Yen Tran v. American Economy Insurance Company

Filing 21

ORDER granting in part and denying in part 7 Motion to Compel and Abate. (Signed by Magistrate Judge Stephen Wm Smith) Parties notified. (jmarchand)

Y e n Tran v. American Economy Insurance Company

D o c . 21

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION YEN TRAN d/b/a IM PERIA L SHOPPING CENTER Plaintiff, v. § § § § § AM E R IC A N ECONOMY INSURANCE COMPANY, § Defendant. § ORDER D e fe n d a n t American Economy Insurance Company ("AEIC") has filed a m o tio n 1 to compel appraisal and "abate" 2 this insurance lawsuit pending resolution o f the appraisal process. (Dkt. 7). After a hearing on July 1, 2010, AEIC's motion is granted in part and denied in part. Background P la in tiff Yen Tran d/b/a Imperial Shopping Center ("Tran") has sued d e fe n d a n t AEIC for failure to pay a sufficient amount for Hurricane Ike damage
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CIVIL ACTION H-10-0016

The parties have consented to jurisdiction before this magistrate judge for all proceedings, including final judgment. (Dkt. 12) A "motion to abate" is not expressly authorized by federal statute or rule. See Wyatt v. Terhune, 305 F.3d 1033, 1044-45 (9th Cir. 2002) ("a matter in abatement . . . is subject to an unenumerated Rule 12(b) motion."). While federal courts have authority to entertain such preliminary motions, the decision to do so is largely a matter of judicial discretion, "which must be exercised in light of the policy against unnecessary dilatory motions." 5C WRIGHT & MILLER, FEDERAL PRACTICE & PROCEDURE § 1360 (3d ed. 2004); see also 28 U.S.C. § 2105 (precluding appellate reversal for "error in ruling upon matters in abatement which do not involve jurisdiction"). 1

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Dockets.Justia.com

u n d e r a commercial property insurance policy (the "Policy"). On September 22, 2 0 0 8 , Tran reported that the storm damaged the roof and siding of the Imperial S h o p p in g Center and contributed to a loss of income.3 Two days later AEIC i n s p e c t e d the property and issued a payment for the damages.4 On March 27, 2 0 0 9 , Tran hired his own public adjuster, Stephen Kiser, to re-evaluate his claim. D u e to Kiser's findings, AEIC conducted a re-inspection and subsequently issued a n additional supplemental payment.6 T ra n remained dissatisfied with the additional payment and filed this la w s u it on November 25, 2009.7 In its Answer, AEIC reserved the right to invoke th e policy's appraisal provision to resolve issues regarding the amount of loss. T h e Policy's appraisal clause provides that either party may make written demand fo r an appraisal if the parties disagree on the amount of loss, stating: 2. Appraisal a. If we and you disagree on the amount of loss, either may m a k e written demand for an appraisal of the loss. In this e v e n t, each party will select a competent and impartial a p p ra ise r and notify the other of the appraiser selected within 2 0 days of such demand. The two appraisers will select an u m p ir e . If they cannot agree within 15 days upon such
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Ex. A, ¶ 3. Id. Ex. A, ¶ 4. Id. Ex. B, Plaintiff's Original Petition. Ex. C. 2

u m p ir e , either may request that selection be made by a judge o f a court having jurisdiction. Each appraiser will state se p a ra te ly the amount of loss. If they fail to agree they will su b m it their differences to the umpire. A decision agreed to b y any two will be binding as to the amount of the loss. Each p a rty will: (1 ) (2) Pay its chosen appraiser; and B e a r the other expenses of the appraisal and umpire equally

b.

If there is an appraisal: (1) You will retain your right to bring a legal action against u s , subject to the provisions of Paragraph E.4.9 Legal A c tio n Against Us Property Loss Condition; and We will still retain our right to deny the claim.

(2)

See Ex. A-1, Policy, Texas Changes. (Dkt. 7-4). A E I C sent its first written demand for appraisal on February 28, 2 0 1 0 ,-- th re e months after Tran's suit was filed.1 0 AEIC further designated Mark W e st as its appraiser on March 10, 2010, and requested that Tran's appraiser c o n ta c t West to select an umpire.1 1 On March 17, 2010, Tran's counsel sent a le tte r declining participation in the appraisal process on grounds that AEIC's right
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Paragraph E.4: LEGAL ACTION AGAINST US No one may bring a legal action against us under this policy unless: a. There has been full compliance with all of the terms of this insurance, and b. The action is brought within 2 years and one day after the date on which the direct physical loss or damage occurred. (D. Ex. A-1, (Dkt. 7-2 at 37)). Ex. D. Ex. E. 3

to demand appraisal had been waived.

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A n a ly s is 1. Motion to Compel Appraisal T h e Texas Supreme Court recently affirmed the enforceability of appraisal c lau se s in property insurance policies: However injudicious it may be for parties to bind themselves by s u c h agreement, it seems to be well settled that, having done so, th e y cannot disregard it . . . In the absence of fraud, accident, or m is t a k e , the parties having agreed that the amount of loss shall b e determined in a particular way, we are constrained to hold that s u c h stipulation is valid. S t a t e Farm Lloyds v. Johnson, 290 S.W.3d 886, 888 (Tex. 2009). An appraisal c la u s e binds the parties to determine the extent or amount of loss in a particular m a n n e r, but it does not divest the courts of jurisdiction. Id. at 889 (citing Scottish U n io n & Nat. Inc. Co. v. Clancy, 8 S.W. 630 (Tex. 1888)). Stated differently, a p p ra is a l clauses leave open the question of liability for such loss to be determined, if necessary, by the courts. The appraisal clause in the policy signed by both AEIC and Tran is similarly e n fo r c e ab le on its face. Even so, Tran argues that AEIC's right to appraisal has been w a iv e d by its delay in asserting the right. The court does not agree. Waiver is an affirmative defense that can be successfully maintained against

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Ex. F. 4

a party who intentionally relinquishes a known right or engages in intentional c o n d u c t inconsistent with asserting that right. In re Acadia Ins. Co., 279 S.W.3d 7 7 7 , 779 (Tex. App.--Amarillo 2007, orig. proceeding) (citing Tenneco, Inc. v. E n te rp r is e Prods. Co., 925 S.W.2d 640, 643 (Tex. 1996)). The key inquiry is w h e th e r the intention to waive "[is] clearly demonstrated." Id. (citing Rodriguez v . Classical Custom Homes, Inc., 176 S.W. 3d 928, 932 (Tex. App.--Dallas 2005, n o pet.)); See In re Slavonic Mut. Fire Ins. Ass'n, 2010 WL 1236333, at *4. "Silence o r inaction, for so long a period as to show an intention to yield the known right," is sufficient to prove waiver. Tenneco, 925 S.W.2d at 643. The plaintiff bears the b u rd e n of showing affirmative facts evincing a carrier's intention to relinquish the rig h t to appraisal. In re State Farm Lloyds, 170 S.W.3d at 634. When a policy is silent as to the time for invoking the right to appraisal, the la w will require that the demand for appraisal be made within a reasonable amount o f time. Laas v. State Farm Mut. Auto Ins. Co., 2000 Tex. App. LEXIS 5332, 2000 W L 1125287, at *6 (Tex. App.--Houston [14th Dist.] Aug. 10, 2000, pet. denied) ( c itin g Lion Fire Ins. Co. v. Heath, 29 Tex. Civ. App. 203, 68 S.W. 305, 306 (Tex. C iv . App. 1902, no writ)). The proper point of reference for determining waiver b y delay is the point at which the insurer and the insured had reached impasse o v e r the amount of damages. Laas, 2000 Tex. App. LEXIS 5332, 2000 WL

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1 1 2 5 2 8 7 at *6 (citing Terra Industries, Inc. v. Commonwealth Ins. Co. of America, 9 8 1 F. Supp. 581, 602. (N.D. Iowa 1997)). Waiver is ordinarily a question of fact, b u t where the facts are admitted or clearly established, it becomes a question of law . Tenneco, 925 S.W.2d at 643. T r a n asserts this impasse was reached on March 27, 2009, the date Tran h i r e d a public adjuster and requested his claim be re-opened. But the record s h o w s that the parties continued to deal with each other in evaluating the loss after th a t date. AEIC reinspected the property and distributed additional funds a c c o rd in g to its own estimate in June, without objection from Tran. Until receipt o f Tran's demand letter in November, it was reasonable for AEIC to consider the m a tte r satisfactorily resolved. Upon service of the lawsuit, AEIC immediately r e s e rv e d the right to invoke the appraisal provision in its original answer. On these fa c ts, it is reasonable to conclude that the parties did not reach an impasse until su it was filed on November 25, 2009. Until that time, AEIC had every reason to b eliev e Tran's claim was settled or capable of being settled. Tran's requests were p ro m p tly responded to by AEIC and Tran did not dispute the re-adjusted claim u n til he wrote his demand letter, one week before filing suit. At most, therefore, the interval between impasse and AEIC's request for a p p ra is a l was three months. This period of time is insufficient to support a finding

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o f waiver. Cf. Sanchez v. Property and Casualty Ins. Co. of Hartford, 2010 WL 4 1 3 6 8 7 (S.D. Tex. Jan 27, 2010) (10 month delay held sufficient to constitute w a iv e r of right to appraisal). For these reasons, AEIC did not intentionally waive its right to appraisal in this case. 2. Motion to Abate This court declines to suspend these proceedings in order to allow the a p p ra isa l process to run its course. While the Texas Supreme Court has held a p p ra isa l to be a condition precedent to suit, State Farm Lloyds v. Johnson, 290 S .W .3 d 886 at 894, in this case the appraisal request was not made until after suit w a s filed. The abatement sought here would be contrary to the cardinal principle of th e Federal Rules of Civil Procedure that cases be administered "to secure the just, s p e e d y , and inexpensive determination of every action." FED. R. CIV. P. 1; see 5C, W RIGHT & MILLER, FEDERAL PRACTICE AND PROCEDURE § 1360, at 78 (3d ed. 2004) ( " [ A ] lth o u g h a given motion might raise a valid point, unless its determination w o u ld have the effect of promoting `the just, speedy, and inexpensive d e te rm in a tio n ' of the action as mandated by Rule 1, the district court should p r o b a b ly deny the application and thereby avoid any delay."). Because the parties h a v e until March 1, 2011 to complete discovery, this case need not be held hostage

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w h ile the parties engage in the appraisal process. On completion, the court will e n te rta in any necessary motions. All other requested relief is denied at this time.1 3 C o n c lu s io n F o r the foregoing reasons, defendant AEIC's motion to compel appraisal and a b a te (Dkt. 7) is granted with respect to the appraisal and denied with respect to th e abatement claim. Signed at Houston, Texas on July 2, 2010.

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In his response (Dkt. 14), Tran requests a continuance to conduct discovery on the appraisal issues prior to the court's ruling. 8