COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 2-04-305-CV
IN
RE CLARENDON INSURANCE COMPANY RELATOR
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ORIGINAL
PROCEEDING
MEMORANDUM OPINION1
I. Introduction
In
this original proceeding, relator Clarendon Insurance Company complains that the
trial court abused its discretion by entering a September 7, 2004 order denying
Clarendon’s motion to dismiss or in the alternative to abate and by entering a
September 24, 2004 order granting real party in interest Tommy Goff’s motion
to strike Clarendon’s demand for appraisal. We hold that the trial court did
not abuse its discretion by denying relator’s motion to dismiss or in the
alternative to abate but did abuse its discretion by striking relator’s demand
for appraisal. Accordingly, we will deny the writ as to the September 7, 2004
order but will conditionally grant the writ as to the September 24, 2004 order.
II. Factual and
Procedural Background
Goff
filed a claim under his homeowner’s insurance policy, issued by Clarendon, for
water damage and mold damage to his home. Clarendon enlisted the help of a
third-party claims administrator, and that third-party claims administrator then
enlisted the services of William C. Richardson to adjust Goff’s losses.
Richardson learned that Goff was a homebuilder by profession and verbally agreed
to allow Goff to do his own repair work. Richardson did not prepare any
paperwork affixing the amount of the loss. Instead, Goff was to submit invoices
for the repair work he performed, and Clarendon planned to reimburse Goff
monthly.
Clarendon
paid Goff $263,998.50 for repairs over approximately four months. After making
these payments, Clarendon became concerned about the manner in which Goff’s
claims were being handled by the third-party claims administrator. As a result,
in April 2003, Clarendon hired a new third-party claims administrator. The new
third-party claims administrator retained another firm to examine the validity
of Goff’s claims as insured losses, and the firm began its review in June
2003.
Shortly
after Clarendon hired the new third-party claims administrator, it quit making
payments to Goff. Clarendon explained that Goff refused to allow anyone to enter
his home to videotape or photograph the repairs. Goff’s insurance contract
with Clarendon provided that it was Goff’s duty after a loss to “as often as
we reasonably require . . . provide [Clarendon] access to the damaged
property.” Clarendon explained that it desired to access the damaged property
to match the repairs actually made with the repairs it had paid Goff for
performing. Clarendon quit paying Goff because it could not verify his invoices.
On
August 13, 2003, Goff made a policy limits settlement demand to Clarendon. Five
days later, Goff filed suit against Clarendon. During the discovery period,
Clarendon sent Goff a demand for appraisal based on a provision in its insurance
contract with Goff which provides, “[i]f you and we fail to agree on the
actual cash value, amount of loss, or cost of repair or replacement, either can
make a written demand for appraisal.” Goff filed a motion to strike
Clarendon’s demand for appraisal.
Clarendon
then filed a motion to dismiss or abate Goff’s lawsuit. Clarendon asserted
that its contract with Goff did not permit Goff to bring suit unless he complied
with the policy’s provisions. Clarendon claimed that Goff had not complied
with the policy provisions and that his suit should be dismissed because he had
refused to allow Clarendon access to the damaged property. Clarendon also
claimed that Goff’s suit should be abated because Clarendon had invoked the
demand-for-appraisal provision of the contract. Clarendon claimed Goff’s suit
should be abated pending the outcome of an appraisal.
On
September 7, 2004, the trial court signed an order denying Clarendon’s motion
to dismiss or in the alternative to abate. On September 24, 2004, the trial
court signed an order granting Goff’s motion to strike Clarendon’s appraisal
demand. The case was ordered to mediation, and Clarendon’s petition for writ
of mandamus followed.
III. Standard
of Review
Mandamus
will issue only to correct a clear abuse of discretion or the violation of a
duty imposed by law when there is no other adequate remedy at law. Walker v.
Packer, 827 S.W.2d 833, 839 (Tex. 1992) (orig. proceeding). A trial court
clearly abuses its discretion when it reaches a decision so arbitrary and
unreasonable as to amount to a clear and prejudicial error of law. Id.
With respect to the resolution of factual issues or matters committed to the
trial court’s discretion, we may not substitute our judgment for that of the
trial court unless the relator establishes that the trial court could reasonably
have reached only one decision and that the trial court’s decision is
arbitrary and unreasonable. Id. at 839-40. This burden is a heavy one. Canadian
Helicopters, Ltd. v. Wittig, 876 S.W.2d 304, 305 (Tex. 1994) (orig.
proceeding). Our review is much less deferential with respect to a trial
court’s determination of the legal principles controlling its ruling because a
trial court has no discretion in determining what the law is or in applying the
law to the facts. Walker, 827 S.W.2d at 840. Thus, a clear failure by the
trial court to analyze or apply the law correctly will constitute an abuse of
discretion and may result in mandamus. Id.
Absent
extraordinary circumstances, mandamus will not issue unless relator lacks an
adequate appellate remedy. In re Van Waters & Rogers, Inc., 145
S.W.3d 203, 210-11 (Tex. 2004) (citing Walker, 827 S.W.2d at 839). An
appeal is inadequate for mandamus purposes when parties are in danger of
permanently losing substantial rights, such as when the appellate court would
not be able to cure the error, the party’s ability to present a viable claim
or defense is vitiated, or the error cannot be made part of the appellate
record. Id.; Canadian Helicopters Ltd., 876 S.W.2d at 306; Walker,
827 S.W.2d at 843-44.
IV. September
24, 2004 Order Striking Demand for Appraisal
A.
Clarendon Did Not Waive Demand for Appraisal
Goff
claims that Clarendon waived its right to an appraisal or is estopped from
seeking an appraisal because its conduct is inconsistent with a demand for an
appraisal and because it breached the insurance contract by failing to remit
timely payments. The issue of waiver in conjunction with a demand for appraisal
was decided long ago by the Texas Supreme Court. In Scottish Union &
National Insurance Company v. Clancey, the issue was whether compliance with
the stipulations in the policy relating to the proof of loss by the assured and
the demand for an appraisement of the damaged property were waived by the
appellant. 18 S.W. 439, 440, 83 Tex. 113, 114 (1892). The court held that
[i]t is a well-known principle in this class of cases that the acts relied on as
constituting a waiver should be such as 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. It cannot
be said, in the face of the proof showing that proof of loss was insisted on by
the company, and that it was endeavoring to ascertain the amount of damages done
by the fire to the goods of the appellee, that this indicated an intention or
desire to dispense with the very requirements inserted in the policy for the
purpose of enabling the company to arrive at this loss. The facts in this case
show that there was no waiver of the stipulations in the policy relating to
proof of loss and appraisement of the property. They show, on the other hand, that appellants, through
their agents and adjuster, were endeavoring to ascertain the amount of damage,
while the appellee declined to comply with the conditions in the policy, on
which alone his right to recover depends.
Id.
at 440-41 (emphasis added).
Here,
the insurance contract’s appraisal provision does not contain a deadline for
demanding an appraisal. Thus, Clarendon did not waive the demand-for-appraisal
provision by failing to assert it within some contractually specified time
period. Clarendon’s payment of Goff’s invoices for four months likewise does
not constitute a waiver of the demand-for-appraisal provision. Clarendon
intended to examine the repairs performed by Goff and match the repairs to the
invoices submitted by Goff, as it was entitled to under the policy provision
requiring Goff to permit Clarendon access to the damaged property. An appraisal
became necessary only when Goff refused Clarendon access to the damaged
property. We hold that Clarendon did not waive the contract’s
demand-for-appraisal provision.
B. Trial Court Abused its Discretion by Striking
Demand for Appraisal
The
parties’ insurance contract contained a specific demand-for-appraisal
provision. As we have explained, the record does not support Goff’s contention
that Clarendon waived this provision. Where an insurance contract like the one
here mandates appraisal to resolve the parties’ dispute regarding the value of
a loss and where the appraisal provision has not been waived, a trial court
abuses its discretion and misapplies the law by refusing to enforce the
appraisal provision. See id. (reversing and remanding for appraisal); see
also In re Allstate County Mut. Ins. Co., 85 S.W.3d 193, 195-96 (Tex. 2002)
(orig. proceeding) (holding trial court abused its discretion by construing
appraisal provision as arbitration agreement and refusing to enforce it); Vanguard
Underwriters Ins. Co. v. Smith, 999 S.W.2d 448, 451 (Tex. App.—Amarillo
1999, orig. proceeding) (holding trial court abused its discretion by refusing
to enforce appraisal provision). We hold that the trial court abused its
discretion by striking Clarendon’s demand for appraisal in its September 24,
2004 order.2
C.
No Adequate Remedy at Law
Goff
argues that Clarendon is not entitled to mandamus relief because Clarendon has
an adequate remedy at law. Specifically, Goff contends that the trial court’s
rulings do not “go to the heart” of Clarendon’s case and that Clarendon
may confirm the repair work performed through a request for inspection under
Texas Rule of Civil Procedure 196.
The
Texas Supreme Court recently addressed this issue; that is, whether when a trial
court abused its discretion by determining that the appraisal clause in an
insurance policy was unenforceable, the relator had an adequate remedy at law. In
re Allstate, 85 S.W.3d at 196. The supreme court held that the relator did
not have an adequate remedy at law because the parties contractually agreed to
the appraisal clause as the method for determining the amount owed by the
insurance company to avoid breach of the contract. Id. The supreme court
explained that if the insurance company’s offer exceeded the appraised value,
“there would be no breach of contract.” Id. The supreme court noted
that the appraisals “go to the heart” of the plaintiff’s breach of
contract claim and held that, at a minimum, denying the appraisals would vitiate
the insurance company’s ability to defend the breach of contract claim. Id.
Accordingly, it held that the insurance company had no adequate remedy at law. Id.
The
present facts are similar to the facts in In re Allstate. Id. at 195-96.
The trial court’s striking of Clarendon’s motion for appraisal prevents
Clarendon from obtaining the independent valuations that could counter at least
Goff’s breach of contract claim. See id. at 196. The appraisal here, as
in In re Allstate, goes to the heart of the plaintiff Goff’s breach of
contract claim. Thus, Clarendon, like Allstate, does not possess an adequate
remedy at law.
We
cannot agree with Goff’s contention that Clarendon possesses an adequate
remedy under Texas Rule of Civil Procedure 196. Rule 196 might enable Clarendon
to obtain access to the damaged property, but it would not provide an appraisal
setting a value concerning the amount of Goff’s loss or cost of repairs. Under
the insurance contract, the parties contractually agreed that an appraisal would
be the method used to set such a value, and Clarendon as a matter of law did not
breach the insurance contract if its payments totaling $263,998.50 for repairs
to Goff exceed such an appraised value of the loss or the cost of repairs.
Because Clarendon at this point seeks an appraisal, not the right to inspect the
damaged property, Rule 196 does not provide an adequate remedy at law. Having
already determined that the trial court abused its discretion by striking
Clarendon’s motion for appraisal, we further hold that Clarendon possesses no
adequate remedy at law.
V. The
September 7, 2004 Order Denying Motion to Dismiss or Abate
Clarendon
also argues that the trial court abused its discretion by denying its motion to
abate. Goff contends that the failure of a trial court to grant a motion to
abate is not subject to mandamus. We agree. The trial court did not abuse its
discretion by denying Clarendon’s motion to abate Goff’s lawsuit pending an
appraisal. See id. at 196 (refusing to hold that a trial court abuses its
discretion by refusing to abate a suit pending an appraisal). We hold that the
trial court did not abuse its discretion by denying Clarendon’s motion to
abate. See id.
VI. Conclusion
We
deny Clarendon’s petition for writ of mandamus concerning the trial court’s
September 7, 2004 order. We conditionally grant the writ as it pertains to the
appraisal. The trial court is ordered to vacate its order of September 24, 2004,
to grant Clarendon’s motion for appraisal, and to order an appraisal in
compliance with section I, paragraph 7 of the insurance agreement. We are
confident that the trial court will comply with this opinion within the next
thirty days. The writ will issue only if the trial court fails to comply.
SUE
WALKER
JUSTICE
PANEL
B: HOLMAN, WALKER, and MCCOY, JJ.
DELIVERED:
December 23, 2004
NOTES
1.
See Tex. R. App. P. 47.4.
2.
The parties dispute whether Goff would allow Clarendon in his house to verify
the repairs and whether Goff’s invoices were properly in order. It is
undisputed, however, that the parties have failed to agree “on the actual cash
value, amount of loss, or cost of repair or replacement,” so that either party
was entitled to “make a written demand for appraisal.”