Texas high court hears dispute over appraisal clause when coverage issues overlap

The Supreme Court of Texas heard oral argument in case number 250461 on whether an insurance-policy appraisal clause requires appraisal when coverage questions—including mold remediation, building-code compliance and causation—are intertwined with valuation. Counsel told the court insurers acknowledged coverage and paid $9,200,000 while the policyholder sought about $40,000,000, leaving a disputed gap of roughly $30 million.

Counsel identified the central dispute as whether appraisal is the mandatory method to resolve the amount of loss or whether a trial court may first resolve coverage-related questions that could change what the appraisers should value. "They had paid $9,200,000, and the policy holder said the claim was about $40,000,000," Speaker 1 told the court, summarizing the factual difference the appraisal would decide.

The party pressing enforcement of appraisal urged the court that appraisal is a preferred alternative-dispute-resolution method for quantification disputes and that appraisal awards are binding on amount absent fraud, accident, material mistake, a failure to follow policy procedure, or appraisers exceeding their authority. "Appraisal is not real proof damage... There’s no restriction... they can retain engineers, architects," Speaker 1 said in argument, describing the expertise appraisers may use.

Opposing counsel and several justices pressed that this case presents more than a simple quantification dispute. The record, they said, includes shifting positions by insurers about what is covered and how much should be paid. The transcript records a contested mold remediation point: counsel said the policyholder sought a $10,000,000 sublimit for mold while insurers' remediation estimate and payment was about $1.2 million.

Justices asked whether conducting a full appraisal could waste time and expense if later legal rulings narrow coverage or change the universe of what should have been appraised. Counsel for one party said trial courts have discretion to determine whether appraisal is appropriate in such commingled disputes, and urged that the trial court's factual record (including alleged shifting insurer positions) supported denying appraisal in this case.

Counsel also discussed practical aspects of appraisal: who the appraisers may consult, whether appraisers should account for municipal code requirements when estimating replacement costs, and whether appraisers’ legal misunderstandings (for instance, misreading applicable building codes) can later be challenged. Counsel noted that appraisal awards can be set aside for fraud, accident, material mistake or failure to comply with policy procedure.

On procedural posture, counsel reported a stay had been obtained in the court of appeals and that the trial judge (Judge Moyer) granted a stay so the Supreme Court could resolve whether appraisal should proceed here. After extended questioning, the court took the case under submission and recessed without issuing a decision.

The arguments turn on how the court interprets prior decisions such as Johnson (cited by counsel) and how strictly trial courts must send valuation disputes to appraisal when coverage and causation remain contested. The court's forthcoming opinion could affect how often and under what circumstances appraisal is used in large commercial property claims where valuation, overlapping policies and code-driven repair costs intersect.