As a Texas policyholder, understanding your rights regarding insurance claims, especially those involving the appraisal process and potential attorney’s fees, is crucial. The recent Texas Supreme Court decision in Mario Rodriguez v. Safeco Insurance Company has significant implications for individuals facing property insurance disputes, particularly those arising from forces of nature.
What is Appraisal?
Appraisal is a dispute resolution process often included in property insurance policies. If you and your insurer disagree on the amount of loss or damage, either party can demand appraisal. Typically, each side selects an appraiser, and these two appraisers then select an umpire. The appraisers (or the umpire if they disagree) then determine the amount of the loss.
While appraisal can be a fair way to resolve disputes over the amount of loss, it’s important for policyholders to understand that timely payment of an appraisal award may significantly impact the ability to pursue further legal claims and recover attorney’s fees.
The Case: Rodriguez v. Safeco Explained
In this case, a Texas homeowner’s property was damaged by a tornado. Safeco initially paid about $27,000, but the homeowner believed this was too low. Rodriguez sent Safeco a notice explaining that he was entitled to more money under his insurance policy. Although Safeco received the letter, it never replied. Rodriguez pursued litigation, citing the Texas Prompt Payment of Claims Act (“TPPCA”), a statute that aims to prevent insurers from delaying payment of claims.
More than a year after Rodriguez filed his lawsuit, Safeco invoked a provision in the policy that permits an appraisal by disinterested third parties. The appraisal panel determined the replacement cost value of the damage to Rodriguez’s home, and Safeco paid the amount in full minus the deductible, policy limits, and prior payment.
At that point, the Rodriguez still wanted to sue Safeco for mishandling the claim and sought attorney’s fees under the Texas Prompt Payment of Claims Act. Safeco argued that because they had paid everything owed under the policy (plus interest), no further damages or attorney’s fees were recoverable.
The Texas Supreme Court agreed with Safeco.
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The Key Ruling: Payment Ends the Fight for Legal Fees
The Court ruled that Texas Insurance Code § 542A.007 prohibits an award of attorney’s fees when an insurer has fully discharged its obligations under the policy by voluntarily paying the appraised amount, plus any statutory interest, in compliance with the policy’s appraisal provisions.
In short, if the insurer pays the full appraisal award and interest before a judgment, the formula results in no attorney’s fees. Even if the insurer delayed payment unfairly or underpaid at first, paying the full appraisal amount later can close the door on your ability to recover attorney’s fees in court.
Why This Decision Matters
This ruling limits the actions an attorney can take on your behalf if the insurance company pays the appraisal award before trial. Once payment is made:
- Your claim for attorney’s fees under the Prompt Payment of Claims Act may be gone.
- The court views the claim as fully resolved under the policy.
- Claims for mishandling or unfair treatment may become much harder to pursue.
Many policyholders believe that getting paid the full appraisal award means they have won. In reality, they may have given up their right to recover the legal costs it took to get a fair payment.
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What Public Adjusters Don’t Always Tell You
Public adjusters play an important role in helping property owners estimate damage and negotiate with insurers. However, they do not provide legal advice, and many do not explain the legal trade-offs of accepting an appraisal payment.
A public adjuster’s job is to help you through the appraisal process, but only an insurance lawyer can explain how accepting payment may limit your right to sue. That is why it is essential to consult a Houston insurance claims lawyer before completing the appraisal process.
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How to Protect Yourself
To avoid giving up your legal rights:
- Speak with an experienced insurance claims lawyer before appraisal begins. A lawyer can help you decide whether to pursue bad faith or prompt payment claims before accepting any payment.
- Understand what appraisal resolves and what it does not. Appraisal only settles the value of the loss. It does not address whether the insurance company delayed or mishandled your claim.
The Bottom Line
Rodriguez v. Safeco is the biggest Texas first-party insurance case in years and provides insurers with a strategy to avoid paying legal fees, even when they act unfairly. Accepting an appraisal payment without understanding your rights can leave you stuck with legal fees and no further recourse.
We Can Help Protect Your Rights
If your insurance company has delayed, denied, or underpaid your claim, do not wait to take action. Contact Barcus Arenas, PLLC for a free consultation.
You can count on a Houston insurance claims lawyer from our team to support you after the insurance company denies your claim for fair compensation. We have the experience and resources to assist with a denial and can carefully explain the next steps you need to take.
Reach out now to learn more about the services we provide to property owners facing these challenges.
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