela’s application for the appointment of an umpire is

not part of an ongoing lawsuit and does not itself include substantive claims or causes of

action. Thus, based on the record presented, the application in this case appears to fall

within the nature of an ancillary proceeding. See Marsh USA Inc. v. Cook, 354 S.W.3d

764, 775 (Tex. 2011) (noting that “ancillary” means “supplementary”) (cleaned up); see,

e.g., In re DePinho, 505 S.W.3d 621, 623 (Tex. 2016) (orig. proceeding) (per curiam)

(stating that pre-suit discovery is “not an end within itself” but instead is “in aid of a suit

which is anticipated” and “ancillary to the anticipated suit”) (cleaned up). Consistent with

this concept, relator has not identified, and we have not found, any cases that treat an

order appointing an umpire as a final, appealable judgment. Therefore, in accordance

with our standard of review for original proceedings, we examine whether the

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circumstances of the case render a remedy by appeal from a future final judgment to be

inadequate.

       Relator asserts that requiring it to participate in an appraisal with an “incompetent”

umpire that it did not contractually agree to will result in extra costs and delay. Relator

contends that under the policy, it will incur costs in paying for the improper appraisal.

Relator argues that “the appraisal will result in an invalid and nonbinding award purporting

to set the amount of the loss for Vela’s insurance claim . . . which will inevitably require

the parties to litigate the validity of that award.” Relator contends that any award by an

unqualified umpire would be made “without authority” and would be unenforceable. See

Fisch v. Transcon. Ins., 356 S.W.2d 186, 189–90 (Tex. App.—Houston 1962, writ ref’d

n.r.e.) (“Since the umpire’s power to act is conditioned upon a disagreement between the

appraisers and the submission of their differences only to him, we are of the opinion that

the award, which was signed by only one appraiser and the umpire who had no authority

to act, is invalid.”); cf. Wells v. Am. States Preferred Ins., 919 S.W.2d 679, 685 (Tex.

App.—Dallas 1996, writ denied) (“Indeed, an appraiser’s acts in excess of the authority

conferred upon him by the appraisal agreement are not binding on the parties.”); see also

TMM Invs., Ltd. v. Ohio Cas. Ins., 730 F.3d 466, 470 (5th Cir. 2013). In this regard, we

note that an appraisal award may be set aside when the award was made: (1) without

authority; (2) by fraud, accident, or mistake; or (3) without complying with the policy

requirements. See Johnson, 290 S.W.3d at 888 & 895; see also In re Tex. Mun. League

Intergovernmental Risk Pool, No. 13-20-00486-CV, 2021 WL 743305, at *1 (Tex. App.—

Corpus Christi–Edinburg Feb. 25, 2021, orig. proceeding [mand. denied]) (mem. op.).

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       Based on the specific facts and circumstances of this case, we conclude that

relator lacks an adequate remedy by appeal to address the trial court’s error in appointing

an individual as umpire who fails to meet the requirements delineated in the insurance

policy. See In re Universal Underwriters of Tex. Ins., 345 S.W.3d at 412; In re Allstate

Cnty. Mut. Ins., 84 S.W.3d at 196; see also In re Prudential Ins. Co. of Am., 148 S.W.3d

at 140 (noting that the supreme court has issued mandamus “to enforce contractual

rights” and has done so “to enforce the parties’ agreement to submit to an appraisal

process for determining the value of a vehicle claimed to be a total loss”). Absent

mandamus review, the trial court’s error will cause the parties and public to incur “time

and money utterly wasted enduring eventual reversal of improperly conducted

proceedings.” In re Prudential Ins. Co. of Am., 148 S.W.3d at 136. Stated otherwise, a

refusal to enforce the terms of the insurance policy regarding the requirements for an

umpire will impair the efficacy of the appraisal process insofar as an umpire who fails to

meet the policy’s requirements will lack the expertise necessary to obtain an appraisal

award reflecting the proper valuation of the property damages at issue. Further, allowing

the appointment of an unqualified umpire would engender additional litigation and would

affect relator’s ability to defend any claims for breach of contract that might be filed in the

future. See In re Auto Club Indem. Co., 580 S.W.3d 852, 857–58 (Tex. App.—Houston

[14th Dist.] 2019, orig. proceeding). We thus conclude that relator lacks an adequate

remedy by appeal.

C.     Summary

       The trial court abused its discretion by appointing an umpire in contradiction to the

                                              13
requirements delineated in the insurance policy, and relator lacks an adequate remedy

by appeal to address this error. We sustain the sole issue presented in this original

proceeding.

                                     V.     CONCLUSION

       The Court, having examined and fully considered the petition for writ of mandamus

and the applicable law, is of the opinion that relator has met its burden to obtain relief.

Accordingly, we lift the stay previously imposed in this case. See TEX. R. APP. P. 52.10.

We conditionally grant the petition for writ of mandamus. We direct the trial court to vacate

its order appointing Salinas as umpire and to appoint an umpire in accordance with the

terms of the insurance policy. The writ will issue only if the trial court fails to comply.

                                                                  DORI CONTRERAS
                                                                  Chief Justice

Delivered and filed on the
15th day of February, 2023.

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