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On February 2, 2024, the Texas Supreme Court issued its opinion in Maria Rodriguez v. Safeco Insurance Company of Indiana. This case involved whether or not an insured could recover attorney’s fees on a weather-related claim when the appraisal process was invoked, the insured obtained a favorable award after appraisal, the insurer promptly paid the full appraisal award, and the insurer paid any possible statutory interest on the award. The Texas Supreme Court, on a certified question from the Fifth Circuit Court of Appeals, held that an insurer’s prompt payment of the full appraisal award plus any possible statutory interest owed on the award under the Texas Prompt Payment Act precludes the insured’s recovery of attorney’s fees under Chapter 542A of the Texas Insurance Code. Chapter 542A was enacted by the Texas Legislature in 2017 and establishes new procedures and potential remedies to insureds relating to weather-related claims.
In May of 2019, Mario Rodriguez’ home was struck by a tornado. After Safeco issued an initial payment of $27,449.88, a dispute arose between Rodriguez and Safeco as to the total amount of the loss and Rodriguez filed suit Under Chapter 542A. After suit was filed and mediation was unsuccessful, Safeco invoked the appraisal provision of the insurance policy. On April 5, 2022, the appraisal panel issued a finding that the amount of the unpaid loss was $36,514.52. Seven days later, Safeco issued payment to Rodriguez in the amount of $32,447.73- which constituted the full appraisal award minus Rodriguez’ deductible and a prior supplemental payment. In addition to the payment of the appraisal award, Safeco also issued a check to Rodriguez for $9,458.40 for the interest which would possibly be owed on the appraisal award under the Prompt Payment Act. After issuing these payments, Safeco filed for summary judgment, contending that its full payment of the appraisal award plus interest resolved all claims Rodriguez could assert against it in the lawsuit. Rodriguez opposed summary judgment, arguing that he remained entitled to his attorney’s fees. Summary judgment was granted by the District Court for the Northern District of Texas and the appeal followed.
In determining that payment of an appraisal award plus all possible statutory interest precludes any claim for attorney’s fees, the Supreme Court held that Chapter 542A of the Texas Insurance Code allows for the recovery of attorney’s fees only when an insured has obtained a judgment against the insurer. Rodriguez could never recover a judgment against Safeco since Safeco fully satisfied the appraisal award and all possible statutory interest; accordingly, the Court held that he had no claim for attorney’s fees.
Although limited to those claims governed by Chatper542A of the Texas Insurance Code, this decision provides some long-desired clarity for insurers handling claims governed by this statute as to the impact of the appraisal process and the Texas Prompt Payment Act. Carriers facing Chapter 542A claims should take note of the importance of prompt invocation of the appraisal clause in their policies and should also promptly satisfy any appraisal award in favor of their insureds, plus statutory interest, on these weather-related claims in order to preclude the award of attorney’s fees.
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