Related Practices
Another Strong Endorsement of the Contractual Right to Appraisal
The Zelle Lonestar LowdownSeptember 30, 2026
Underwood Financial, Ltd. v. Amco Ins. Co., No. 3:23-cv-00825-L, 2026 WL 2256697 (N.D. Tex. Aug. 5, 2026).
Judge Sam Lindsay of the United States District Court for the Northern District of Texas recently issued one of the most unequivocal decisions upholding the right to appraisal under an insurance policy, compelling appraisal of two claims with dates of loss over four years old, and in which litigation had been pending, and active, since April 2023. Far from breaking new ground, the decision in Underwood Financial, Ltd. v. Amco Ins. Co., continues the long-standing judicial trend of enforcing the parties’ contractual agreement to resolve the amount of loss through appraisal.
Underwood Financial, Ltd. v. Amco Ins. Co. involved two hail and wind claims under two consecutive policies with effective dates from January 31, 2021 through January 31, 2023. The first storm event at issue occurred on April 23, 2021. Upon notice of the loss and completion of its investigation, Amco tendered payment totaling $41,573.22 for hail damage to HVAC units at the property. Importantly, Amco did not identify covered damage to the roofing, however, and accordingly did not accept coverage for the same.
After a June 2, 2022 rainstorm, Underwood filed a second claim for roof and interior damage. After its investigation, Amco denied the claim, citing noncovered and/or excluded preexisting conditions, including long-term ponding and wear and tear.
Underwood disagreed with the claim determination and requested that both claims be reopened. Amco reopened the claims and completed additional investigation, but ultimately denied coverage for any further damage based on noncovered and/or excluded wear and tear and damage from a prior hail storm in April 2017.
On April 19, 2023, Underwood filed a lawsuit on both claims, which was originally set for trial on the Court’s August 5, 2024 trial docket. On January 22, 2024, the parties participated in their first mediation, which was ultimately unsuccessful.
The parties agreed to request modification of the scheduling order and trial was reset multiple times, first to the November 4, 2024 docket, and then again to the July 7, 2025 docket. In the interim, the parties engaged in ongoing written and oral discovery, including seven depositions, fourteen third-party subpoenas, and expert disclosures.
On June 17, 2025, Amco filed a Motion to Strike the Opinions and Testimony of Plaintiff’s Retained Testifying Expert Scott Jetton and its Motion for Summary Judgment. While these motions were pending, the parties again jointly requested a continuance of the trial setting. The Court reset the case for September 8, 2026 trial docket.
On March 19, 2026, the Court denied Amco’s Motion to Strike and Motion for Summary Judgment. In its Order, the Court also “strongly encourage[d] the parties to consider resolution of the remaining claims,” further suggesting a magistrate judge conduct a settlement conference. 2026 WL 2256697, at *2.
The Parties agreed to proceed with a second settlement conference with Magistrate Judge Rutherford on April 20, 2026, but were again unable to resolve the dispute. Though the Parties’ counsel continued settlement dialogue in May 2026, on May 28, 2026, Amco invoked appraisal under both the 2021 and 2022 Policies and designated its appraiser.
Underwood declined Amco’s appraisal request, and Amco accordingly moved to compel appraisal and stay all remaining deadlines for 60 days.
Underwood contested appraisal, arguing that “(1) the appraisal clause has not been triggered ‘because this is a coverage dispute, not an amount-of-loss dispute;’ (2) Defendant ‘waived its right to appraisal,’ causing [Underwood] substantial prejudice; and (3) “appraisal would be futile in this case, because it would not resolve the case.” 2026 WL 2256697, at *4. In particular, Underwood claimed appraisal was “procedurally inappropriate in light of the active litigation posture, unsupported by the policy language, and rendered futile by the physical changes to the Property, which [Amco] has long been aware.” Id. at *3.
In considering the Motion, Judge Lindsay rejected Underwood’s argument that the dispute was not appraisable due to coverage issues, detailing strong Texas public policy favoring enforcement of appraisal provisions in insurance disputes:
[W]hen an indivisible injury to property may have several causes, appraisers can assess the amount of damage and leave causation up to the courts. When divisible losses are involved, appraisers can decide the cost to repair each without deciding who must pay for it. When an insurer denies coverage, appraisers can still set the amount of loss in case the insurer turns out to be wrong. And when the parties disagree whether there has been any loss at all, nothing prevents the appraisers from finding “$0” if that is how much damage they find.
Id. at *5. Ultimately, “unless the ‘amount of loss’ will never be needed ... appraisals should generally go forward without preemptive intervention by the courts.” Id. (citing State Farm Lloyds v. Johnson, 290 S.W.3d 886, 895 (Tex. 2009)).
The Court next rejected Underwood’s waiver argument, largely relying on the Policies’ nonwaiver provisions, which provided that “[its] terms can be amended or waived only by endorsement issued by us and made a part of this policy.”
The Court again noted strong Texas public policy favoring the freedom of contract, urging the enforceability of contractual provisions such as the Polices’ nonwaiver provisions. While such nonwaiver provisions could themselves be waived, Texas Supreme Court precedent has repeatedly held that such waiver requires intent: “Defendant must, by its conduct, manifest clear intent to waive the nonwaiver provision. Otherwise, the nonwaiver provision is facially dispositive.” Underwood, 2026 WL 2256697, at *6.
Here, because there was no argument or evidence that Amco had waived the nonwaiver provisions by and through endorsement, the Court held that “the parties are bound by the terms of the Policies [and] Defendant, therefore, maintains its right to compel appraisal.” Id. at *7.
Finally, the Court noted that even if it had found waiver, Underwood’s claims of prejudice were legally deficient. To that end, Underwood cited extensive legal expenses it had incurred litigating the case for over three years, including taking and defending seven depositions, working with fourteen tenants in responding to third-party subpoenas, working with its damages expert, extensive briefing on Amco’s Motion to Exclude and Motion for Summary Judgment, and preparing for the September 2026 trial setting.
But the Court rejected the same, confirming longstanding Texas law that “arguments of prejudice based on court costs, expert costs, litigation expenses, and attorney's fees, ‘are insufficient to establish prejudice.’” Id. at *7 (citing In re Germania Farm Mut. Ins. Ass'n, No. 13-26-00015-CV, 2026 WL 1628701, at *7 (Tex.App—Corpus Christi, June 5, 2026)). As the Texas Supreme Court has held:
[I]t is difficult to see how prejudice could ever be shown when the policy, like the one here, gives both sides the same opportunity to demand appraisal. If a party senses that an impasse has been reached, it can avoid prejudice by demanding an appraisal itself. This could short-circuit potential litigation and should be pursued before resorting to the courts.
As such, the Court compelled the Parties to participate in appraisal of the insurance claims in dispute and vacated the trial date and all pretrial deadlines.
Underwood may be an extreme example, but its message is clear: even after years of litigation, a party’s demand for appraisal under an insurance policy can be extraordinarily difficult to avoid. Once appraisal is demanded, parties should assume it will be required—and plan accordingly.
The opinions expressed are those of the authors and do not necessarily reflect the views of the firm or its clients. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
