To Abate or Not to Abate – Judges Answer the Question
Should appraisal and litigation proceed concurrently?
Appraisal is intended as an extrajudicial process to resolve insurance disputes regarding the amount of damage and is a procedure intended to take place instead of litigation. However, in Texas, appraisal and litigation often coincide because either appraisal is invoked after litigation has commenced or the insured files a lawsuit in spite of an ongoing appraisal. In these cases, should courts abate the litigation pending completion of appraisal? Or should the litigation and appraisal go forward simultaneously?
Texas law grants courts great discretion in determining whether to abate a case pending appraisal. While the decision as to whether to compel appraisal may often be overturned on appeal, the appellate courts are much more reticent to question a court’s ruling on a motion to abate a case pending appraisal. The Texas Supreme Court has held that the failure to grant a motion to abate is not subject to mandamus, noting: “While the trial court has no discretion to deny the appraisal, the court does have some discretion as to the timing of the appraisal.” In re Allstate County Mut. Ins. Co., 85 S.W.3d 193, 196 (Tex. 2002).
Recently, the Southern District of Texas, Corpus Christi Division denied a motion to abate in a case in which the insurer demanded appraisal prior to litigation. In Eller v. United Property & Casualty Insurance Co., No. 2:18-CV-199, 2018 WL 3817999 (S.D. Tex. Aug. 10, 2018), the insurer demanded appraisal in February 2018. The insured did not respond to the demand until June 14, 2018, the same day he filed suit against United Property & Casualty in the 36th Judicial District Court of San Patricio County, Texas. The insurer removed the matter to federal court and moved to abate the litigation pending appraisal. The Court denied the motion to abate, contending that insurer already received the benefit of the 60-day pre-suit notice period under Chapter 542A of the Texas Insurance Code. The Court further noted that the insurer “cited no evidence that prejudice will result from allowing the case to proceed simultaneously with the completion of the appraisal process[.]”
However, in Butler v. Property & Casualty Insurance Company of Hartford, No. H-10-3613, 2011 WL 2174965 (S.D. Tex. June 3, 2011), the Southern District of Texas, Houston Division abated a case pending appraisal. In that case, the insured argued that abatement pending the outcome of appraisal was not necessary because the appraisal clause was permissive in nature. The Court ordered abatement, noting: “[E]ven if the appraisal clause were not a condition precedent to filing suit, abatement of the case pending appraisal would still be warranted and appropriate. Appraisal will set the amount of loss conclusively and may dispose of Plaintiff’s breach of contract claim entirely. The appraisal may obviate the need for further litigation, with all of the burdens and costs of pretrial discovery and the like; and if not, then in due season what remains to be litigated can proceed with efficient focus by the parties upon the specific issues remaining. Indeed, Plaintiff will have suffered no prejudice should she prevail in the appraisal process; her claims will remain intact.” Id. at n.10 (internal citations omitted).
While granting an abatement is within the discretion of the trial court, an insurer can better ensure that the abatement takes place once appraisal is invoked by including language to that effect in the policy. In Debesingh v. Geovera Speciality Ins. Co., No. 4:18-CV-02316, 2018 WL 4810629 (S.D. Tex. Oct. 4, 2018), the insurer included the following language in its appraisal provision:
If there is an appraisal:
- You and we agree that any suit for or involving a disagreement in the amount of loss claimed under this policy shall be abated on the demand for appraisal by either you or us until after an appraisal award is issued in accord with this Condition;…
The Court held that the case law holding that a court had discretion to abate were not dispositive because those cases did not involve a mandatory abatement provision in the policy. “In the case at bar, the parties’ contract, not just judicial economy, compels this Court to abate Plaintiff’s whole lawsuit. The Court enforces the unambiguous Policy ‘as written.’” Id. at *3 (emphasis in original).
Bottom Line: Whether a case will be abated pending appraisal depends almost entirely on the discretion of the trial judge. While the courts considering abatement focus on issues of prejudice and judicial economy, individual judges will rule differently, and appellate courts will rarely question the trial judge’s discretion on this issue. However, by including abatement as a condition to appraisal in the language of the policy, the court loses may lose the discretion to deny an abatement since the parties are bound by the terms of the policy.