The Texas Supreme Court granted mandamus, agreeing that the trial court abused its discretion in denying the insurers’ motion to compel appraisal because of existing coverage issues. In re ACE American Ins. Co., 2026 Tex. LEXIS 411 (Tex. May 8, 2026).

The insured owned, leased and managed commercial properties nationwide. Several insurers collectively insured these properties under various commercial property policies. The insured’s property at issue was a food-distribution warehouse in Dallas.

A water line that supplied the warehouse’s fire-suppression system ruptured below the building’s concrete slab, causing considerable damage. The insured timely notified the insurers of the claim. The insurers investigated the claim.

The insurers demanded an appraisal under the policies’ provisions because, despite “certain undisputed payments” having been made, “the parties are at an impasse with respect to the remaining scope of damage and costs related to the Claim.” The insured declined to participate in the appraisal process, asserting it was “premature and unwarranted.”

The insurers filed suit and moved to compel appraisal, alleging that the parties disagreed on the amount of loss. The insurers asserted that they “have paid the insured all that is owed under the policy in connection with the claim” but that “Insured is of the position that additional funds are owed.” Insured counterclaimed for breach of contract, Insurance Code violations, and bad faith. The trial court denied the insurers’ motion to compel appraisal. The insurers filed a petition for writ of mandamus in the court of appeals, which denied relief.

In a prior case, the Texas Supreme Court held that appraisal bound the parties to have the extent or amount of loss determined in a particular way, but the question of liability remained for the courts. The court held that here the parties’ dispute was at least in part about the amount of loss and that potential coverage disputes did not defeat a contractual right to appraisal. The insurers did not argue that the claimed property damage was caused by anything other than the water-main rupture, a covered peril.

The insured asserted that the parties disagreed on the scope of the policy’s coverage of the “replacement cost” of damaged property and maintained that an appraisal could not be conducted without a court addressing what the cost entailed. There was no dispute between the parties, however, on coverage for the replacement cost of damaged property. Rather, they disputed whether the insured paid more than was necessary to replace damaged property. The insured may be correct that the crux of the parties’ disagreement was over “complex engineering and construction methodologies,” but that did not remove the dispute from an appraiser’s purview.

Finally, the insured’s contention that the insurers’ failure to adjust the clam timely and in good faith by failing to pay amounts owed did not excuse the insured from complying with the appraisal provision. An insurer’s alleged bad faith in handling a claim did not constitute an exception to the general enforceability of an appraisal clause.