Summary
predicting that Texas law would not apply the notice-prejudice rule to proof-of-loss provision in property insurance policy
Summary of this case from Gregory v. Safeco Ins. Co. of Am.Opinion
No. 5:19-CV-086-H
2020-10-20
GUIDEONE MUTUAL INSURANCE COMPANY, Plaintiff, v. FIRST BAPTIST CHURCH OF BROWNFIELD, Defendant.
R Chad Geisler, Weldon Paul Miller, Germer Beaman & Brown PLLC, Austin, TX, Christina Herrera, GuideOne Insurance, Des Moines, IA, for Plaintiff. Christopher G. Lyster, Lyster & Associates, PLLC, Fort Worth, TX, for Defendant.
R Chad Geisler, Weldon Paul Miller, Germer Beaman & Brown PLLC, Austin, TX, Christina Herrera, GuideOne Insurance, Des Moines, IA, for Plaintiff.
Christopher G. Lyster, Lyster & Associates, PLLC, Fort Worth, TX, for Defendant.
MEMORANDUM OPINION AND ORDER GRANTING GUIDEONE'S MOTION FOR SUMMARY JUDGMENT
JAMES WESLEY HENDRIX, UNITED STATES DISTRICT JUDGE
Before the Court is GuideOne Mutual Insurance Company's Motion for Summary Judgment. Dkt. No. 15. GuideOne seeks a declaratory judgment (1) finding the appraisal award void; (2) striking the appointed umpire; and (3) setting aside the appraisal award. Id. Having considered the motion, the parties' briefing, the contractual language, and the applicable law, the Court finds that the motion should be granted. Because First Baptist failed to satisfy the sworn proof-of-loss condition precedent to the appraisal process, the award was not entered with the appropriate authority or in substantial compliance with the Policy. Consequently, the Court declares the appraisal award void and strikes the appointed umpire.
1. Factual Background
A. The Policy
GuideOne issued a commercial property insurance policy (Policy) to First Baptist. Dkt. No. 16 at 102. Subject to many exceptions, the Policy covers "direct physical loss of or damage to [First Baptist's] Covered Property." Id. at 121. Insureds have eight duties in the event of loss or damage. Id. at 141. One of these is to "[s]end [GuideOne] a signed sworn proof of loss containing the information [GuideOne] request[s] to investigate the claim. [First Baptist] must do this within 60 days after [GuideOne's] request." Id. If, after a claim on the Policy has been made, the parties disagree on the extent of property damage, either may make a written demand for an appraisal of the loss. Id. at 108.
B. The Claim
During the Policy term, First Baptist made a claim for property damage caused by a hailstorm. Id. at 259. After investigating the claim, GuideOne sent nearly $38,000 to First Baptist to repair the hail damage. Id. Several months later, GuideOne received a letter from First Baptist that disputed the value of the loss as determined by GuideOne and sought to invoke the appraisal clause in the Policy. Dkt. No. 22-1 at 176. GuideOne responded and informed First Baptist that their actions were premature. Dkt. No. 16 at 282. GuideOne then made its first request for a sworn proof of loss. Id. First Baptist subsequently requested that the 121st Judicial District Court for Terry County appoint an umpire. Dkt. No. 22-1 at 179. GuideOne did not participate in the application proceeding, and the court appointed Todd D. Bilbrey to umpire the dispute. Id. at 254. After Bilbrey was appointed, GuideOne hired their own appraiser. Dkt. No. 17 at 6. At no point in this process did First Baptist send GuideOne a sworn proof of loss.
The appraisers submitted evaluations that were over one million dollars apart, and the umpire issued an award totaling $918,085.38. Dkt. No. 22-1 at 255–76. Bilbrey and First Baptist's appraiser signed the award. Id. at 276. GuideOne's appraiser did not. Id.
2. Procedural History
GuideOne seeks a declaratory judgment setting aside Bilbrey's appraisal award, arguing that it was not made in compliance with the terms of the Policy. Dkt. No. 1 at ¶¶ 17–18. GuideOne asserts that "[First Baptist] has not complied with the terms of the Policy by unilaterally having an umpire appointed and by failing to provide GuideOne with sworn proof of loss and estimates related to [First Baptist's] position on the damages sustained." Id. at ¶ 17. GuideOne now moves for summary judgment and requests a declaration from the Court "(1) finding that the Appraisal Award was not made or achieved with proper authority and/or in substantial compliance with the Policy, (2) striking the improperly appointed umpire for the appraisal of this matter, and (3) setting aside the improper Appraisal Award as void." Dkt. No. 15 at 2.
3. Summary Judgment Standard
Summary judgment is appropriate when "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The precise standard for summary judgment depends on whether the movant bears the burden of proof on the claim for which summary judgment is sought. When "the movant bears the burden of proof on an issue, either because [it] is the plaintiff or as a defendant [it] is asserting an affirmative defense, [it] must establish beyond peradventure all of the essential elements of the claim or defense to warrant judgment in his favor.’ " Fontenot v. Upjohn Co. , 780 F.2d 1190, 1194 (5th Cir. 1986) (emphasis in original). "Once the movant does so, the burden shifts to the nonmovant to establish an issue of fact that warrants trial." Smith v. Reg'l Transit Auth. , 827 F.3d 412, 420 n.4 (5th Cir. 2016).
Movants must cite to particular parts of the record to show the absence of a genuine dispute or explain why the cited materials do not create a genuine dispute. Fed. R. Civ. P. 56(c)(1). The Court must consider materials cited by the parties but may also consider other materials in the record. Fed. R. Civ. P. 56(c)(3).
In evaluating a motion under Rule 56, the Court must determine whether, after considering the evidence in the light most favorable to the nonmoving party, a rational jury could find in favor of that party. Scott v. Harris , 550 U.S. 372, 380, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 586–87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) ). "[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 247–48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (emphasis in original). "[T]he substantive law will identify which facts are material." Id. at 248, 106 S.Ct. 2505.
A federal court sitting in diversity applies state substantive law. See Gasperini v. Ctr. for Humanities, Inc. , 518 U.S. 415, 427, 116 S.Ct. 2211, 135 L.Ed.2d 659 (1996). Neither party disputes that Texas law governs this action.
4. Analysis
GuideOne seeks summary judgment for a declaratory judgment and argues that the appraisal award should be set aside because (1) First Baptist did not submit a sworn proof of loss and therefore failed to satisfy a condition precedent to appraisal; and (2) the appointment of an umpire was premature and improper. Dkt. No. 18 at 12. In response, First Baptist argues that (1) a sworn proof of loss is not a condition precedent to the appraisal process; (2) appointment of the umpire was not premature; (3) GuideOne must show prejudice from the failure to fulfill a condition precedent; and (4) GuideOne waived any condition precedent to appraisal because it fully participated in the appraisal process. Dkt. No. 21. The Court grants summary judgment because the appraisal award was made without authority and not in substantial compliance with the Policy, and GuideOne did not waive any condition precedent.
A. The requirements of the Declaratory Judgment Act are satisfied.
Under the Declaratory Judgment Act, 28 U.S.C. § 2201, a court may declare rights and other legal relations of any party if there is a judicially remediable right. Schilling v. Rogers , 363 U.S. 666, 677, 80 S.Ct. 1288, 4 L.Ed.2d 1478 (1960). The Fifth Circuit has summarized this jurisprudence as requiring an actual controversy "that the dispute must be definite and concrete, real and substantial, and admit of specific relief through a decree of a conclusive character." Vantage Trailers, Inc. v. Beall Corp., 567 F.3d 745, 748 (5th Cir. 2009) (citations omitted).
Here, the Court finds that the requirements for a declaratory judgment under 28 U.S.C. § 2201(a) are met. The dispute between GuideOne and First Baptist is justiciable and is not merely academic or moot. The Texas state court already appointed an umpire that subsequently entered an appraisal award in favor of First Baptist, which GuideOne now contests. Dkt. Nos. 1 at 4, 22-1 at 276. This dispute also satisfies the requirement that it be definite and concrete. Both parties have indicated adverse legal interests, and the dispute relates directly to legal relations through their contractual obligations under the insurance Policy. The dispute here is real and substantial and requests specific relief through a decree of a conclusive character—rendering the appraisal award void.
An order from this Court would not merely be an advisory opinion, but rather would clearly resolve the legal status of the appraisal award at issue. Consequently, the Court has the authority to enter a declaratory judgment in this case.
B. The appraisal award is void because it was neither made with authority nor in substantial compliance with the Policy.
An appraisal clause is a standard, enforceable provision commonly found in insurance contracts or policies in Texas. State Farm Lloyds v. Johnson , 290 S.W.3d 886, 888–89 (Tex. 2009). The appraisal process is available to settle valuation disputes between policyholders and insurers when the parties fail to agree on the amount of loss or the scope of damages. Id. at 887–88. Ordinarily, appraisal provides an efficient way for an insurer and the insured to resolve differences through the evaluation of competing estimates by a neutral third-party umpire. Nolan v. GeoVera Specialty Ins. Co. , No. 1:11-CV-207, 2012 WL 12892787, at *4 (E.D. Tex. Aug. 10, 2012) ("Litigating over appraisal ... defeats the purpose of appraisals, which are designed to be a less expensive, more efficient alternative to litigation.").
Texas courts have recognized three situations where the results of an otherwise binding appraisal may be disregarded, including: (1) when the award was made without authority; (2) when the award was the result of fraud, accident, or mistake; or (3) when the award was not made in substantial compliance with the terms of the contract. Hennessey v. Vanguard Ins. Co. , 895 S.W.2d 794, 798 (Tex. App.—Amarillo 1995, writ denied). Here, only the first and third situation apply, both will be addressed in turn.
i. The appraisal award was made without authority because First Baptist did not properly invoke the appraisal process by filing a sworn proof of loss.
GuideOne asserts that the appraisal award should be set aside because First Baptist failed to satisfy a condition precedent to the appraisal process by never submitting a sworn proof of loss. Dkt. No. 17 at 14. As a result, GuideOne asserts that the award was made without authority. Id. Conversely, First Baptist claims that GuideOne never indicated that the sworn proof of loss was a condition precedent. Dkt. No. 21 at 11.
Although the Policy requires that a sworn proof of loss be provided within 60 days of request, timing is not an issue here. It is undisputed that First Baptist never provided a sworn proof of loss.
Under Texas law, the construction of an insurance policy is a question of law. ARM Props. Mgmt. Grp. v. RSUI Indem. Co. , 400 F. App'x 938, 940 (5th Cir. 2010). Texas courts "apply the same rules to the interpretation of insurance policies as to any other contract, and ‘read all parts of each policy together and exercise caution not to isolate particular sections or provisions from the contract as a whole.’ " Id. A condition precedent is generally defined under Texas law as "an event that must happen or be performed before a right can accrue to enforce an obligation." See Solar Applications Eng'g v. T.A. Operating Corp. , 327 S.W.3d 104, 108 (Tex. 2010). To determine whether a condition precedent exists, the court must ascertain the intention of the parties, which can only be done by looking at the entire contract. Id. at 109.
The relevant language from the Policy makes clear that a sworn proof of loss is required:
Appraisal
The appraisal provision in the Building and Personal Property Coverage Form is replaced by the "Appraisal" section in the Texas Changes form. See Dkt. No. 16 at 108.
If we and you disagree on the amount of loss, either may make a written demand for an appraisal of the loss. In this event, each party will select a competent and impartial appraiser and notify the other of the appraiser selected within 20 days of such demand. The two appraisers will select an umpire. If they cannot agree within 15 days upon such umpire, either may request that selection be made by a judge of a court having jurisdiction. Each appraiser will state the amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will be binding as to the amount of loss.
...
Duties in the Event of Loss or Damage
You must see that the following are done in the event of loss or damage to Covered Property: ...
(7) Send us a signed, sworn proof of loss containing the information we request to investigate the claim. You must do this within 60 days after our request. We will supply you with the necessary forms.
Loss Payment
...
We will pay for covered loss or damage within 30 days after we receive the sworn proof of loss, if you have complied with all the terms of this Coverage Part and: (1) We have reached agreement with you on the amount of loss; or (2) An appraisal award has been made.
Dkt. No. 17 at 13 (emphasis added).
Texas law on whether a proof of loss is a condition precedent in insurance policies appears to hinge on nuanced factual differences. GuideOne relies on a nearly identical case, GuideOne Mutual Insurance Company v. First United Methodist Church of Hereford , decided in April 2020 in the Northern District of Texas's Amarillo Division. No: 18-CV-140-Z, 2020 WL 3485620 (N.D. Tex. Apr. 1, 2020). First Baptist urges the Court to consider other cases because Texas appellate courts and federal district courts have interpreted the scope of the notice-prejudice rule from Paj, Inc. v. Hanover Insurance Co. differently. In Paj , the Texas Supreme Court held that an "insured's failure to timely notify its insurer of a claim or suit does not defeat coverage if the insurer was not prejudiced by delay." 243 S.W.3d 630, 636—37 (Tex. 2008). The notice-prejudice rule in Texas insurance law prevents an insurer from denying coverage based on untimely notice. Id. at 636 (citing Matador Petroleum Corp. v. St. Paul Surplus Lines Ins. Co. , 174 F.3d 653, 658 (5th Cir. 1999) ). Paj's effect on proof-of-loss provisions is less clear. Each case and its reasoning are addressed below.
a. GuideOne Mutual Insurance Company v. First United Methodist Church of Hereford
Hereford resolved a case with nearly identical facts to the present dispute. 2020 WL 3485620. Most notably, the policy language is the same, and the defendant church did not provide a sworn proof of loss prior to its attempt to invoke the appraisal process.
The similarities include: the same contractor, appointed umpire, appraiser for a defendant church, attorneys, public claims adjuster, and the same plaintiff, GuideOne. Dkt. No. 17 at 5. It also appears that counsel for GuideOne and both churches are the same, briefing on these issues at the summary judgment stage are, likewise, virtually identical.
The Hereford court properly read the Appraisal Clause and the "Duties" and "Loss of Payment" subsections together. It determined that a sworn proof of loss as described in the "Duties" subsection was a condition precedent to the Appraisal Clause. Id. at *7. The court reasoned that the "Duties" subsection requires the insured to deliver a signed sworn proof of loss in the event of a loss or damage to covered property. Id. Additionally, the "Loss Payment" subsection required the insurer to pay for covered loss or damage within 30 days after it receives the sworn proof of loss only if the insured complied with all of the terms of coverage. Id. The court concluded that viewing the policy as a whole, the parties intended that a sworn proof of loss is a condition precedent to the Appraisal Clause. Id. at *7–8. As a result, the appraisal award was made with neither authority nor in substantial compliance with the policy. Id. at *8.
This decision is consistent with Texas's general policy disfavoring conditions that result in forfeiture. In Judge Kacsmaryk's Order Denying Motion to Reconsider, he explained that the court did not in any way "conclude that a sworn proof of loss was a condition precedent to Defendant's receiving coverage or to the entire insurance policy." GuideOne Mut. Ins. Co. v. First United Methodist Church of Hereford , No: 18-CV-140-Z, 2020 WL 3485623, at *2 (N.D. Tex. Apr. 29, 2020). He further explained that the order did not "necessarily preclude Defendant from receiving coverage or even attempting to repeat the appraisal process again—provided that it submits a sworn proof of loss first." Id. at *3.
Hereford 's analysis is instructive because it addresses the same policy before the Court now. Unlike other cases, the Hereford court did not rely on a broad assertion that proofs of loss are always conditions precedent, but instead analyzed the language of the policy to ascertain its scope and the parties' intent. That analysis is consistent with Texas contract law and supports the conclusion that the Policy here creates a condition precedent to the appraisal clause.
b. Federal District Court Decisions
The following district court cases have reached a different result than Hereford , but they are factually distinguishable from Hereford and the present case. In sum, the courts analyzed whether failing to provide a proof of loss resulted in a failure to provide sufficient notice—and whether prejudice resulted. They address proof of loss compliance relative to coverage generally, but do not address proof of loss as a condition precedent to appraisal.
The Eastern District of Texas has addressed issues regarding proofs of loss on multiple occasions. Specifically, in Cunningham v. Allstate Vehicle & Property Insurance Co. , the court effectively summarized and affirmed four previous cases addressing the same Allstate policy language. No. 4:18-CV-4, 2018 WL 2020723 (E.D. Tex. May 1, 2018). There, the defendant filed a motion to dismiss for lack of subject-matter jurisdiction based on the plaintiff's failure to provide notice of suit by filing a proof of loss 91 days prior to suit. The court applied the notice-prejudice rule from Paj because, in that instance, the proof of loss merely served as notice. The court explained that coverage may not be denied based on a party's failure to provide notice. Furthermore, the court found that the plaintiff's complaint worked as substantial compliance with the proof-of-loss requirement because it provided notice.
Judge Mazzant effectively reaffirms the courts' positions from four other cases that concerned the same policy language and reached the same result. Presswood v. Allstate Vehicle & Prop. Ins. Co. , No. 4:16-CV-958-ALM-KPJ, 2017 WL 7051074, at *2 (E.D. Tex. Aug. 11, 2017), report and recommendation adopted by, 2017 WL 3940525 (E.D. Tex. Sept. 7, 2017) ; Wilson v. Allstate Ins. Co. , No. 4:16-CV-970-ALM-CAN, 2017 WL 3671861, at *3 (E.D. Tex. Mar. 5, 2017), report and recommendation adopted by, 2017 WL 1313854 (E.D. Tex. Apr. 10, 2017) ; Lopez v. Allstate Vehicle & Prop. Ins. Co., No. 4:17-CV-103, 2017 WL 1294453, at *3 (E.D. Tex. Apr. 4, 2017) ; Polen v. Allstate & Prop. Ins. Co. , No. 4:16-CV-842, 2017 WL 661836, at *2–3 (E.D. Tex. Feb. 17, 2017).
In Vilaythong v. Allstate Insurance Co. , the court addressed the same Allstate policy discussed above. No. 3:17-CV-0627-G, 2017 WL 4805522, at *3 (N.D. Tex. Oct. 25, 2017). The court stated in its analysis that under a traditional view, an insured could not recover if a proof of loss was not provided as required by the policy. Id. But in interpreting Paj , the court reasoned that failure to comply with a policy's notice provision will only defeat a claim where the insurer can demonstrate prejudice, regardless of whether it is a condition precedent. Id. While this case contemplates Paj in the context of conditions precedent, like those from the Eastern District of Texas, its analysis only applies to conditions precedent to policy coverage, not to the enforcement of an appraisal clause.
c. Texas Appellate Courts
Several Texas appellate courts have reached the same conclusion as Herford , but for different reasons. Texas appellate courts have generally accepted that a proof of loss is a condition precedent to receiving coverage and invoking appraisal. In March 2020, for example, the Amarillo Court of Appeals held that, under Texas law, a sworn proof of loss is a condition precedent to payment of a loss. City of Spearman v. Tex. Mun. League Intergovernmental Risk Pool , 601 S.W.3d 72, 76 (Tex. App.—Amarillo 2020, pet. filed). The court identified that one purpose of a proof of loss is to afford the insurer an adequate opportunity to investigate the claim, prevent fraud, and form an intelligent estimate of its rights and liabilities. Id.
Spearman criticized several federal district courts in Texas that have "unilaterally expand[ed] Paj to encompass the obligation of submitting proofs of loss." 601 S.W.3d at 77. Spearman also limits Paj' s scope to notice and expressly rejects its extension to proofs of loss because a "proof of loss serves a key purpose that differs from merely placing the insurer on notice of a potential loss or claim. It serves as a key domino in the procedural structure for adjusting claims built into the policy." Id. Instead of expanding the notice-prejudice rule, Spearman cites the Texas Supreme Court's clear ruling in American Teachers Life Insurance Co. v. Brugette , which expressly states that a proof of loss is a condition precedent to insurance policies. 728 S.W.2d 763 (Tex. 1987).
While Spearman addressed the issue head-on, other courts of appeals have briefly weighed in on the scope of Paj. The 14th District Court of Appeals in Houston recognized that substantial compliance with a proof-of-loss provision may satisfy the proof-of-loss condition precedent to recovery. James Constr. Grp., LLC v. Westlake Chem. Corp. , 594 S.W.3d 722, 742 (Tex. App—Houston [14th Dist.] 2019, pet. filed). The court went on to explain that a party will not lose the benefit of coverage for immaterial or non-prejudicial non-compliance with timely-notice provisions based on Paj . Id. Importantly, this case does not expand the notice-prejudice rule, but merely accepts substantial compliance.
E.g., Lemon v. Hagood , 545 S.W.3d 105, 118 (Tex. App.—El Paso 2017, pet. denied) (noting that filing a proof of loss is a condition precedent subject to waiver); Bekins Moving & Storage Co. v. Williams , 947 S.W.2d 568, 576 n.1 (Tex. App.—Texarkana 1997, no pet.) ("In the context of a claim on an insurance policy, proof of loss and notice of claim are conditions precedent to recovery on the policy.").
d. Reconciling these cases supports a finding that a sworn proof of loss is a condition precedent to invoking appraisal.
Hereford and Spearman are instructive here. Despite taking a different approach, both courts reached the same conclusion. This Court likewise finds that, under the Policy in play here, a sworn proof of loss is a condition precedent to the appraisal process. Although, the Policy's language requiring a sworn proof of loss is not included in the appraisal clause, the Court must read all parts of each policy together. See ARM Props. Mgmt. Grp. , 400 F. App'x at 940. And taken as a whole, it is clear that a sworn proof of loss is a condition precedent to appraisal. Moreover, the Policy is indistinguishable from the one in Hereford , and this Court finds that the parties had the same intent.
In an attempt to avoid this conclusion, First Baptist asserts that its failure to provide a sworn proof of loss is immaterial to the agreement, but Spearman undermines this argument. In some policies the proof of loss may be immaterial, such as in Cunningham —where it was merely a notice of litigation. But a proof of loss for appraisal serves a different role by providing substantive information regarding the scope of the disagreement between the parties.
The Court also agrees with Spearman's interpretation of the notice-prejudice rule. The Amarillo Court of Appeals made a compelling distinction between the notifying purpose of a notice of loss and the substantive, diagnostic information contained in a proof of loss. That same distinction is present in this case. Furthermore, while Paj established the notice-prejudice rule, the decision's language does not expressly extend to a proof of loss when it serves a non-notice purpose. Here, the sworn proof of loss was intended to quantify the parties' disagreement, not simply serve as a notice of disagreement.
Moreover, the notice-prejudice rule was not clearly intended to go beyond failure to satisfy notice-of-loss conditions. The rule was designed to avoid complete forfeiture of coverage from an insured's failure to timely notify the insurer of the loss. Here, GuideOne received notice of loss, inspected the property, and paid out under the Policy. There is no potential forfeiture of coverage. GuideOne has never challenged First Baptist's coverage, but instead sought to require compliance with their agreement even after the payment of loss was made. Consequently, GuideOne does not need to demonstrate prejudice from First Baptist's failure to provide a sworn proof of loss under the Policy.
A proof of loss is still subject to waiver by the insurer, and the insured may satisfy a proof-of-loss provision through substantial compliance. The issues of substantial compliance and potential waiver are addressed in the following sections.
ii. The award was not made in substantial compliance with the Policy's terms.
GuideOne also argues that the appraisal award was not made in substantial compliance with the Policy's terms. Dkt. No. 17 at 14. GuideOne asserts that a sworn proof of loss and general cooperation are required for substantial compliance. Id. at 15. First Baptist, conversely, argues that it complied without exception. Dkt. No. 21 at 8.
Under Texas law, the question of whether a party has substantially complied with the terms of a contract is purely a question of fact that the trier of fact alone may decide. Turrill v. Life Ins. Co. of N. Am. , 753 F.2d 1322, 1326 (5th Cir. 1985). Only when the evidence of conduct is undisputed is the matter taken away from the jury. Chappell Hill Bank v. Lane Bank Equip. Co. , 38 S.W.3d 237, 245 (Tex. App.—Texarkana 2001, pet. denied). Here, all material facts are undisputed and may be resolved on summary judgment. a. First Baptist did not satisfy the proof-of-loss provision through substantial compliance.
The parties do not dispute that First Baptist never submitted a sworn proof of loss, let alone within the requisite 60 days, before it invoked the appraisal process. The only dispute that remains is a question of law as to whether this action was required under the agreement.
A proof of loss only requires substantial compliance. Cunningham , 2018 WL 2020723 at *2. To be effective, substantial compliance must occur within the time period allowed for the furnishing of the formal proof of loss. Hanover Ins. Co. of N.Y. v. Hagler , 532 S.W.2d 136, 139 (Tex. App.—Dallas 1975, writ ref'd n.r.e.).
Here, First Baptist argues that it satisfied the proof-of-loss provision by providing the same information through its appraisal. Dkt. No. 21 at 6. Notably, it neither identifies when that information was provided, nor argues it was timely. The exhibits from both parties establish that the first request for a sworn proof of loss was made on February 21, 2018. Dkt. No. 16 at 282. The Policy requires that a sworn proof of loss be provided within 60 days from the first request. Therefore, the sworn proof of loss, or its equivalent, must have been furnished by April 22, 2018. Based on First Baptist's appraisal, the appraiser did not gather the information until April 20, 2018, and did not compile the appraisal until June 28, 2018—127 days after the first request. See Dkt. No. 22-1 at 256–57. There is no indication in the record as to when this was given to GuideOne, but at a minimum it was 67 days late.
In light of the parties' arguments and the record, the Court finds that First Baptist did not substantially comply with the proof of loss provision. First Baptist did not meet the timeline for submission, and even if the appraisal did contain the right information, it did not satisfy its purpose. By the time the GuideOne received the appraisal, the appraisal process was well underway.
b. First Baptist did not properly invoke the appraisal process because it sought appointment of an umpire prior to submitting a proof of loss.
Under the Policy, the parties must disagree about the value of the loss before either may invoke appraisal. Dkt. No. 17 at 13. GuideOne argues that the parties were unable to disagree on the value of the loss because there was not a quantifiable disagreement. This argument fails because the Policy does not require a quantifiable disagreement, just a disagreement. When the Policy is read as a whole, however, it is clear that a proof of loss is necessary in the event of a loss, regardless of whether the parties seek to invoke appraisal. The proof of loss provides substantive information prior to appraisal that may allow the parties to determine whether appraisal is appropriate.
Without satisfying the condition precedent to the agreement, or at least substantially complying with it, First Baptist could not invoke the appraisal process under the terms of the agreement. Therefore, the appointment of the umpire and the subsequent award were premature. First Baptist argues that GuideOne fully participated in the appraisal process, but the Court cannot accept this proposition. First Baptist began appraisal proceedings over GuideOne's numerous valid objections. GuideOne did not appoint its own appraiser until it was forced to midway through the process following the unilateral appointment of an umpire. First Baptist attempts to argue that this constitutes waiver because GuideOne no longer insisted on the proof of loss, but a party should not be expected to persist in actions it knows to be futile. It was reasonable for GuideOne to stop asking for a sworn proof of loss after four attempts met with hostile responses.
In the response to the third request, a First Baptist representative said, "I don't know if you're new to this, but please show me in the policy specifically in the appraisal language where I need to complete a sworn proof of loss in order to have the appraisal valid. I'll be waiting." Dkt. No. 16 at 299.
Ultimately, the Policy requires the insured to comply with all of its terms, including general cooperation. GuideOne did not attempt to hide the proof-of-loss requirement, but instead, was very clear that it was necessary for appraisal. First Baptist neither complied with the proof-of-loss provision, nor generally cooperated with GuideOne.
C. GuideOne did not waive any condition precedent based on the nonwaiver provision and its continued insistence of performance.
"The failure to perform a condition precedent may be waived by the failure to insist on performance." Farmer v. Holley , 237 S.W.3d 758, 760 (Tex. App.—Waco 2007, pet. denied). "Under Texas law, waiver is an intentional relinquishment of a known right or intentional conduct inconsistent with claiming that right." Bott v. J.F. Shea Co. , 388 F.3d 530, 533 (5th Cir. 2004). "Waiver is largely a matter of intent, and for implied waiver to be found through a party's actions, intent must be clearly demonstrated by the facts and circumstances." Id. "Silence or inaction, for so long a period as to show an intention to yield a known right, is also enough to prove waiver." Id.
"Texas courts consider a contract's non-waiver clause to be ‘some evidence of non-waiver,’ but not a substantive bar to finding that a particular provision was indeed waived." Bott , 388 F.3d at 534. However, "[g]iven Texas's strong public policy favoring freedom of contract, there can be no doubt that, as a general proposition, nonwaiver provisions are binding and enforceable. Conn Credit I, L.P. v. TF LoanCo III, L.L.C. , 903 F.3d 493, 503 (5th Cir. 2018). "To find waiver of a nonwaiver provision, ‘there must, at a minimum, be some act inconsistent with its terms.’ " Id. Consequently, under Texas law, nonwaiver provisions create a presumption that a party did not intend to relinquish its rights. Id. at 504.
Furthermore, Texas law has the same requirements for waiver of a condition precedent as that of waiver generally. See id. at 503-04. Therefore, to succeed on an assertion of waiver of a condition precedent, the waiving party must clearly demonstrate an intent to waive. Id.
Here, First Baptist argues that when GuideOne selected its appraiser and participated in the appraisal process, it waived any condition precedent to the appraisal clause requiring a sworn proof of loss. This exact argument was rejected by Hereford in addressing an identical nonwaiver provision. The Policy's nonwaiver provision there provided:
This policy contains all the agreements between [First Baptist] and [GuideOne] concerning the insurance afforded. The first Named Insured shown in the Declarations is authorized to make changes in the terms of this policy with our consent. This policy's terms can be amended or waived only by endorsement issued by [GuideOne] and made a part of this policy.
Hereford concluded that this provision precluded waiver of any of the policy's terms apart from an endorsement issued by GuideOne and subsequently made a part of the policy. As a result, Hereford concluded that the nonwaiver provision created a presumption that GuideOne did not intend to waive the requirement of a sworn proof of loss as a condition precedent to the appraisal clause.
The same nonwaiver provision is present in this case. And just like in Hereford , here, First Baptist's brief is devoid of any legal arguments on the issue of waiver. Instead, it simply asserts that any condition precedent was waived when GuideOne appointed an appraiser. Dkt. No. 21 at 8. The lack of support, coupled with the presumption created by the nonwaiver provision, reinforce GuideOne's argument that the condition was not waived. GuideOne argues that it only appointed the appraiser "[o]ut of an abundance of caution, and in order to comply with the Order" issued by the state court appointing an umpire. Dkt. No. 17 at 16.
Additionally, prior to appointing its appraiser, GuideOne insisted that a sworn proof of loss be provided on four separate occasions, demonstrating its insistence that First Baptist comply with all of the Policy's terms. This refutes First Baptist's arguments that GuideOne never indicated that it was a condition precedent. Following First Baptist's initial communication with GuideOne attempting to invoke the appraisal process, GuideOne stated that the request was premature, and that First Baptist must submit a sworn proof of loss. Dkt. Not. 16 at 282. GuideOne insisted three more times, and each time First Baptist refused and argued that it was not required.
Given the Policy's nonwaiver provision, the lack of authority to support First Baptist's position and the undisputed evidence, the Court finds that GuideOne did not waive any condition precedent to the Policy's enforcement. Therefore, because the condition precedent was not fulfilled, the appraisal process was improperly invoked, and the award was granted without authority to do so.
5. Conclusion
GuideOne is entitled to judgment as a matter of law on its declaratory judgment action because there are no disputes of material fact, and the sworn proof of loss was a condition precedent to appraisal that was never satisfied. The appraisal award was neither entered with the appropriate authority nor in substantial compliance with the terms of the Policy. Thus, the Court grants GuideOne's Motion for Summary Judgment. Further, the Court declares the appraisal award void and strikes the appointed umpire. The Clerk of Court is directed to terminate this case.
So ordered on October 20, 2020.