In re American Mercury Lloyds Insurance Company — Memorandum Opinion by Justice Crump

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-26-00794-CV
In re American Mercury Lloyds Insurance Company
ORIGINAL PROCEEDING FROM TRAVIS COUNTY
M E M O R A N D U M 	O P I N I O N
On August 27, 2026, Relator American Mercury Lloyds Insurance Company
(Mercury) filed a petition for writ of mandamus seeking relief from the trial court’s order
denying Mercury’s motion to compel appraisal.1 	Real parties in interest Lauren and Andrew
Grace 	have 	filed 	a 	response. 	For 	the 	following 	reasons, 	we 	conditionally 	grant
Mercury’s petition.2
1 	The trial court’s order also denied Mercury’s motion to abate the trial court
proceedings against it pending completion of the appraisal process. 	Mercury does not seek
mandamus relief from that portion of the order in this proceeding.
2 	This Court granted in part the joint motion of Mercury and trial-court defendant
Community Insurance Advisors, Inc. for temporary relief to stay all trial court proceedings
pending the Court’s disposition of this original proceeding. In our order, we temporarily stayed
the trial court proceedings as to the Graces’ claims against Mercury. 	See Tex. R. App. P.
52.10(b). We lift this temporary stay.

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BACKGROUND
In the underlying proceeding, the Graces sued Mercury, their insurer, after it
denied their claim for damages filed under their homeowners’ insurance policy. Relevant to this
proceeding, their policy included an appraisal provision, which states:
If you and we fail to agree on the amount of loss, either may demand an
appraisal of the loss. 	In this event, each party will choose a competent and
impartial appraiser within 20 days after receiving a written request from the
other. The two appraisers will choose an umpire. If they cannot agree upon an
umpire within 15 days, you or we may request that the choice be made by a
judge of a court of record in the state where the “residence premises” is
located. The appraisers will separately set the amount of loss. If the appraisers
submit a written report of an agreement to us, the amount agreed upon will be
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 set the amount of loss.[3]
The policy also contains a nonwaiver provision, which provides that “[a] waiver or change of a
provision of this policy must be in writing by us to be valid.”
The record reflects that in February 2025, the Graces filed an insurance claim
with Mercury concerning damage from a water leak in their house. 	After Mercury determined
that the claim was not covered because the water damage was caused by long-term or repeated
seepage, the Graces hired a public appraiser to estimate the damage from the water leak. 	On
May 20, 2025, the Graces sent a pre-suit notice to Mercury demanding $76,293.79, which
included the public appraiser’s estimated amount and attorney’s fees. In response to this letter,
Mercury requested to inspect the property.
3 The appraisal provision also requires each party to pay its own appraiser and “[b]ear
the other expenses of the appraisal and umpire equally.”

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In an email exchange on July 22, 2025, between the parties’ counsel, the Graces
notified Mercury that “the parties remain at an impasse” and that the Graces would proceed with
litigation and “be on record of Mercury’s waiver” if Mercury did not invoke the appraisal
provision in their policy by July 25, 2025. 	Mercury responded on the same day that as “stated
before,” it was “interested in amicably resolving this matter” and that it would “consider making
a settlement offer following the reinspection” and would “participate in good faith at mediation”
but that its “interest in resolving this matter [was] not a waiver of any term or condition of the
policy, including appraisal.”
On October 3, 2025, the Graces filed the underlying suit against Mercury. 	On
November 10, 2025, Mercury answered, and the parties thereafter exchanged initial disclosures.
See Tex. R. Civ. P. 194.2(a) (generally requiring initial disclosures within 30 days after filing of
first answer).
On December 10, 2025, Mercury notified the Graces that it was invoking the
appraisal provision in their policy to “contractually determine the amount of loss.” 	“Given the
dispute as to the amount of loss,” Mercury named its appointed appraiser and asked the Graces to
appoint their appraiser. 	Mercury also expressly stated that the appraisal “cannot resolve
coverage questions.”
After the Graces did not appoint an appraiser, Mercury filed its motion to compel
appraisal and to abate the trial court proceedings against it pending completion of appraisal. The
Graces filed a response, arguing that Mercury had waived its right to appraisal. Mercury filed a
reply to the response, and the trial court held a hearing on Mercury’s motion for appraisal.
Following the hearing, the trial court signed its order denying Mercury’s motion without stating
its reasoning in the order. This original proceeding followed.

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ANALYSIS
Standard of Review
To secure mandamus relief, a relator must establish that (1) the trial court
committed a clear abuse of discretion or violated a duty imposed by law, and (2) there is no
adequate remedy by appeal. 	In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 135–36 (Tex.
2004) (orig. proceeding). “A trial court abuses its discretion if ‘it reaches a decision so arbitrary
and unreasonable as to amount to a clear and prejudicial error of law’ or if it clearly fails to
correctly analyze or apply the law.” 	In re Cerberus Cap. Mgmt., L.P., 164 S.W.3d 379, 382
(Tex. 2005) (orig. proceeding) (quoting Walker v. Packer, 827 S.W.2d 833, 839 (Tex. 1992)
(orig. proceeding)).
When a trial court abuses its discretion by denying a motion to compel appraisal,
mandamus relief is available. See In re Allstate Vehicle & Prop. Ins. Co., No. 01-26-00027-CV,
2026 WL 1765178, at *3 (Tex. App.—Houston [1st Dist.] June 18, 2026, orig. proceeding)
(mem. op.) (“Trial courts have no discretion to ignore a valid appraisal clause.” (citing State
Farm Lloyds v. Johnson, 290 S.W.3d 886, 888 (Tex. 2009))). “A trial court’s abuse of discretion
in failing to enforce an appraisal clause cannot be remedied by appeal.” 	Id. (citing In re
Universal 	Underwriters 	of 	Tex. 	Ins. 	Co., 	345 	S.W.3d 	404, 	412–13 	(Tex. 	2011)
(orig. proceeding)).
Appraisal
“Appraisal clauses, commonly found in homeowners, automobile, and property
policies in Texas, provide a means to resolve disputes about the amount of loss for a covered
claim.” 	In re Universal Underwriters of Tex. Ins. Co., 345 S.W.3d at 406–07 (citing Johnson,

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290 S.W.3d at 888). 	“Appraisals can provide a less expensive, more efficient alternative to
litigation,” and they “‘should generally go forward without preemptive intervention by the
courts.’” 	Id. (quoting Johnson, 290 S.W.3d at 895).4 	“Absent illegality or waiver, appraisal
clauses are generally enforceable.” In re Allstate Vehicle & Prop. Ins. Co., 2026 WL 1765178,
at *3 (citing In re Universal Underwriters of Tex. Ins. Co., 345 S.W.3d at 407).
In its petition, Mercury argues that the trial court clearly abused its discretion by
refusing to enforce the appraisal provision in the Graces’ policy because it is valid and
enforceable and the dispute between the parties is at least in part about the amount of loss. 	In
their response, the Graces do not challenge the validity of the appraisal provision but argue that
Mercury did not establish the provision’s “condition precedent to appraisal: a genuine, existing
disagreement over the amount of a covered loss.”5 Their argument is based on the first sentence
of the appraisal provision in the Graces’ policy: “If you and we fail to agree on the amount of
loss, either may demand an appraisal of the loss.” 	They argue that a party’s right to demand
appraisal is not triggered under this provision unless and until the parties engage with each other
4 In Johnson, the court explained:
There may be a few times when appraisal is so expensive and coverage is so
unlikely that it is worth considering beforehand whether an appraisal is truly
necessary. 	But unless the “amount of loss” will never be needed (a difficult
prediction when litigation has yet to begin), appraisals should generally go
forward without preemptive intervention by the courts.
State Farm Lloyds v. Johnson, 290 S.W.3d 886, 888 (Tex. 2009) (citation omitted).
5 The Graces did not raise this argument in their written response to Mercury’s motion to
compel before the trial court, but the transcript from the hearing on Mercury’s motion reflects
that the trial court raised and considered this argument in interpreting the appraisal provision in
the Graces’ policy.

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as to the amount of loss, and that in this case, the record does not contain any evidence that “the
parties ever discussed, compared, or disputed any dollar figure,” rather the record shows
Mercury’s “categorical denial of coverage in its entirety.” The record reflects that after Mercury
notified the Graces that their claim was not covered, they hired a public appraiser to determine
the amount of loss and provided the appraiser’s estimate to Mercury, but Mercury’s position
remained that the Graces’ claim was not covered under their policy.6
The Texas Supreme Court has addressed and rejected an analogous argument to
the one the Graces make here. 	See In re ACE Am. Ins. Co., 734 S.W.3d 887, 894–95 (Tex.
2026). In that case, the insurer sued the insured to compel appraisal, and the insured argued that
“no genuine disagreement between the parties exist[ed] as to amount of loss—as is necessary to
trigger a party’s right to appraisal—because Insurers’ position on that amount has been
‘inconsistent and constantly shifting.’” Id. In rejecting that argument, the Texas Supreme Court
observed, “To ‘disagree’ is, quite simply, ‘to fail to agree.’” See id. (citing dictionary definition
of “disagree”); see also In re Germania Farm Mut. Ins. Ass’n, 722 S.W.3d 282, 290–91 (Tex.
App.—Corpus Christi–Edinburg 2025, orig. proceeding) (rejecting argument that appraisal
applies only when dispute over amount of claimed loss and explaining that appraisal may
proceed even when insurer denies claim and there are disputed issues involving coverage). The
Texas Supreme Court further explained that coverage disputes generally “do not render an
appraisal improper in the first instance” because “even ‘when an insurer denies coverage,
6 To the extent that the Graces attached exhibits to their response that were not before the
trial court when it ruled on Mercury’s motion, we do not consider them. 	See In re M-I L.L.C.,
505 S.W.3d 569, 574 (Tex. 2016) (orig. proceeding) (“In determining whether a trial court
abused its discretion, a reviewing court is generally bound by the record before the trial court at
the time its decision was made.” (citing University of Tex. v. Morris, 344 S.W.2d 426, 429
(1961))).

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appraisers can still set the amount of loss in case the insurer turns out to be wrong.’” In re ACE
Am. Ins. Co., 734 S.W.3d at 894 (citing Johnson, 290 S.W.3d at 894).
Here the record establishes that the parties “fail to agree” as to the amount of loss
because Mercury did not agree to the amount the Graces demanded, and the Graces did not agree
that no amount of loss was covered by their policy. 	See id. at 895. 	And if the trial court
ultimately concludes that the Graces’ claims are covered under the insurance policy, the amount
of loss will already have been determined. 	Id.; see also In re Allied Tr. Ins. Co., No. 01-25-
00101-CV, 2025 WL 1799523, at *4–6 (Tex. App.—Houston [1st Dist.] July 1, 2025, orig.
proceeding) (mem. op.) (explaining that denial of claim did not preclude appraisal from moving
forward); In re SureChoice Underwriters Reciprocal Exch., 702 S.W.3d 878, 884 (Tex. App.—
Houston [1st Dist.] 2024, orig. proceeding) (concluding that appraisal was not precluded where
insurance policy provided for appraisal when the parties “fail to agree on the amount of loss”
even though case presented issues involving coverage).
On this record, we conclude that the trial court abused its discretion to the extent
that it denied Mercury’s motion to compel appraisal based on a determination that the appraisal
provision in the Graces’ policy had not been triggered.
Waiver of Appraisal
In its petition, Mercury also argues that the record establishes that Mercury did
not waive its right to appraisal. Waiver in this context is the “intentional relinquishment” of the
right of appraisal or “conduct ‘inconsistent with claiming’ the right of appraisal.” 	In re Liberty
Ins. Corp., 496 S.W.3d 229, 235 (Tex. App.—Houston [1st Dist.] 2016, orig. proceeding)
(quoting In re Universal Underwriters of Tex. Ins. Co., 345 S.W.3d at 407). Although waiver is

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ordinarily a fact question, when the facts are “admitted or clearly established,” as is the case
here, “it becomes a question of law.” Id. at 232–33.
Generally, a party may waive the right to appraisal if it waits an unreasonable
amount of time to invoke appraisal after the parties reached an impasse in their negotiations and
the delay causes prejudice to the opposing party. 	See Ortiz v. State Farm Lloyds, 589 S.W.3d
127, 131 (Tex. 2019) (“[W]aiver in this context occurs when the party seeking appraisal fails to
demand it within a reasonable time after the parties reach an impasse on the amount of the loss,
if the failure prejudices the opposing party.”); In re Universal Underwriters of Tex. Ins. Co.,
345 S.W.3d at 408–09 (explaining that delay is measured from point of impasse and that impasse
is not same as “a disagreement about the amount of loss”). Impasse occurs when both parties are
aware that further negotiations would be futile. 	In re Universal Underwriters of Tex. Ins. Co.,
345 S.W.3d at 409–10; see In re Ooida Risk Retention Grp., Inc., 475 S.W.3d 905, 912 (Tex.
App.—Fort Worth 2015, orig. proceeding) (“An impasse occurs when the parties mutually
understand that neither will negotiate further.”).
Although a factor to consider, the denial of a homeowner’s claim for damages
does not by itself constitute waiver of a contractual right to appraisal. 	In re Liberty Ins. Corp.,
496 S.W.3d at 235 (quoting In re Universal Underwriters of Tex. Ins. Co., 345 S.W.3d at 407).
“Rather, to determine whether an insurer ‘waived its right to invoke an appraisal clause, we must
also consider the language of the [p]olicy, as well as whether the insurer expressed its intent to
reserve its appraisal rights.’” 	In re Allied Tr. Ins. Co., 2025 WL 1799523, at *5 (quoting In re
Liberty Ins. Corp., 496 S.W.3d at 235).
In their response to the motion to compel appraisal in the trial court proceedings,
the Graces argued that Mercury “waived its right to invoke appraisal through its failure to

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demand appraisal within 20 days after receiving written request” and “through tactical litigation
conduct, specifically by filing an answer and engaging in discovery.”7 	They relied on their
pre-suit notice to show when impasse occurred. 	The Graces’ insurance policy, however,
includes a nonwaiver provision, does not set a deadline for when a party can invoke appraisal,
and both sides had the contractual right to invoke the appraisal provision. 	See In re United
Servs. Auto. Ass’n, No. 03-19-00292-CV, 2020 WL 7640145, at *2, *6 (Tex. App.—Austin
Dec. 23, 2020, orig. proceeding) (mem. op.) (granting mandamus relief against trial court’s order
denying motion to compel appraisal and relying on provision in insurance policy requiring
waiver to be in writing); In re Liberty Ins. Corp., 496 S.W.3d at 233–35 (concluding that
insurer’s denial of insurance claim did not amount to waiver of right to appraisal and relying on
provision in contract that waiver must be in writing).
The Graces also do not contend, and there is no evidence in the record to support,
that Mercury waived its right to appraisal in writing. There is further no evidence showing that
Mercury understood further negotiations to be futile before it sought appraisal. 	Mercury
responded to the Graces’ May 2025 letter by requesting an inspection and, in the email exchange
in July 2025, Mercury stated that it was interested in “amicably resolving this matter,” that it
would consider making a settlement offer following reinspection, that it would “participate in
good faith in mediation,” and that its “interest in resolving this matter [was] not a waiver of any
of the terms or conditions of the policy, including appraisal.” 	In its answer to the Graces’ suit,
Mercury also invoked the policy’s terms and reserved its right to rely on its provisions.
7 	It appears that the Graces are relying on the twenty-day deadline in the appraisal
provision, but that deadline addresses when a party must appoint an appraiser after a demand for
appraisal has been made. There is no such deadline to demand appraisal.

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And, even if we were to conclude that Mercury did not demand appraisal within a
reasonable time following impasse, the Graces were required to show that Mercury’s delay in
invoking the process prejudiced them. See In re American Nat’l Prop. & Cas. Co., 582 S.W.3d
400, 406–07 (Tex. App.—San Antonio 2018, orig. proceeding) (placing burden on party seeking
waiver to show “that any failure to demand appraisal within a reasonable time prejudiced her”);
In re Ooida Risk Retention Grp., Inc., 475 S.W.3d at 912 (explaining that “prejudice required . . .
is prejudice following impasse and prior to invocation of the appraisal process, i.e., prejudice
caused by the insurer’s unreasonable delay in invoking the process”). 	As the Texas Supreme
Court explained, “[i]f the insured has suffered no prejudice due to delay, it makes little sense to
prohibit appraisal when it can provide a more efficient and cost-effective alternative to
litigation.” In re Universal Underwriters of Tex. Ins. Co., 345 S.W.3d at 411–12.
Before the trial court, the Graces relied on “more than $500 in filing and service
fees” and more than $2,500 in attorney-fee expenses to show prejudice, but courts, including this
Court, have found these types of litigation costs incurred by the party initiating litigation not to
show prejudice. See In re United Servs. Auto. Ass’n, 2020 WL 7640145, at *4 (concluding that
litigation expenses did not show prejudice when the party chose to initiate litigation rather than
first pursuing appraisal); In re American Nat’l Prop. & Cas. Co., 582 S.W.3d 400, 406–07 (Tex.
App.—San Antonio 2018, orig. proceeding) (concluding that incurred litigation costs did not
show prejudice when party initiated litigation “rather than first pursuing an appraisal”). 	The
Graces had the right to demand appraisal themselves, but they chose to initiate litigation. See In
re Universal Underwriters of Tex. Ins. Co., 345 S.W.3d at 411–12 (explaining that it is difficult
to see how prejudice could ever be shown when policy gives both sides same opportunity to

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demand appraisal because party who senses that impasse has been reached can avoid prejudice
by demanding appraisal itself).
On this record, we conclude that the trial court abused its discretion to the extent
that it denied Mercury’s motion on the ground that Mercury waived its right to appraisal. 	See
Ortiz, 589 S.W.3d at 131; In re Universal Underwriters of Tex. Ins. Co., 345 S.W.3d at 408–10;
cf. In re Allstate Vehicle & Prop. Ins. Co., 549 S.W.3d 881, 893–94 (Tex. App.—Fort Worth
2018, orig. proceeding) (holding that trial court did not abuse its discretion by denying motion to
compel appraisal based on insurer’s three-month delay from point of impasse in invoking right to
appraisal, its intentional conduct and verbal statements to trial court inconsistent with its right of
appraisal, and in light of prejudice demonstrated by insured and lack of nonwaiver clause).
CONCLUSION
For 	these 	reasons, 	we 	conditionally 	grant 	Mercury’s 	petition 	for 	writ 	of
mandamus and direct the trial court to vacate its order denying Mercury’s motion to compel
appraisal. The writ will issue only if the trial court fails to act in accordance with this opinion.
__________________________________________
Karin Crump, Justice
Before Justices Triana, Crump, and Ellis
Filed: 	October 21, 2026