Texas Supreme Court On Insurance Appraisals

In State Farm Lloyds v. Johnson (06-1071), the Texas Supreme Court recently addressed insurance appraisals including: a history of insurance appraisal; the scope of damages; causation; and challenges to appraisal awards.

The court's final paragraph follows:

But in every property damage claim, someone must determine the “amount of loss,” as that is what the insurer must pay. An appraisal clause “binds the parties to have the extent or amount of the loss determined in a particular way.” Like any other contractual provision, appraisal clauses should be enforced. There may be a few times when appraisal is so expensive and coverage is so unlikely that it is worth considering beforehand whether an appraisal is truly necessary. But 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.