A New Formula for Waiver of Appraisal Clauses: Conduct + Prejudice


On May 6, 2011, the Texas Supreme Court clarified an important issue for property insurers in Texas: appraisal clauses are not waived merely by the passage of time. Instead, the Court’s decision in In re Universal Underwriters of Texas Insurance Company bolsters the already strong preference for appraisal clauses by holding such provisions are enforceable absent (1) conduct indicating waiver; and (2) prejudice to the other party. The ruling not only fills a void in Texas jurisprudence, it deals a nearly fatal blow to appraisal waiver arguments. Moreover, because an appraisal typically occurs early in the life of a disputed claim (often before substantial discovery and motion practice), the Universal Underwriters case will be a tool that both insurers and policyholders can use to quickly determine the amount of loss at issue through appraisal, thereby potentially reducing their litigation expenses.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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