Appendices
to
The Scope of Appraisal in Property Casualty Insurance:
A Legal and Ethical Analysis (Refined Edition)
Thomas V. Di Sieno, Digitory Solitons, Inc.
These appendices provide comprehensive supporting materials drawn from the original research compilation, including full case summaries, canonical policy language, an expanded glossary, and practical practitioner tools. They are designed to be used alongside the main white paper for training, course development, claims handling, and legal reference.
Appendix A: Glossary of Key Terms
This glossary defines core terminology used throughout the white paper and in insurance appraisal practice.
Appraisal
The contractual process by which a dispute over the amount of loss or value of damaged property is resolved. Each party appoints a competent and disinterested appraiser; if the appraisers cannot agree, they select a neutral umpire. The resulting award (signed by any two of the three) is generally binding as to the amount of loss.
Appraiser
A qualified individual selected by either the insured or the insurer to determine the amount of loss or value of damaged property. Appraisers act independently but may advocate for the appointing party within the bounds of objectivity, integrity, and the insurance contract. They are not agents of the appointing party and must remain disinterested.
Umpire
A neutral third party selected by the two appraisers (or, if they cannot agree, by a court) to resolve differences between the appraisers. The umpire’s decision, when joined by one appraiser, becomes part of the binding award. The umpire must be competent and disinterested.
Standard Fire Policy (New York Standard Fire Policy / “165 Lines”)
A model property insurance policy first adopted in New York in 1853 and substantially revised in 1943. It serves as the statutory or contractual baseline in many states. The policy explicitly includes an appraisal clause and prohibits carriers from diminishing the rights it grants to insureds.
Independent
In the context of an appraiser, this term means the appraiser is not subject to the control or direction of either party to the insurance contract. Prior relationship with the appointing party does not automatically destroy independence if there is no evidence of dishonesty or improper conduct in the specific matter (Levin v. Northwestern Nat’l Ins. Co.).
Impartial
A stricter standard than mere independence. It implies a lack of bias and a commitment to equitable, fair decision-making. Case law distinguishes the two: an appraiser may be “independent” yet still advocate for the appointing party’s position, provided the advocacy stays within contractual and ethical bounds (Auto-Owners Ins. Co. v. Allied Adjustors & Appraisers).
Contra Proferentem
A fundamental rule of contract interpretation holding that any ambiguity in a contract should be construed against the party that drafted it (typically the insurer). In appraisal disputes, this doctrine is frequently invoked to construe the scope of the appraisal clause broadly in favor of the insured.
Proof of Loss
A sworn statement submitted by the insured detailing the items claimed, their value, and the amount of loss. This document logically and legally defines the claim and, therefore, the proper subject matter of any subsequent appraisal. Carriers generally may not insist on a narrower list of items if those items are in dispute as to amount of loss or value.
Actual Cash Value (ACV)
The value of property at the time of loss, typically calculated as replacement cost minus depreciation. Appraisal often determines both actual cash value and the amount of loss.
Business Interruption (BI) / Extra Expense / Additional Living Expense (ALE)
Economic loss coverages that compensate for lost income or increased costs resulting from property damage. These losses are generally appraisable once any legal questions (e.g., definition of the restoration period) are resolved by a court.
Appraisal Memorandum / Submission Agreement
A written document executed by the parties at the start of appraisal that precisely defines what is—and is not—to be appraised. Strongly recommended to prevent later disputes over the appraisers’ authority (particularly after Maiden Creek T.V. & Appliance, Inc. v. General Cas. Ins. Co.).
Deductible
The amount the insured must bear before the insurer’s obligation to pay arises. Application of deductibles is generally outside the scope of appraisal (Hanson v. Commercial Union Ins. Co.).
Coverage Limits / Policy Limits
The maximum amount the insurer will pay for a covered loss. Appraisers may not exceed these limits in an award.
Exclusions
Policy provisions that eliminate coverage for certain causes of loss, types of damage, or circumstances. Items or damages falling under exclusions are generally not appraisable.
Appendix B: Sample Policy Language — Standard Fire Policy Appraisal Clause
The following is the canonical appraisal language from the New York Standard Fire Policy (the “165 Lines”), which forms the foundation for most property insurance policies in adopting jurisdictions:
“In case the insured and this company shall fail to agree as to the actual cash value or the amount of loss, then, on the written demand of either, each shall select a competent and disinterested appraiser and notify the other of the appraiser selected within twenty days of such demand. The appraisers shall first select a competent and disinterested umpire; and failing for fifteen days to agree upon such umpire, then, on request of the insured or this company, such umpire shall be selected by a judge of a court of record in the state in which the property covered is located. The appraisers shall then appraise the loss, stating separately actual cash value and loss to each item; and, failing to agree, shall submit their differences, only, to the umpire. An award in writing, so itemized, of any two when filed with this company shall determine the amount of actual cash value and loss. Each appraiser shall be paid by the party selecting him and the expenses of appraisal and umpire shall be paid by the parties equally.”
Key statutory safeguards in many states (including New York Insurance Law §3404) provide that carriers may amend the statutory language but may not diminish the rights granted to the insured. The appraisal clause is binding on both parties.
Appendix C: Full Case Summaries
The following summaries focus on the holdings most relevant to the scope of appraisal. They are drawn from the original research materials and landmark decisions discussed in the white paper.
Maiden Creek T.V. & Appliance, Inc. v. General Cas. Ins. Co.
Court: Pennsylvania (key decision on exceeding authority)
Facts: The parties resolved one portion of a claim but could not resolve the building portion. They submitted only the unresolved portions to appraisal. The appraisers appraised the entire loss, including the previously resolved segment, and reduced the payment for the resolved portion.
Holding: The court granted the insured’s petition for an upward modification of the award. The appraisers exceeded their authority because the parties had not “disagreed on the amount of loss” for the resolved portion. Appraisal is appropriate only where there is actual disagreement on the amount of loss.
Key Principle for Scope: Appraisers may not reopen or revisit areas of the claim already agreed to or paid. They cannot award less than an undisputed amount previously paid or agreed upon.
Practical Takeaway: Parties should prepare a written appraisal memorandum detailing exactly what is and is not to be appraised to avoid later challenges.
Duane Reade, Inc. v. St. Paul Fire & Marine Ins. Co.
Court: New York (World Trade Center litigation)
Facts: Following destruction of a Duane Reade store in the World Trade Center attacks, the insured claimed business interruption for the actual time required to restore operations at an identical store to previous levels. The carrier argued the claim should be limited to the time needed to restore the business level of the entire Duane Reade chain.
Holding: The length of the restoration period was a question of valuation for the appraisers. The legal definition of “restoration period” was a question for the court. The court defined it as the time required for the insured to resume “functionally equivalent operations at the same location” (not chain-wide). The calculation of months/years was delegated to the appraisal panel.
Key Principle for Scope: Economic losses and business interruption claims are appraisable. Once a court resolves legal questions (e.g., definition of the restoration period), the quantum of loss is properly determined by appraisers.
Practical Takeaway: For complex economic claims, select appraisers with expertise in business interruption or forensic accounting.
Safeco Ins. Co. v. Sharma
Court: California (important limitation on appraiser authority)
Facts: The insured claimed theft of a matched set of 36 paintings. The appraisal panel determined that the paintings were not a matched set and therefore of lesser value.
Holding: The court reversed confirmation of the appraisal award. An appraisal panel is not empowered to determine whether the insured lost what he claimed to have lost or something different. Although the matching issue affected value, it was a coverage/factual predicate question beyond the scope of appraisal.
Key Principle for Scope: Appraisers determine value based on the items claimed; they do not decide threshold factual questions about what property was actually lost or its character (e.g., matched set vs. individual pieces).
Practical Takeaway: In cases involving matching, sets, or similar factual disputes, appraisers should consider rendering alternative valuations (one assuming the property was as claimed, one assuming it was not) and let the court decide which premise applies.
AIU Ins. Co. v. Lexes, 815 A.2d 312 (Del. Supr. 2003)
Holding: An appraisal award is subject to judicial review and may be set aside if the appraisers included items that were (1) explicitly excluded from coverage, (2) exceeded the policy’s maximum coverage limits, or (3) encompassed expenses allocated to the insured under the appraisal clause.
Key Principle: Appraisers cannot expand the award beyond the policy’s coverage or the terms of the appraisal submission.
Hanson v. Commercial Union Ins. Co., 150 Ariz. 283, 723 P.2d 101 (Ct. App. Div. 1 1986)
Holding: Appraisers exceeded their authority by resolving disputes related to the number and amount of deductibles and by including an award for interest.
Key Principle: Deductibles, interest, and similar issues are outside the scope of appraisal.
Happy Hank Auction Co. v. American Eagle Fire Ins. Co. (1954, N.Y. Court of Appeals)
Holding: Effectively rendered the appraisal clause unenforceable in New York by depriving courts of authority to compel insurer participation.
Impact: Created an uneven playing field favoring insurers and forcing policyholders into litigation. Later corrected by legislative amendment.
Standard Fire Insurance Co. v. Fraiman (Texas)
Holding: Repudiated the Happy Hank reasoning. Affirmed the insured’s right to rely on the plain language of the policy and enforced the appraisal clause as part of the consideration for the premiums paid.
Significance: Represents the national rejection of the restrictive Happy Hank approach.
Other Important Cases (Summary Form)
Levin v. Northwestern Nat’l. Ins. Co. (1911): Prior employment by the carrier or service as a public adjuster does not automatically disqualify an appraiser if there is no dishonesty or improper conduct in the award.
Auto-Owners Ins. Co. v. Allied Adjustors & Appraisers (Mich. 1999): Distinguished “independent” from “impartial.” An appraiser may be biased toward the appointing party yet still render sound, independent recommendations.
Norwich Union Fire Ins. Soc. Ltd. v. Cohen (10th Cir. 1933): Appraisers are not agents of the appointing party and may not be subject to their direction.
Dennis v. Standard Fire Insurance Co.: Appraisers may act as “partisans within bounds” or “independent advocates” provided they remain unbiased and disinterested within the meaning of the contract.
Remington Paper Co. v. London Assur. Corp. (N.Y. 1896): Reinforces the independent (non-agent) status of appraisers.
Fishman v. Middlesex Mut. Ins. Co. (Conn. 1985): Where coverage is disputed, the burden of proving coverage generally rests with the party seeking to compel appraisal.
Summerfield v. North British & Mercantile Ins. Co. (1894): A carrier’s unilateral attempt to limit the scope of appraisal may constitute a waiver of the right to appraisal as a condition precedent.
Johnson v. Mutual Ins. Co. (Wash. 2001) & State Farm Lloyds v. Johnson (Tex. 2009): Illustrate the ongoing debate over whether appraisers may determine cause of loss (jurisdictional split; many courts reserve cause for judicial determination).
Appendix D: Quick Reference — Is This Issue Appraisable?
Use this framework when scoping an appraisal or advising clients:
Generally Appraisable
Amount and extent of physical damage to claimed items
Cost to repair or replace damaged property (within policy terms)
Whether the loss is total or partial
Actual cash value of damaged property
Length of business interruption / restoration period (once legal definition is set by court)
Extra expenses, lost rents, additional living expenses (economic losses)
Value of stolen or destroyed items as claimed in the proof of loss
Generally, NOT Appraisable
Coverage defenses or liability of the insurer
Whether the insured actually lost the specific property claimed (e.g., matched set vs. individual items — Safeco principle)
Application or amount of deductibles
Awards of interest or attorney’s fees
Items or damages explicitly excluded by the policy
Amounts already agreed to or paid by the carrier (Maiden Creek rule)
Cause of loss (in most jurisdictions)
Legal interpretation of policy language or definitions
Borderline / Requires Careful Scoping
Matching issues — best handled with alternative valuations
Scope of restoration (single location vs. entire operation) — legal definition by court, quantum by appraisers
New damage discovered mid-appraisal — document via MOU or supplemental agreement
Appendix E: Recommended Outline for an Appraisal Memorandum / Submission Agreement
A written appraisal memorandum is the single most effective tool to prevent disputes over the appraisers’ authority. Consider including the following elements:
Identification of the parties, policy number, claim number, and date of loss.
Clear statement of the items or categories of loss submitted to appraisal (cross-reference the proof of loss).
Explicit identification of any items or portions of the claim that are NOT submitted to appraisal (e.g., previously paid or agreed amounts, coverage disputes reserved for litigation).
Statement that the appraisers’ authority is limited to determining the amount of loss / value with respect to the submitted items and does not extend to coverage, liability, or previously resolved amounts.
Agreement on the identity (or method of selection) of the umpire if the appraisers cannot agree.
Any agreed-upon procedures, timelines, or evidence exchange protocols.
Signatures of authorized representatives of both parties (or their counsel).
This document should be executed before the appraisers begin substantive work.
Appendix F: Practitioner Notes & Additional Guidance
1. Always start with the insured’s proof of loss. It defines the claim and the proper scope of appraisal.
2. Document scope changes in writing (MOU or supplemental agreement) when property conditions change, new information emerges, or legal developments occur.
3. Select appraisers with subject-matter expertise. Economic loss claims often benefit from public adjusters or forensic accountants experienced in business interruption.
4. In matching or set disputes, consider alternative valuations to keep the process moving while preserving judicial resolution of threshold facts.
5. Remember the ethical core: appraisers must be independent, disclose conflicts, and base conclusions on competent evidence. Both parties share responsibility for a fair process.
6. This compilation reflects the law as synthesized from the research materials provided. Practitioners must always consult current primary sources and jurisdiction-specific authority, as appraisal law continues to evolve.
— End of Appendices —
Companion to the Refined White Paper | Prepared for Professional & Educational Use