INSURED CHURCH OVERCOMES SUMMARY JUDGMENT MOTION EVEN THOUGH INSURER INVOKED APPRAISAL AND PAID AWARD

Federal judge Sam Lindsay of the Northern District of Texas, Dallas Division, rejected an insurer’s motion for summary judgment last Monday, concluding that the insurer’s payment of an appraiser’s award was insufficient to defeat the insured’s breach of contract claim, and that the insured’s statutory and common- law bad faith claims remained viable as well.  In Church on the Rock North v. Church Mutual Insurance Company, Civ. No. 3:10-CV-0975-L, 2013 WL 497879 (N.D. Tex. Feb. 11, 2013), the insured, a Dallas house of worship known as the North Church, had sued over Church Mutual’s handling of a claim for damages arising out of an April 2010 thunderstorm.  The parties agreed on the cost of a number of repairs, but differed on others, including the amount to be paid for replacement of the North Church’s roof.  Church Mutual invoked the appraisal process, and while appraisal was ongoing, North Church sued.

 Church Mutual removed the lawsuit to federal court, and the case was administratively closed (subject to a potential future motion to re-open) so that appraisal could be completed.  Based on the umpire’s award, Church Mutual issued two checks, one for the remaining unpaid balance of the loss owed, and a second releasing depreciation.  Church Mutual later moved to re-open the lawsuit and for summary judgment on North Church’s claims for breach of contract, common law bad faith, and violations of the Texas Insurance Code and the Deceptive Trade Practices Act.  According to Judge Lindsay’s order, “[b]oiled down to its essence, [Church Mutual’s] contention is that without a viable contract claim, North Church’s other claims necessarily fail, and North Church cannot succeed on its contract claim because it is estopped by the alleged binding appraisal award and [Church Mutual’s] timely payment of that award from pursuing a contract claim[.]”

In   a   lengthy   memorandum   opinion,   Judge   Lindsay   rejected   Church   Mutual’s   position   in   all respects.  Specifically, he concluded that Church Mutual had failed to establish as a matter of law that the appraisal award was binding and enforceable, but only assumed that it was true.  Moreover, Church Mutual did not present sufficient evidence to prove that North Church intended to be bound by the award, failed to prove that its payments were timely, and did not establish as a matter of law that its calculations of deductible, depreciation, and prior payments were correct.  Thus, Church Mutual’s motion for summary judgment on the contract claims was denied.

 The court’s denial of summary judgment on the contract claims resulted in a denial of summary judgment on all extra-contractual claims, since Church Mutual’s theory was that extra-contractual claims could not succeed absent an underlying breach of contract.  However, Judge Lindsay went further and observed that mere payment of an appraisal award, without more, did not preclude an award for pre-appraisal violations of the Insurance Code.  He also noted that North Church’s statutory claims were based on timing of payment and purported misrepresentations, not allegedly wrongful underpayment or denial of policy benefits, so the statutory claims would not stand or fall with the common-law bad faith claim.  In closing, Judge Lindsay expressly stated that he was not commenting on the strength or weakness of North Church’s case, but only that Church Mutual had not met its summary judgment burden.