Texas Supreme Ct. Hears Arguments on Attorney Fee Awards When Appraisal Awards Are Paid

Insurance defense attorneys on Wednesday urged the Texas Supreme Court to uphold the “plain language” of a law passed in 2017 that they say precludes recovery of attorney fees in cases where the insurer pays the full amount of an appraisal.

The high court heard oral arguments about a certified question from the 5th Circuit Court of Appeals that asked for an interpretation of Chapter 542A. Homeowner Mario Rodriguez is demanding attorney fees from Safeco Insurance Co. of Indiana even though the insurer invoked an appraisal and paid him more than he initially demanded.

Safeco and attorneys who filed amicus briefs argued that the law clearly bars attorney fees for claimants if the insurer pays the full amount of an appraisal award.

Rodriguez’s attorney, Melissa Waden Wray with Daly & Black, said her client had to hire her to file a lawsuit only because Safeco first denied his claim and then paid only a fraction of what the repairs actually cost.

“This is not about generating more attorney fees, its about making Mr. Rodriguez whole,” Wray told the high court. “At the time they finally paid the appraisal award three years after the tornado, Mr. Rodriguez had incurred $30,000 in attorney fees, $4,500 in appraisal costs and $3,500 in expert fees.”

Rodriguez sued Safeco after the carrier paid only $1,295.55 for his damage claim. He demanded an additional $29,500, but Safeco did not respond.

Safeco invoked the policy’s appraisal provision after Rodriguez sued. The appraisal panel determined the replacement cost value of the damage was $36,514.52. Safeco paid $32,447.43, which was the amount of the award after taking into account the policy limits and subtracting the deductible and the prior payment. Safeco also paid an additional $9,458.40, claiming that amount would cover “any conceivable interest owed” under the TPPCA.

Wray argued that Rodriguez is still entitled to attorney fees because of the unreasonable delay. She argued in briefings that if insurers cannot be found liable for paying attorney fees when they pay appraised amounts, they will delay payment as long as possible, make lowball settlement offers and invoke appraisal only after the property owner sues.

Safeco’s attorney, Mark D. Tillman with Tillman Batchelor, warned that if justices find attorney fees are allowed even when appraised amounts are paid, plaintiffs’ attorneys will “sign up hundreds of cases, dump them into appraisal and do no work” because they know that they will still be paid even if insurers pay the appraised amount. Tillman said Chapter 542 clearly states that the payment of an appraisal award precludes any award of attorney fees. He said the court should not be swayed by hypothetical scenarios.

Justices Jeff Boyd, Brett Busby and Evan A. Young made comments that indicated sympathy for Wray’s arguments. Boyd interjected after Tillman said Rodriguez has no right to attorney fees after his insurer paid the full amount of the appraisal plus interest.

“But you made them sue you before you paid,” Boyd said. “You made them sue even before you ordered an appraisal.”

Boyd said later, however, that he’s also concerned that plaintiffs’ attorneys may file unnecessary lawsuits knowing they will be paid in some cases even if appraised amounts are paid.

The justices gave no indication about how they would answer the 5th Circuit’s certified question after oral arguments concluded on Wednesday.

Top photo: Attorney Melissa Waden Wray makes oral arguments on Wednesday before the Texas Supreme Court.