Chapter V
Timing Issues
Pages
When Appraisal Should be Demanded 241
Responding to a Demand for Appraisal 279
The Order of Priority Between Appraisal
and Litigation 284
Timing of the Award 299
When the Loss is Payable 301
Time to Bring Suit 306
Competing Demands 316
Compliance with Post-Loss
Policy Provisions 324
Moving to Set Aside an Award 327
When Appraisal Should Be Demanded
For a demand for appraisal to be timely, there must actually be some disagreement between the insured and the insurer as to the amount of loss or value. There must have been an honest attempt made by the parties to meet on the question of damage before the appraisal clause can be invoked.441
A demand for an appraisal must be made in good faith, within a reasonable time, in plain and simple terms, and in compliance
441 Harrison v. Hartford Fire Ins. Co., 59 F.732 (C.C.S.D. Iowa 1894); Hanover Fire Ins. Co. v. Harper, 77 Ill. App. 453 (4th Dist. 1898); Maimes v. Automobile Ins. Co. of Hartford, Conn., 112 Misc. 656, 183 N.Y.S. 690 (Sup. Ct. 1920), aff’d, 196 A.D. 921, 187 N.Y.S. 943
(4th Dept. 1921); Phoenix Ins. Co. v. Badger, 53 Wis. 283, 10 N.E. 504 (1881); Ciapanna
v. Lincoln Fire Ins. Co., 153 Or. 395, 56 P.2d 1113 (1936); 15 Couch on Insurance, §210:77
(3d ed. 2003).
with the terms of the policy.442 The right to demand appraisal is not indefinite as to time, but must be exercised within a reasonable period, depending upon the facts of the particular case.443 Certainly, where the policy is silent as to the time for invoking the right to appraisal, the law will require that the demand be made within a reasonable time.444 In determining whether a demand for an appraisal has been presented within a reasonable period of time, the definition of timeliness is often fact specific.445
Under New York law, determining the timeliness of an appraisal demand involves consideration of three factors, none of which are dispositive. They include: 1) whether the appraisal sought is impractical and impossible in that the appraisal demand would result in prejudice to the opposing party, 2) whether the party engaged in good-faith negotiations over valuation of loss prior to the appraisal demand,
442 Grand Rapids Fire Ins. Co. v. Finn, 60 Ohio St. 513, 54 N.E. 545 (1899), overruled in part on other grounds by, Graham v. German Am. Ins. Co., 75 Ohio St. 374, 79 N.E. 930 (1907).
443 Chainless Cycle Mfg. Co. v. Security Ins. Co. of New Haven, 169 N.Y. 304, 62 N.E.
392 (1901); Amerex Group, Inc. v. Lexington Ins. Co., 678 F.3d193 (L.A.2 (N.Y.) 2012)
444 Tran d/b/a Imperial Shopping Center v. American Economy Ins. Co., 2010 W.L.
2680616 (S.D. Tex. 2010).
445Kester v. State Farm Fire and Cas. Co., 726 F.Supp. 1015, 1019 (E.D.Pa. 1989); See
generally, A.L. Frechette and A.M. Swarthart, Annotation, Time Within Which Demand for Appraisal of Property Loss Must be Made Under Insurance Policy Providing for Such Appraisal, 14 A.L.R.3d 674 (1967); Hamilton v. Phoenix Ins. Co., 61 F. 379 (6th Cir. 1894) (what constitutes a reasonable time depends upon all the surrounding circumstances).
and 3) whether appraisal is desirable or necessary under the circumstances.446
In essence, “[t]his means that the existence of a real difference in fact, arising out of an honest effort to agree between the insured and the insurer, is necessary to render operative a provision in a policy for arbitration of differences. Furthermore, there must be an actual and honest effort to reach an agreement between the parties, as it is only then that the clause for arbitration becomes operative, the remedies being successive. For example, a mere arbitrary refusal to pay the amount demanded, and the offer of a less amount, without any attempt upon the part of the insurer to ascertain and estimate the amount of loss and damage, do not constitute such a disagreement as is contemplated.”447
In Texas, it has been determined that “the proper point of reference for determining whether an insurer waived the right to invoke appraisal by delay is the point at which the insurer knew the appraisal clause could be invoked because of a disagreement over the amount of damages, that is, the point of impasse with the insured.”448
Amerex Group, Inc. v. Lexington Ins. Co., 678 F.3d 193 ( (L.A.2 (N.Y.) 2012).
14 Couch on Insurance 2d §50:56 (1982).
Sheridan v. American Bankers Ins. Co., 2011 WL 1542819 (S.D.Tex. 2011).
The point of impasse was not yet reached and thus appraisal was invoked within a reasonable time where an insurer waited approximately one month beyond the date the insured began litigation before seeking appraisal. The Court in that case held that while unreasonable delay was a factor to be considered in determining waiver, reasonableness needed to be measured from the point of impasse – requiring “an
examination of the circumstances and the
parties’ conduct, not merely a measure of the amount of time involved in seeking appraisal.” It clarified that impasse was not synonymous with a disagreement as to the amount of loss or an insurer’s monetary offer to cover damages,
and was negotiations.
not triggered by ongoing Circumstances weighed by the
Court in contemplating waiver include “(1) the time between the breakdown of good faith
negotiations suffered by
concerning the amount of loss the insured and the appraisal
demand; and (2) whether there would be any prejudice to the other party resulting from the delay in demanding the appraisal.” Essentially, appraisal must be invoked within a reasonable time after impasse occurs. In the present action, the insurer invoked appraisal within a reasonable time post impasse, as the policy did not indicate a deadline for making the request, the insurer had not denied liability, and the insured had not indicated a refusal to further
discuss the matter.449
The same Court also emphasized the importance of establishing prejudice in addition to mere delay in showing waiver of the right to appraisal. It stated that prejudice may arise in a variety of ways which cause legal or financial harm to a party, but absent prejudice, appraisal should not be prohibited where it could pose an efficient and cost- effective means of resolution. In that particular case, the insured did not attempt to show prejudice and the court did not explicitly require it, a failure it attributed to “the paucity of cases” in which the waiver of appraisal was addressed rather than its inapplicability. The Court also reasoned the difficulty of showing prejudice under the circumstances since the policy provided both the insured and insurer with an opportunity to invoke appraisal.450
In another Texas matter, waiver of the right to invoke appraisal was not established where circumstances did not amount to prejudice. Where the option to pursue appraisal was provided by the policy, the Court reasoned that insureds opposing an
In re Universal Und. of Texas Ins. Co., 345 S.W.3d 404 (Tex., 2011), citing Terra Ind. Inc. v. Commonwealth Ins. Co. of America, 981 F.Supp. 581 (N.D.Iowa 1997); 29 U.S.C. 151 and Beverly Farm Foundation v.. NLRB, 144 F.3d 1048, 1052 (7th Cir. 1998).
In re Universal Und. of Texas Ins. Co., 345 S.W.3d 404 (Tex., 2011).
insurer’s invocation of appraisal could have avoided costs incurred by requesting appraisal themselves and that there was no evidence that the insurer would have resisted such a request. The Court conditionally granted a writ of mandamus with instructions that the lower court enforce the policy’s appraisal provision, stating, “[w]here the insurance policy provides for an appraisal process, compliance is excused only if the party resisting the appraisal can show prejudice…When a party knows of its right to request an appraisal and does not make that request, it is difficult to attribute the costs incurred to the opponent.”451
A case which further explored the matter of impasse found that an insurer had not waived its right to seek appraisal where there was not a “sufficiently lengthy delay” in its appraisal demand seven days after receiving the insured’s notice of intent to sue. The Court declared that impasse had not yet been reached, as the record did not reflect that the insurer knew further negotiations would be futile until it received the notice of suit from the insured. It asserted that “if one party genuinely believes negotiations to be ongoing, it cannot have intended to relinquish its right to appraisal
In re Cypress Texas Lloyds, 419 S.W.3d 443 (Tex.App. 2012).
K ester v. State Farm Fire and Cas. Co., 726 F. Supp. 1015 (E.D. Pa. 1989)
U.S. District Court for the Eastern District of Pennsylvania - 726 F. Supp. 1015 (E.D. Pa. 1989) December 11, 1989
Patricia KESTER v.
STATE FARM FIRE AND CASUALTY COMPANY. Civ. A. No. 88-9844.
United States District Court, E.D. Pennsylvania.
December 11, 1989.
*1016 Roger J. Harrington, Philadelphia, Pa., for plaintiff. Bonnie Sue Donahey Stein, Morrisville, Pa., for defendant.
Opinion And Order
VAN ANTWERPEN, District Judge.
This diversity matter comes before the court upon the defendant's motion for summary judgment. Oral argument on this motion was heard by the court on October 27, 1989. For the reasons expressed below, we believe that the defendant's motion should be granted, subject to the condition stated herein.
Before embarking upon a discussion of the relevant law, it is first necessary to provide a brief chronology of events in the instant case. On or about February 11, 1988, the plaintiff's dwelling allegedly sustained windstorm damage. At the time of this incident, homeowner's insurance policy # XX-XX-XXXX-X was in effect between the plaintiff and the defendant. The defendant first received notice of the alleged loss on July 19, 1988, when it received a letter from Eastern Public Adjusters ("Eastern") who represented the plaintiff. Eastern had evaluated the plaintiff's claim at $12,782.96 and submitted an estimate for that amount to the attention of Robert Evans, the claims adjuster assigned to handle this case for the defendant. Mr. Evans prepared an estimate for the defendant, after an inspection of the plaintiff's property. That estimate came to
$1,878.64.
On September 6, 1988, the defendant wrote a letter to the plaintiff, questioning whether or not the defendant was obligated for the loss because of the plaintiff's delay in providing written notice of the loss to the company. On or about November 22, 1988, Mr. Evans sent a letter to the plaintiff's agent concerning the defendant's estimate. On November 30, 1988, the plaintiff filed suit in the Philadelphia County Court of Common Pleas. The defendant answered the complaint and also removed the case to Federal court on the grounds of diversity jurisdiction. On or about December 1, 1988, the defendant received a sworn proof of loss on behalf of the
plaintiff. On March 23, 1989, the defendant, through its counsel, made a written demand upon the plaintiff for appraisal under the terms of the insurance policy. By letter, dated April 4, 1989, the defendant notified the plaintiff's counsel that it was appointing Michael Potter of Maryland as its appraiser. The plaintiff has not designated an appraiser.
Paragraph 6 of the homeowner's policy issued by the defendant reads in pertinent part:
Appraisal. If you and we fail to agree on the amount of loss, either one can demand that the amount of the loss be set by appraisal. If either makes a written demand for appraisal, each shall select a competent, independent appraiser. Each shall notify the other of the appraiser's identity within 20 days of receipt of the written demand. The two appraisers shall then select a competent, impartial umpire....
Paragraph 6 also states: "If the appraisers submit a written report of an agreement to us, the amount agreed upon shall be the amount of the loss."
Paragraph 8 of the policy further provides: "Suit Against Us. No action shall be brought unless there has been compliance with the policy provisions. The action *1017 must be started within one year after the date of loss or damage."
Fed.R.Civ.P. 56(c) instructs a court to enter summary judgment when the record reveals that "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law."
This rule provides the court with a useful tool when the critical facts are undisputed, facilitating the resolution of a pending controversy without the expense and delay of conducting a trial made unnecessary by the absence of factual dispute. Peterson v. Lehigh Valley Dist. Council, 676 F.2d 81, 84 (3d Cir. 1982); Goodman v. Mead Johnson & Co., 534 F.2d 566, 573 (3d
Cir.1976), cert. denied, 429 U.S. 1038, 97 S. Ct. 732, 50 L. Ed. 2d 748 (1977).
Summary judgment is inappropriate, however, where the evidence before the court reveals a genuine factual disagreement requiring submission to a jury. An issue is "genuine" only if the evidence is such that a reasonable jury could find for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S. Ct. 2505, 2510, 91 L. Ed. 2d 202 (1986). At the summary
judgment stage, "the judge's function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Id. 106 S. Ct. at 2511. However, if the evidence is merely "colorable" or is "not significantly probative," summary judgment may be granted. Id.
In a summary judgment action, the moving party bears the initial burden of identifying for the court those portions of the record which it believes demonstrate the absence of a material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 106 S. Ct. 2548, 2553, 91 L. Ed. 2d 265 (1986).
Following such a showing in a case where the non-moving party is the plaintiff and therefore
bears the burden of proof, it must by affidavits or by the depositions and admissions on file "make a showing sufficient to establish the existence of [every] element essential to that party's case." Id. 106 S.Ct. at 2552-53; Anderson, 106 S. Ct. at 2514; Matsushita Elec. Indus. Co. v.
Zenith Radio Corp., 475 U.S. 574, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986); Fed.R.Civ.P. 56(e).
In making its ruling on a summary judgment motion, the court must view all inferences in a light most favorable to the non-moving party, United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S. Ct. 993, 994, 8 L. Ed. 2d 176 (1962); Continental Ins. Co. v. Bodie, 682 F.2d 436, 438 (3d Cir.1982), must resolve all doubts against the moving party, Gans v. Mundy, 762 F.2d 338, 341 (3d Cir.1985), cert. denied, 474 U.S. 1010, 106 S. Ct. 537, 88 L. Ed. 2d 467 (1985), and must take as true all allegations of the non-moving party that conflict with those of the movant, Anderson, 106 S. Ct. at 2513.
With these standards in mind, we now turn our attention to the motion before us. The central issue in the instant case is this: does the existence of the policy's appraisal clause preclude the plaintiff from bringing this court action? We do not find the parties to be in disagreement with the facts which we have set forth above. We, therefore, consider the disposition of the instant case to turn upon the application of the relevant law to these facts.
In order to invoke the appraisal provision of a policy, the insurer must admit liability and there must be a dispute only as to the amount of the loss. Ice City, Inc. v. Insurance Company of North America, 456 Pa. 210, 314 A.2d 236, 240 (1974). Also, "if appraisal is not requested, or the request is fruitless, or appraisal proceedings are inclusive or abandoned by the parties' joint consent or liability is denied, then the appraisal provision in the contract may not bar the insured from bringing an action for relief in the courts." Id. 314 A.2d at 239 (footnotes omitted) (emphasis supplied). In none of its communications with the plaintiff did the defendant expressly deny liability for the claim and the defendant explicitly admitted liability in open court at the hearing on this motion held on October 27, 1989.
The plaintiff argues, however, that the defendant definitively denied liability when it answered her complaint. While it is true that the answer filed by the defendant in response to the plaintiff's complaint *1018 denied liability on fraud and other grounds, there is authority to suggest that such response does not constitute a denial. Authorities cited in 3 A.L.R.3d 383, 416 (1949) hold that an insurer's denial of liability, which is raised for the first time in an answer to a complaint, does not amount to a waiver of the condition precedent. In Kahnweiler v. Phoenix Insurance Co., 57 F. 562 (D.Kan.1893), rev'd on other grounds, 67 F. 483 (8th Cir.1895), the court stated:
he plaintiffs insist that the provision in the policy for arbitration has been waived by the company, and is inoperative; that the company could not invoke that provision to abate or defeat the plaintiffs' suit, because it made no demand for arbitration, and because it denies its liability in toto. This denial of liability in toto appears for the first time in the answer of the defendant in this suit. Up to that time the company had offered to pay its proportion of what it claimed was the actual loss of the insured, but there was an irreconcilable difference between the parties as
to the amount of that loss, thus bringing the case within the provisions of the arbitration clause of the policy. Inasmuch as the arbitration should precede any suit, at no time during the period for arbitration did the company deny its liability for the loss. That the company has set up in one count of its answer a denial of any liability does not affect the case. It might waive any objection to the cause of the fire, and offer to settle, to avoid litigation; but this would not effect [sic] its right, when sued, to set up in its answer any legal defense it had to the action....
In Carp v. Queen Insurance Co., 104 Mo.App. 502, 79 S.W. 757 (1904), the court also considered whether the denial of liability in an answer to the complaint constituted such denial of liability as would preclude resort to appraisement. The Carp court concluded that it did not, stating:
"The denial of liability which dispenses with the necessity of an appraisal must occur, except under special circumstances, before answering in a suit on the policy; for a suit will not lie without previous appraisal, when the company has not denied liability or otherwise waived the condition." Id. 79 S.W. at 760.
In the instant case, the defendant did not deny liability before filing its answer to the plaintiff's complaint.
The plaintiff raises, but does not brief, an argument that, under Pennsylvania law, as expressed in Judge v. Celina Mutual Insurance Company, 303 Pa.Super. 221, 449 A.2d 658, 661 (1982),
"an affirmative defense not properly pleaded is waived."
The plaintiff is here referring to the appraisal clause in the policy. The plaintiff has not explained why a Pennsylvania Rule of Civil Procedure (Pa.R.C.P. 1030) should be applicable to the instant case in Federal court. Under the Federal Rules of Civil Procedure, Rule 8(c) deals with "Affirmative Defenses". That rule reads, in pertinent part: "In pleading to a preceding pleading, a party shall set forth affirmatively ... arbitration and award " It is true that the answer filed by the
defendant does not raise the appraisal clause among its affirmative defenses. Kahnweiler, 67 F. 483 (8th Cir. 1895), was, in fact, reversed by the appellate court because of the failure to raise the existence of an arbitration clause in the answer to the complaint. Karno-Smith Co. v. School District of City of Scranton, 44 F. Supp. 860 (M.D.Pa.1942), addressed the propriety of the raising of the existence of an arbitration clause in a motion to dismiss. Said the court in
Karno-Smith:
It should be noted that rule 8(c) of the Federal Rules of Civil Procedure, 28 U.S.C.A. following
section 734c, requires certain defenses to be set forth affirmatively. Among these defenses which must be affirmatively pleaded are arbitration and award, ... Thus these grounds are not
properly before the court on defendant's motion to dismiss....
Id. at 862.
The court in Karno-Smith denied the motion to dismiss and directed that an answer to the complaint be filed within twenty days from notice of its order.
In the instant case, we have no motion to dismiss before us, but we do have a motion for summary judgment which raises the issue of the appraisal clause as a bar to the *1019 litigation of the amount of the plaintiff's loss. Fed.R.Civ.P. 15(a) stipulates the conditions and the timetable under which a party may amend its pleading. It reads in part pertinent to the instant case:
"Otherwise a party may amend the party's pleading only by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires." In Howze v.
Jones & Laughlin Steel Corp., 750 F.2d 1208 (3d Cir.1984), the Third Circuit has spoken of certain considerations which must be taken into account before an actual motion to amend may be granted. That court has said:
Delay alone, however, is an insufficient ground upon which to deny a motion to amend. Cornell and Co., Inc. v. Occupational Safety and Health Review Commission, 573 F.2d 820 (3d Cir.1978). Rather, the touchstone is whether the non-moving party will be prejudiced if the amendment is allowed. Id. at 823. ...
Id. at 1212.
We are mindful that there is not now before us a motion to amend the defendant's answer. We believe, however, that the words of the Third Circuit are equally applicable to the situation here. The Pennsylvania Supreme Court has stated: "It is beyond cavil that settlement of disputes by arbitration or appraisal is the approved public policy of this Commonwealth. [Citations omitted]." Ice City, 314 A.2d at 241
We can conceive of no prejudice to the plaintiff in allowing the defendant to file an amended answer raising the affirmative defense of the appraisal clause. The plaintiff will be in no worse position after such amendment as she has been before it. Moreover, amendment would serve to honor Pennsylvania's public policy in favor of arbitration of disputes.[1]
We shall next proceed to dispose of the plaintiff's remaining arguments in the instant opinion. The plaintiff also argues that the defendant waived its right to appraisal by waiting until March 23, 1989 before requesting it.
The policy in the instant case makes no provision for a time when appraisal must be requested. However, in Lefkowitz v. Hummel Furniture Co., 385 Pa. 244, 122 A.2d 802, 804 (1956), the Pennsylvania Supreme Court stated: "[W]here no time for performance is provided in the written instrument the law implies that it shall be done within a reasonable time "
In the instant case, eight months elapsed between the insurer's first awareness of the plaintiff's loss (July 19, 1988) and its request for appraisal (March 23, 1989). We must now decide whether eight months constituted a "reasonable time."
Neither the parties' research nor our own has uncovered Pennsylvania case law regarding the issue of timeliness of a demand for appraisal. Other jurisdictions, however, have considered the matter and have concluded that "[t]he timeliness of a demand for an appraisal in each case depends upon the circumstances as they existed at the time the demand was made. Annot., 14 A.L.R.3d 674 (1967)." Keesling v. Western Fire Insurance Company of Fort Scott, Kansas, 10 Wash. App. 841, 520 P.2d 622, 626 (1974). See also Hanby v. Maryland Casualty Co., 265 A.2d 28, 30 (Del.1970); School District No. 1 v. Globe & Republic Insurance Co., 146 Mont. 208, 404 P.2d 889, 893 (1965). Also, the "circumstances" which have proven to be most *1020 decisive are two: prejudice resulting from the delay and the breakdown of good-faith negotiations concerning the amount of the loss suffered by the insured. Keesling, 520 P.2d at 628; School District No. 1, 404 P.2d at 893.
In the instant case, the only "prejudice" which the plaintiff alleges seems related to the continued existence of her court action or related to the contractually mandated resort to appraisal in the event of the parties' disagreement over the amount of the loss. The plaintiff claims loss of a judicial forum in which to prove coverage, liability, replacement cost and interest, loss of a date certain for arbitration, expense in appointing an appraiser and umpire, and delay in resolution, apparently on the grounds that the defendant has appointed an appraiser from Maryland. We believe that none of these claims amounts to the sort of prejudice that would preclude giving free rein to the policy's appraisal clause. The plaintiff has also claimed prejudice in the expenditure of attorney's fees. However, as the court in Keesling, 520 P.2d at 628 opined:
While authority can be found for the proposition that institution of suit by the insured serves to cut off the insurer's right to demand appraisal (Littrell v. Allemania Fire Ins. Co., 250 N.Y. 628, 166 N.E. 350; Davis v. Imperial Ins. Co., 16 Wash. 241, 47 P. 439 (1896)), we think that the better view is that the inconvenience of bringing suit is just one circumstance to be considered in determining whether a delay in demanding appraisal was unreasonable, that is, whether the inconvenience suffered was sufficient to justify a refusal to proceed under the appraisal provision of the policy. Stephens v. Union Assur. Soc., 16 Utah 22, 50 P. 626 (1897).
We do not believe that the plaintiff's institution of suit and consequent expenditure of attorney's fees warrants the conclusion that the appraisal clause must be considered waived in the instant case.
Nor can we say that there was a break-down of good-faith negotiations prior to the initiation of this action. The defendant was not even aware of the plaintiff's loss until five months after it had occurred. From July, 1988 until late November, 1988, there was a good-faith dispute over the timeliness of the plaintiff's claim and over the amount of the loss sustained. At the end of November, 1988, the tenor of the parties' relationship changed, when the parties became
adversaries in the suit filed by the plaintiff on November 30, 1988. We, therefore, believe that the plaintiff has not met this part of the circumstances "test", either.[2]
*1021 As we have explained above, we believe that the defendant is entitled to an award of summary judgment in its favor, subject to the defendant's immediate filing of an amended complaint raising the affirmative defense of the existence of an appraisal clause in the policy.
An appropriate order follows.
Order
AND NOW, this 11th day of December, 1989, upon consideration of the defendant's Motion for Summary Judgment and of the plaintiff's response thereto, it is hereby ORDERED that defendant is granted leave to file an amended answer and further, said motion for summary judgment is GRANTED effective December 21, 1989, when judgment shall be deemed entered, subject to the defendant's filing an amended answer properly pleading the defense of the existence of the appraisal clause in the policy before said effective date of summary judgment.
Notes
The granting of summary judgment, subject to the defendants' filing of an amended complaint raising the affirmative defense of statute of limitations, was the course chosen by the court in Echols v. Strickland, 92 F.R.D. 75 (S.D.Tex. 1981). The Echols court stated:
Because this case is still in the pre-trial stage and because the Defendants would therefore generally be permitted to avail themselves of the liberal amendment provisions of Rule 15 by filing amended answers with proper invocation of the defense, the better view is that the defense has not been waived. Greenwald v. Cunard Steam-Ship Company, 162 F. Supp. 250 (S.D.N.Y.1958); Wright & Miller, FEDERAL PRACTICE AND PROCEDURE: Civil § 1278, p. 344
(1969); see United Transportation Union v. Florida East Coast Railway, 586 F.2d 520, 527 (5th Cir.1978). Accordingly, the Court will proceed to consider the defense on its merits.
Id. at 77.
We are also aware of the liberal amendment provisions of Fed.R.Civ.P. 15 and that is why we, too, have chosen to follow this course.
The plaintiff argues that the defendant's "full and complete log sheets are essential to a determination of timeliness". The defendant has produced, pursuant to a discovery request made by the plaintiff, numerous log entries made for the plaintiff's claim. It has refused to furnish, however, certain log entries, maintaining that they are non-discoverable because made after the commencement of the instant litigation. The plaintiff would have us deny this motion for summary judgment because it is not in possession of log notes made after the commencement of suit. In support of her argument, the plaintiff cites us to a slip opinion by Magistrate Naythons,
Regalbuto v. Republic Insurance Co., No. 88-3430, slip op., 1988 WL 90421 (E.D.Pa. August 25, 1988). In Regalbuto, however, there stood before the court a motion to compel log sheets made prior to suit and prior to an appraisal demand. Since the log sheets in the instant case were made after the start of litigation, we fail to see the relevance of Regalbuto. Also, the plaintiff evidently made no motion to compel the production of the log sheets made after the commencement of litigation. The plaintiff may not now complain that she is not in possession of "full and complete log sheets".
The plaintiff also argues that the defendant's denial, of the existence of a statement given by plaintiff, followed by its subsequent explanation that it had taken a recorded statement by the plaintiff on September 27, 1988, but that no "statement" existed because the recording device had failed to function, entitles it to an "adverse inference" against the defendant "on any relevant fact." We do not agree. The plaintiff's own definition of "statement" is as follows: "a written statement signed or unsigned or a stenographic, mechanical, electrical or other recording, or a transcription thereof, which is substantially verbatim recital of an oral statement by the person making it contemporaneously recorded." (Emphasis supplied). Since the defendant had no "written statement" from the plaintiff and since there was no recorded statement or transcription thereof, we believe that the defendant was correct when it denied the existence of the plaintiff's statement.
unless it expressly waives that right.” 452
Neither party can use the right to demand appraisal so as to take undue advantage of the other, but both must act in good faith.453
It has been stated that the disagreement necessary to trigger appraisal cannot be unilateral in that the clause contemplates some meaningful exchange of information sufficient for each party to arrive at a conclusion before a disagreement can exist.454
The timeliness in which the insurer is required to demand appraisal under the terms of the policy begins to run from the time the insurer admits liability.”455 As to an excess insurer’s appraisal demand made some 5 years after the loss, it was held that whether such delay was reasonable depended upon the specific facts of the case.456
In Florida, appraisal was deemed to be
In re Texas Windstorm Ins. Ass’n, 2013 WL 4806996 (Tex. App.-Houston [14th Dist] 2013).
Uhrig v. Williamsburgh City Fire Ins. Co., 101 N.Y. 362, 4 N.E. 745 (1886); Bishop
v. Agricultural Ins. Co., 130 N.Y. 488, 29 N.E. 844 (1882).
Hailey v. Auto-owners Ins. Co., 181 N.C. App. 677, 640 S.E.2d 849 (2007); see also
200 Leslie Condo. Assn., Inc. v. QBE Ins. Corp., 2011 WL 2470344 (S.D.Fla.).
455 American Capital Assur. Corp. v. Courtney Meadows Apartment, L.L.P., 36 So.3d 704,
35 Fla L. Weekly D802 (Fla. App. 1 Dist., 2010).
456 Amerex Group, Inc. v. Lexington Ins. Co., 678 F.3d 193 ( (L.A.2 (N.Y.) 2012).
premature where a disagreement by the parties was lacking as to the amount of loss and there was an absence of opportunity for an insurer to invoke post-loss conditions. The court asserted that such a disagreement could not be unilateral. It stated that “by the terms of the contract, it was contemplated that the parties would engage in some meaningful exchange of information sufficient for each party to arrive at a conclusion before a disagreement could exist.” It defined disagreement as “the existence of a real difference in fact, arising out of an honest effort to agree between the insured and the insurer…necessary to render operative a provision in a policy for arbitration of differences. Furthermore, there must be an actual and honest effort to reach an agreement between the parties, as it is only then that the clause for arbitration becomes operative, the remedies being successive.457
Consistently, where a factual dispute existed as to whether an insured had complied with post-loss obligations, a Florida court recently stated that, “Before a Circuit Court can compel appraisal under an insurance policy, it must make a preliminary determination as to whether the demand for
457 Garden-Aire Village South Condo. Ass’n. v. QBE Ins. Corp., 774 F.Supp.2d 1224 (2011); See also, Cypress Chase Condominium Ass’n “A” v. QBE Ins. Co., 2011 WL 1544860 (S.D. Fla. 2011) .
appraisal is ripe. ‘Until these [post-loss] conditions are met and the insurer has a reasonable opportunity to investigate and a d j u s t t h e c l a i m , t h e r e i s n o ‘disagreement’...regarding the value of the property or the amount of loss’ to be appraised”. It held that, “[o]nce the trial court determines that a demand for appraisal is ripe, the court has the discretion to control the order in which an appraisal and coverage determinations proceed.”458
A Texas court could not impose an additional condition precedent to appraisal on either party where one was not found in the policy, reasoning that the terms of the subject
insurance There, an
policy must be applied as written. insured sought to have an insurer’s
request for appraisal denied on the grounds that the insurer had not fulfilled its obligation to adequately investigate the insured’s claims as a condition precedent to demanding
CasapeprSaistaul adndyhad failed to demonstrate to the
court what was and was not disputed. The Court observed nothing in the policy to supply such a requirement and that “to make performance specifically conditional, a term such as ‘if’, ‘provided that’, ‘on condition that’, or some similar phrase of conditional language
458 Citizens Prop. Ins. Corp. v. Admiralty House, Inc., 66 So.3d 342 (2011).
must normally be included.” 459
Many courts have been guided by the reasonableness of the timing of the demand under the circumstances of the case and whether the insured has been prejudiced as a result of the passage of time.460 These cases have often required an appraisal to go forward even after the commencement of litigation, where the insured has not been put to substantial expense, or forced to confront significant delay in the claims process. An additional factor considered was that an insignificant amount of time had passed between the conclusion of good faith negotiations and the commencement of suit.461
In Butler v. Property and Casualty Ins. Co. of Hartford, the court found that the insurer did not first have to prove that it conducted an adequate investigation as a condition precedent to invoking appraisal.462 As there was nothing in the insurance policy that required that kind of exercise as a condition precedent to appraisal, the court determined
459 Butler v. Prop. and Cas. Ins. Co. of Hartford, 2011 WL 2174965(S.D. Tex. 2011), citing Criswell v. European Crossroads Shopping Center, Ltd., 792 S.W.2d 945, 948 (Tex. 1990). 460 School District Number 1 v. Globe and Republic Ins. Co., 146 Mont. 208, 404 P.2d 889 (1965); Kester v. State Farm Fire and Cas. Co.,, 726 F.Supp. 1015 (E.D. Pa. 1989); Monroe Guar. Ins. Co. v. Backstage, Inc., 537 N.E.2d 528 (Ind. App. 3d Dist. 1989); Hanby v. Maryland Cas. Co., 265 A.2d 28 (Del. 1970).
461 Terra Ind., Inc. v. Commonwealth Ins. Co. of America, 981 F.Supp. 581 (N.D. Iowa
1997).
462 2011 WL 2174965 (S.D.Tex.).
that appraisal could be invoked at any time after disagreement about the amount of loss occurred.
The court in the Texas case, EDM Office Services, Inc. v. Hartford Lloyds Ins. Co.,463 held that the insurer did not waive its right to invoke appraisal even if it did not comply with the “Claims Handling” provisions of the policy as compliance with such provisions is not a condition precedent to commencing the appraisal process. The court found no waiver because the appraisal provision did not use conditional language and the insured did not identify any provision showing that the parties intended the insurer full comply with the “Claims Handling” provisions before seeking appraisal.
This issue was dealt with similarly in Dike v. Valley Forge Ins. Co.464 In that case, the insured argued that Valley Forge could not demand appraisal because it failed to conduct a reasonable investigation of his claims, which the insured asserted was a condition precedent to invoking appraisal. The court determined that, even assuming the insurer failed to comply with the “Claims Handling” provisions of the insurance policy, it would not
463 2011 WL 2619069 (S.D.Tex. 2011).
464 Dike v. Valley Forge Ins. Co.,797 F.Supp.2d 177, 2011 WL 2517270 (S.D.Tex. 2011).
prevent the insurer from seeking appraisal as “compliance with the “Claims Handling” provisions...[is] not a condition precedent to exercising appraisal rights.”
Where an appraisal has not become impossible or impracticable due to the passage of time, it has been held that even where the insurer had waited 13 months after the loss and 4 months after the litigation was commenced to demand an appraisal, that the demand was still reasonable under the circumstances. This is particularly so where there is no claim that the insurer thwarted the possibility of having an earlier appraisal performed.465
An insurer in Florida was deemed to have promptly invoked its right to appraisal pursuant to the policy when it filed a motion to compel appraisal after the parties had neither extensively litigated nor engaged in extensive discovery. Florida law provides that “the right to an appraisal may be waived if a party maintains a position inconsistent with the appraisal remedy.” In the instant action, the Court conceded that while the appraisal process could have been invoked by the insurer earlier in the dispute, such an action was not required by the appraisal clause prior
465 Peck v. Planet Ins. Co., 1994 WL 381544 (S.D.N.Y. 1994).
to suit or even at any particular time. Thus, the insurer’s conduct was not inconsistent with appraisal to the extent of demonstrating waiver of the right.466
Contrary circumstances were illustrated in Florida, where the Court examined waiver of the right to appraisal in the context of a time delay in exercising this right. In that case, plaintiff sought to stay litigation and require the parties to proceed to an appraisal after having “actively and vigorously litigated” an action and incurred steep fees and costs in doing so.
The court found it to be unexplained why plaintiff had not filed a petition to compel appraisal earlier in the case. In citing the rule that “a party that fails to seek appraisal within a reasonable time after the commencement of litigation waives its appraisal right by acting inconsistently with that right,” the court in this matter was “hard pressed to imagine a situation where a party acts more inconsistently with the right to seek an appraisal.”467
Where the insurance policy does not
466 The Bullard Bldg. Condo Ass’n, Inc. v. Travelers Property. Cas. Co. of America, 2006 WL 2787850 (M.D. Fla. 2006).
467 Summit Towers Condominium Ass’n, Inc. v. QBE Ins. Corp., 2012 WL 1288735 at *1
(S.D. Fla. 2012); See also, ARI Mut. Ins. Co. v. Hogen, 734 So.2d 574 (Fla.3d DCA 1999)(a trial court erred by granting an insured’s motion to compel appraisal, where it was “apparent that [the insured] aggressively litigated this cause below and that such action over a nine- month period prejudiced the insurance company by resulting legal fees and costs that could have otherwise been avoided had [the insured] elected appraisal initially.”).
specify a time limit for an appraisal demand, the court must determine whether a demand was exercised within a reasonable period of time depending upon the particular facts of the case. In S.R. International Business Ins. Co., Ltd. v. World Trade Center Properties, LLC,468 it was stated that, though New York courts, unlike others, do not appear to have explicitly cited particular factors as “decisive” in determining the reasonableness of the demand, the following three factors are usually relevant: (i) whether the appraisal sought is impractical or
Case Stuimdpyossible (that is, whether granting an insurer’s
appraisal demand would result in prejudice to the insured party); (ii) whether the party engaged in good-faith negotiations over valuation of the loss prior to the appraisal demand; and (iii) whether an appraisal is desirable or necessary under the circumstances.469
In Mississippi, an insured’s request for appraisal made almost five years after a loss was untimely and could not “circumvent the running of the statute of limitations.” In a case
where a Mississippi court examined the timeliness of the appraisal process where
468 2004 Wl 2979790 (S.D.N.Y. 2004).
469 See Peck, 1994 WL 381544 (S.D.N.Y. 1994); Kester v. State Farm Fire & Cas. Co., 726 F.Supp. 1015, 1019-20 (E.D. Pa. 1989) (“[T]he circumstances which have proven to be most decisive are two; prejudice resulting from the delay and the breakdown of good-faith negotiations concerning the amount of the loss suffered by the insured.” (citations omitted)).
a praisal, a condition precedent to filing a l wsuit in the state, was not demanded until
a ter the time to bring suit had passed, general
c ntract principles were relied upon. Although
the appraisal provision was silent as to the time
i which a request must be brought, the Court n ted that “where no time is specified for p rformance of a contractual obligation, the c urts will require that the obligation be p rformed within a ‘reasonable’ time.” It f rther cited the law of Washington state to aid i its consideration of reasonableness:
“ [w]hether a demand for appraisal has been m de within a reasonable time depends upon the circumstances of the case…[including the
t o main factors of] prejudice resulting from
the delay, and the breakdown of good-faith
n gotiations concerning the amount of loss.’”
Finally, the court considered the objective of an insurance policy’s appraisal provision. It held that the provision “provides a contractual avenue in which the parties to an insurance contract can resolve their differences short of litigation…[it] was not intended to extend, and does not extend, the time an insured could bring suit over such claims. Indeed, any such provision would be unenforceable, as Mississippi law prevents any attempts to lengthen or shorten a statute of limitations by
contract.”470
In one New York matter, the Court considered the timeliness of an insurer’s demand for appraisal made after litigation had commenced. Its analysis was based upon whether the delay in making the demand was reasonable in light of the state’s longstanding rule, that even where there is no policy- mandated time limit the right to seek appraisal “‘is not indefinite as to time, but must be exercised within a reasonable period.’” The Court stated the determination of reasonableness must be made depending on particular facts of a case. The state of New York does not readily infer waiver of the right to demand appraisal and has acknowledged the favorability of such a means of resolution. In evaluating the circumstances before it, the Court did an analysis of the aforementioned three factors. It ultimately concluded the insurer’s appraisal demand was timely and the insurer did not waive its right to seek appraisal. The Court observed no resulting prejudice to the non-demanding party because of the delay, clarifying that the first factor must be considered when the demand is made and without the benefit of further knowledge of
470Greater Trueway Apostolic Church v. Church Mut. Ins. Co., 2012 WL 1143947 (S.D. Miss., 2012), citing Keesling v. Western Fire Ins. Co. of Fort Scott Kan., 520 P.2d 622 (Wash. Ct. App. 1974).
how the appraisal would play out. The fact that the insurer had made a settlement offer while mediation was ongoing and prior to litigation indicated continuing negotiations at the time the action was commenced by the insured, satisfying the second factor. Finally, in finding the third factor was met the Court explained this inquiry to include factors such as “whether the appraisal is likely to facilitate a speedier resolution of the dispute than would occur in the District Court proceeding,” “the expected expertise of an appraisal panel in making its valuation determinations” and “the complexity of the valuation.”471
In a Texas case it was held that the trial court abused its discretion in striking a demand for appraisal where the carrier failed to demand appraisal until litigation had incepted.472 In this matter, the carrier had made numerous payments in consideration of the claim over a period of months but terminated its claims administrator and demanded the right to reinspect with a new claims administrator. The insured resisted these efforts whereupon the insured made a policy limits settlement demand to the carrier. Five days later, the insured filed suit against the carrier whereupon during discovery, the carrier
Amerex Group, Inc. v. Lexington Ins. Co., 678 F.3d 193 (L.A.2 (N.Y.) 2012), citing Chainless Cycle Mfg. Co. v. Sec. Ins. Co., 169 N.Y. 304, 310, 62 N.E. 392 (1901).
In re Clarendon Ins. Co., 2004 WL 2984916 (Tex. App.-Ft. Worth 2004).
served a demand for appraisal upon the insured. On these facts, the Texas court held that the carrier had not waived its right for compliance with policy provisions such as the proof of loss requirement, the right to reinspect or the right to appraisal and reversed the trial court sending the matter to appraisal.
Texas courts have also held that although the appraisal clause may be permissive in nature, the underlying action must still be abated pending the outcome of the appraisal process. In Butler, the court found that abatement of the entire case pending appraisal was appropriate in the interest of the efficient and inexpensive administration of justice. The court commented that the insured will have suffered no prejudice by abating the proceeding if she prevailed in the appraisal process, as her claims will still remain intact.473
In a Texas case, the Court found it proper for a trial court to refuse to abate litigation proceedings while the appraisal process goes forward. In In re Cypress Texas Lloyds,474 Cypress petitioned the Court of Appeals to compel the trial judge to abate the underlying proceedings until an appraisal to determine
See Butler v. Prop. and Cas. Ins. Co. of Hartford, 2011 WL 2174965 (S.D.Tex. 2011).
2011 WL 2650724 (Tex.App.-Houston [14 Dist.] 2011); In re Universal Und. of Texas
Ins. Co., 2011 WL 1713278, * 7 b. 5 (Tex., 2011); In re Liberty Mut. Group, Inc., 2011 WL
2149482 (Tex.App.-Houston [14 Dist.] 2011).
the amount of completed. In
the covered loss had been denying the requested relief,
the court held that under Texas law, litigation proceedings need not be abated while the appraisal goes forward.
The Texas Court of Appeals has
confirmed that “while trial courts have some
discretion as to the timing of an appraisal, they have no discretion to ignore a valid appraisal clause entirely.” While the time period may be instructive in interpreting the parties’ intentions, it alone is not the standard by which courts determine the reasonableness of delay.475
However, in a Wisconsin case, the court stated that “[A]n insurance company may not demand an appraisal of loss after the commencement of an action by the insured when the insurance company failed to demand the appraisal prior to the lawsuit even though it had the opportunity to do so,”476 though even this court recognized that other courts have disagreed with this conclusion.477
In re Guideone Mut. Ins. Co., 2013 WL 257371 (Tex.App.-Beaumont 2013).
Lynch v. American Family Mut. Ins. Co., 163 Wis.2d 1003, 1008, 473 N.W.2d 515, 517
(1991).
Id., citing Hanby v. Maryland Cas. Co., 265 A.2d 28 (Del. 1970) (affirming the trial
court’s decision to stay proceedings until completion of the appraisal process); School District, 146 Mont. 208 (appraisal may be demanded after suit was commenced as long as demand was made within a reasonable time); United States Fire Ins. Co. v. Franko, 443 So.2d 170, 171-72 (Fla. 1st DCA1983) (plaintiff’s failure to submit to the appraisal process demanded after the complaint was filed warranted dismissal of the lawsuit).
In Maine, the United States Court of Appeals, First Circuit, stated that while a mechanical rule embracing all possible cases is not possible or appropriate, it is sufficient to state that by waiting until after discovery had been completed and the long-scheduled trial date had almost arrived, that the carrier did unduly delay invoking the appraisal clause. The required elements which must be established in order to prove a waiver of the right to demand appraisal are the components of undue delay plus a modicum of prejudice to the other side.478
In Alabama, the court declared a policy void and determined no coverage existed where the insured had made intentional, material misrepresentations in asserting a claim for hurricane damage. This was in light of policy language that voided coverage if the insured “intentionally conceal[ed] or misrepresent[ed] a material fact concerning the claim”. Ultimately, the court determined that the insurer was within its right to perform this investigation of the claim before pursuing appraisal, and granted the insurer a declaratory judgment stating that the issued policy was void and coverage nonexistent.479
Rankin v. Allstate Ins. Co., 336 F.3d 8 (1st Circ. Conn. 2003).
Scottsdale Ins. Co. v. Prayer Tabernacle Early Church of Jesus Christ, 2011 WL 3320544 (S.D. Ala. 2011).
A demand for appraisal was deemed untimely and thus a provision was rendered unenforceable in a decision in which requirements for timeliness were explored in Louisiana. The court asserted that a "critical factor" in evaluating timeliness is when a dispute surrounding an amount of loss arose, and noted that where there was no contractual guidance as to when appraisal must be invoked, then it must be done within a reasonable time following the dispute. The Court looked to other state decisions to further define this reasonableness requirement, and confirmed that the timing of the demand should be consistent with the subject policy’s Loss Payment Provision. In this particular case, an insurer's request was held untimely because it had not provided insureds with notice of its intent to request appraisal within 30 days from when the proof of loss was submitted as required.480
In Louisiana, an insurer’s demand for appraisal and request for a stay of litigation made just weeks before trial was determined to be unreasonable and untimely.481
In Georgia, specific performance of an appraisal provision was not warranted where
Triple K, Inc. v. Century Surety Co., 2010 WL 3418237 (E.D.La. 2010).
Dwyer v. Fidelity Nat.l Prop. Ins. Co., 2007 WL 1063266 (E.D. La. 2007).
more than a year had passed from the date of loss. Although the provision did not contain a time limit, under those circumstances the Court found that a policy term barring an action against an insurer unless it was brought within one year from the date of loss, prohibited an
Case Stuindsuyred’s suit for damages and appraisal
enforcement.482
However, appraisal demanded within
two months of the onset of litigation was
considered “timely”. 483
In Alabama, the court found prejudicial delay in seeking an appraisal where an insured received compensation for a loss from its insurance company and subsequently requested appraisal upon determination of additional damage. There, the insured waited until 15 months after the claim was paid and damaged property had been fully repaired to seek appraisal of the damaged property. The court deemed the issue to be “not whether any
disagreement exists but whether a disagreement was manifested so as to warrant invocation of the appraisal clause of the insurance policy, or in the alternative, whether [the insured’s] waiting until after the repairs had been made and after the claim had been
Aaron v. Georgia Farm Bureau Mut. Ins. Co., 297 Ga. App.403, 677 S.E.2d 419 (Ga. App. 2009).
Newman v. Lexington Ins. Co., 2007 WL 1063578 (E.D. La. 2007).
p id in full to express any discontent
whatsoever with the amount of the loss assessed by [the insurer] constituted a waiver of his right to seek an appraisal of the damage.” The court found that such a delay was so prejudicial to the insurer that it constituted the insured’s waiver of its right to appraisal.484 One would reasonably wonder if the result would be different in the absence of such prejudice.
Prejudicial delay was further found where insureds failed to provide timely notice to their insurer of a supplemental claim in Alabama. Under those circumstances, insureds submitted their supplemental claim several years after payment from their insurer had been received and admitted that relevant damage had been repaired more than two years prior. There, it was not sufficiently demonstrated that their supplemental claim was within the confines of coverage.485
An insurer’s nine-day delay in invoking appraisal following a dispute was deemed reasonable by a court in Louisiana, where the applicable appraisal provision contained no specified deadline. However, the Court clarified that in the absence of such a
Jadick v. Nationwide Prop. and Ins. Co., 2011 Ala. Civ. App. LEXIS 357 (Ala. App. 2011).
Id.
deadline, appraisal must still be invoked within a reasonable time after a dispute arises.486
In a claim arising out of the World Trade Center attack, it was held that appraisal may no longer be practical where a delay in demanding the appraisal has resulted in the removal, destruction or repair of the damaged property. Plaintiff had sought recovery for property damage and loss of business income in the aftermath of the September 11, 2001 disaster. After litigation had commenced, the carrier contended it was entitled to appraisal under the policy. Citing Chainless Cycle Mfg. Co. v. Security Ins. Co.487 and Peck v. Planet Ins. Co.488 for the proposition that under New York law, the right of appraisal must be exercised within a reasonable period.489
However, in another case arising out of the World Trade Center attack, it was held that where multiple carriers insured the same risk, and an appraisal incepted between the insured and certain insurers, that an additional insurer that had resisted the appraisal while coverage issues were being resolved by the court, had not waived participation by virtue of
Beasley v. GeoVera Specialty Ins. Co., 2013 WL 3187289 (E.D. La. 2013).
Chainless Cycle Mfg. Co., 169 N.Y. 304.
488 Peck v. Planet, 1994 WL 381544 (S.D.N.Y. 1994).
Indian Chef, Inc. v. Fire & Cas. Ins. Co. of Connecticut., 2003 WL 329054 (S.D.N.Y.
2003).
its delay despite the absence of ongoing negotiations where there was no showing made of prejudice, impossibility or impracticality arising from the demand. This was particularly so, where the carrier conceded its willingness to participate in the appraisal on the same terms of the other appraising insurers and be subject to the same policy form.490
A Florida court found that an insurer did not invoke its right to appraisal in a timely manner where parties, through their adjusters, agreed on the amount of loss. There, the appraisal provision in the subject policy allowed the parties to agree on such an issue and was applicable only if the parties (or their adjusters) disputed the amount of loss. In that case the parties’ adjusters had mutually agreed on this point, rendering the demand for appraisal too late.491
The demand for appraisal is not a weapon of attack, but of defense, and accordingly, in order to use it, a party must give reasonable notice of the intention to demand appraisal. The failure to give reasonable and timely notice is evidence of a waiver,
S.R. International Business Ins. Co., Ltd. v. World Trade Center Properties, LLC, 2004 WL 2979790 (S.D.N.Y. 2004).
Bankers Security Ins. Co. v. Brady, 765 So.2d 870 (Fla.5th DCA 2000).
depending on the circumstances of the particular claim. This is especially true where the insured detrimentally relied on the insurer's failure to demand appraisal.492
Where the company waited until after the expiration of 60 days from the filing of a proof of loss, it was held to have waived the right to appraisal.493
The parties do not have an absolute right to wait until the last moment during the 60 day period before the loss becomes payable under the policy, only then to demand the appraisal, but the demand must be made in a reasonable time, depending on the facts of the case.494
Although an Ontario decision recognized the existence of a “reasonable limitation” on the right to appraisal as provided by statutory condition 11 of The Insurance Act allowing for appraisal, it refused to define this limitation under other statutory terms requiring that the loss be payable within 60 days of completion of the proof of loss unless otherwise provided in
Chainless Cycle Mfg. Co., 169 N.Y. 304.
Winchester v. North British Ins. Co. of London and Edinburgh, 160 Cal. 1, 116 P. 63
(1911); Bear v. New Jersey Ins. Co., 138 Fla. 298, 189 So. 252 ( 1939); School District,
146 Mont 208; Nguyen v. St. Paul Travelers Ins. Co., 2007 WL 1672504 (E.D. La. 2007) (insurer’s failure to demand appraisal within 60 days of receipt of satisfactory proof of loss rendered demand untimely).
Langsner v. German Alliance Ins. Co., 67 Misc. 411, 123 N.Y.S. 144 (1910).
the policy (statutory condition 12). It clarified that appraisal was not a condition precedent to commencing that action. The Court reasoned that “[w]hile it is clear that statutory condition 11 limits the time before which an appraisal can be sought, it does not...impose a limitation beyond which an appraisal can be sought. Had such a limitation been intended, it could easily have been specified.” Further, the condition’s terms showed a legislative intent that a loss determination be resolved by appraisal before recovery on the contract could take place.495
In a large and complex claim, the presentation of a proof of loss denoted as “preliminary” was held not to trigger the obligation to demand appraisal within the time provided for payment of claims under the terms of the policy.496
Where the carrier has reason to believe that additional evidence of damage will be presented subsequent to the presentment of a preliminary proof of loss, such a filing appears not to start the clock running for a demand for appraisal.
Sadema Lumber Products Ltd. v. Hanover Ins. Co., (1981) O.J. No. 228, (1981) I.L.R. 279, (1981) I.L.R.1-1381, 8 A.C.W.S. (2d) 300, 1981 CarswellOnt 672 ; The Insurance Act;
R.S.O. 1970, c. 224, s. 102 and s.122.
S.R. International Bus. Ins. Co. Ltd. v. World Trade Center Properties, LLC, 2004 WL
2979790 (S.D.N.Y. 2004).
What constitutes a reasonable time to demand appraisal depends on all the surrounding circumstances and where the circumstances are complex, thirty days was held not to be a reasonable time for the insurers to review the insured’s claim and determine whether an appraisal was appropriate, particularly where the proof presented was identified as “preliminary.”497
In Kentucky, the court construed a pro se litigant’s response to an insurer’s motion to dismiss as a motion to compel appraisal, as the court noted that liberal construction is afforded pro se litigants.498
It has been held that although the policy does not state that the appraisal process may be invoked only after the insured has submitted proofs of loss, it does provide that a party may demand appraisal if the parties fail to agree on the amount of loss. This implies that the insured was required to fulfill their post-loss duties and make a good faith attempt to come to an agreement on the amount of loss before invoking the clause. This necessarily means that the parties would engage in some meaningful exchange of information sufficient
S.R. International Bus. Ins. Co., Ltd. v. World Trade Center Properties, LLC, 2004 WL 2979790 (S.D.N.Y. 2004).
See Bruckner v. Sentinel Ins. Co., Ltd., 2011 WL 589911 (E.D.Ky. 2011).
for each party to arrive at a conclusion before a disagreement could exist.499
However, if the carrier had waived the proof of loss requirement, a superfluous proof filed after the commencement of litigation does not reinstate the insurer’s right to demand appraisal.500
The disagreement necessary to trigger appraisal cannot be unilateral in that the clause contemplates some meaningful exchange of information sufficient for each party to arrive at a conclusion before a disagreement can exist.501
This issue was highlighted in a Florida case in which the insured demanded an appraisal before providing notice to the insurer that it disagreed with the insurer’s position on the amount of loss, and thus, before there was the requisite disagreement between the parties. The court held that the insured’s appraisal request was premature as the insurer was not given the opportunity to invoke the post-loss conditions in the policies, much less assert disagreement with the insured. As the court determined that the insured was attempting to
Tavilla v. Employer Mut. Cas. Ins. Co., 2008 WL 2154800 (Ariz. App. Div.1 2008).
Williams v. Southern General Ins. Co., 440 S.E.2d 753 (Ga. Ct. App. 1994).
501 Hailey v. Auto-owners Ins. Co., 181 N.C. App. 677, 640 S.E.2d 849 (2007).
unilaterally create a disagreement, the insured could not yet compel appraisal.502
It should be noted that where there had been a continuation of good faith negotiations as to the amount of loss, and where the insured was not handicapped by the insurer’s delay in demanding appraisal, the insurer’s delay until after the insured had instituted suit was not unreasonable and the parties were forced to proceed to appraisal, particularly where the loss was more than usually difficult to assess.503
A Federal District Court sitting in the
Northern District of Iowa has held that as the appraisal clause lacks a specific time for the demand to be made, contract interpretation requires a demand to be made within a “reasonable time. In Terra Industries, Inc.,”504 the court was confronted with the occurrence of a catastrophic explosion at the insured’s ferti l i zer plan t wh i c h caused an unprecedented amount of damage. After more than two years of investigation and discussion concerning quantification of the damage, the insured commenced litigation, followed six days later by the submission of a final proof of loss. Several months later, during
502 Garden-Aire Village South Condo Ass’n Inc. v. QBE Ins. Corp., 774 F.Supp.2d 1224 (S.D.Fla. 2011).
503 School District No. 1 of Silver Bow County, 146 Mont. 208 (1965).
504 981 F.Supp. 581 (N.D. Iowa 1997).
motion practice, the insurer demanded appraisal. In concluding that the insurer had waived its right to demand an appraisal, the court relied on the language of the appraisal provision itself in concluding that the carrier’s actions were unreasonable. The insurance policy under consideration, as most insurance policies, requires an appraisal demand to be made when “the insured and the company shall fail to agree as to the actual cash value of the amount of loss.” While the clause lacks a specific time constraint requiring the demand be made within a particular amount of time, rules of construction require that such a demand be made within “a reasonable period of time”.505
The question of what constitutes a
Id. at 597; See also, Middlesex Mut. Assur. Co. v. Clinton, 38 Conn. App. 555, 569, 662 A.2d 1319, 1327 (1995) (insurer waived its right to appraisal because of an unjustifiable delay in demanding it.); Meineke v. Twin City Fire Ins. Co., 181 Az. 576, 892 P.2d 1365 (Ariz.App.Div. 1 1995) (court investigated whether the carrier had waived appraisal by an “unreasonable delay” before making such demand); Preferred Mut. Ins. Co. v. Martinez, 643 So.2d 1101, 1102-03 (Fla. Dist. Ct. App. 1st Dist. 1994) (court considered whether the insurer unreasonably delayed making a demand for appraisal and thus waived the benefit of the provision when insurer failed to demand appraisal during lengthy negotiations prior to trial); Monroe Guar. Ins. Co. v. Backstage, Inc., 537 N.E.2d 528, 529 (Ind. Ct. App. 3d Dist. 1989) (suit had been commenced six weeks before the appraisal demand and the court considered whether the demand was made within a “reasonable time.”); Keesling v. Western Fire Ins. Co. of Fort Scott, Kansas, 10 Wash. App. 841, 847-48, 520 P.2d 622, 626-27 (1974) (the court considered whether appraisal demand made after the action was commenced was made within a “reasonable” period of time); Hanby v. Maryland Cas. Co., 265 A.2d 28 (Del. 1970); School District # 1 of Silver Bow County v. Globe Republic Ins. of America, 146 Mont. 208, 214, 404 P.2d 889, 893 (1965) (carrier’s demand must be made within a reasonable time after disagreement has arisen as to the amount of loss or is deemed waived.); Bard’s Apparel Mfg. Inc. v. Bituminous Fire & Marine Ins. Co., 849 F.2d 245 (6th Cir. 1988) (applying Tennessee law, found that carrier who waited to demand an appraisal until after the insured gave notice of intent to file suit had waived its right to appraisal).
reasonable time depends on all the surrounding circumstances. Whether or not the parties have demanded appraisal within a reasonable time is ordinarily a question to be determined by a jury which would take into consideration the specific circumstances of each case.
Appraisal becomes ripe and the time period of interest begins when the desirability or necessity of the appraisal became apparent to the party demanding it. The measure of this reasonable period of time generally should not be carried beyond the period of 60 days after the receipt of the proof of loss.506
With policies that contain such a 60 day clause, demands for appraisal made after the proofs of loss have been retained more than 3 weeks without objection, have been deemed to be too late.507 Similarly, it has been held that a demand made 59 days after proofs had been furnished508 in one matter, and five months after the proofs had been received in another matter had been too late.509 However, it was held that a delay of 7 days after termination of negotiations to settle the loss was not an unreasonable delay in making an
Springfield Fire and Marine Ins. Co. v. Hays, 57 Okla. 266, 156 P. 673 (1916).
Lion Fire Ins. Co. v. Heath, 29 Tex. Civ. App. 203, 68 S.W. 305 (1902).
Fireman’s Fund Ins. Co. v. Caye, 146 Ky. L. Rptr. 810 (1893).
American Central Ins. Co. v. Heath, 29 Tex. Civ. App. 445, 69 S.W. 235 (1902).
appraisal demand.510
Reliance upon the policy’s 60 day deadline for payment in response to a proof of loss has been rejected by some courts in establishing a time within which an appraisal must be demanded in favor of a test of reasonableness.511
It is not sufficient that the demand for appraisal was mailed within the specified time, but it must also be received by the insured within that period.512
In Scottsdale Ins. Co. v. University at 107th Avenue, Inc.,513 the University suffered hurricane damage and filed a claim. The carrier then inspected and denied the University’s claim because the carrier’s independent adjuster estimated the damages to be well below the University’s claim. When the insured demanded an appraisal, Scottsdale argued that the University had failed to provide the post-loss information required by the insurance policy and that referring the matter to appraisal was premature. The court concluded that the “nature of the insured’s
Hamilton’s Executors v. Fireman’s Ins. Co., 4 Ohio Dec. 407, 11 Ohio Dec. Reprint 784
(Sup. Ct. 1896).
Terra Ind. Inc. v. Commonwealth Ins. Co. of America, 981 F.Supp. 581 (N.D. Iowa
1997).
Winchester, 160 Cal. 1.
513 827 So.2d 1016 (Fla. 3d DCA 2002).
post-loss obligation is merely to provide the insurer with an independent means by which to determine the amount of loss as opposed to
relying solely on the representations of the
insured.”514 Under these circumstances the insurers claim that it did not have sufficient information from which to assess the claim was rejected and the demand for appraisal was held not to be premature.
However, other jurisdictions require the insured to comply with all post loss duties before the insurer must submit to appraisal. In Scottsdale Ins. Co. v. Prayer Tabernacle Early Church of Jesus Christ Number 1,515 an Alabama court held that Scottsdale did not breach its contra
policy when it failed to name its appraiser in response to an insured’s demand for appraisal.
The court held that nothing in the policy required Scottsdale to name an appraiser before it completed its investigation of the insured’s claim. Under the policy, Scottsdale had the right to require the insured to comply with all of its post loss duties before Scottsdale was required to submit to the appraisal process.
514 Id., quoting United States Fid. and Guar. Co. v. Romay, 744 So.2d 467, 471 N. 4 (Fla. 3d DCA 1999).
515 2011 WL 3320544 (S.D.Ala.2011)
In Florida, it was held that an insured was not entitled to an appraisal of its claim for hurricane damage until after it satisfied its obligations to provide the insurer with various documents and to provided the insurer’s loss consultant with access to the damaged property.516 The court determined that the insurer must be given a reasonable opportunity to investigate and adjust the claim before any disagreement regarding the value of the property or the amount of loss could arise. Appraisal is only warranted when there is a real difference in fact, arising out of an actual and honest effort to reach an agreement between the insured and the insurer.517
Additionally, it has been held that where a fire policy required a demand for appraisal to be made by the insurer within 90 days after submission of a proof of loss, a notice mailed within 90 days but received on the 91st day was too late.518
A Florida insurer had substantially complied with an appraisal provision requiring identification of an appraiser within 20 days of the date an appraisal demand was received
Citizens Property Ins. Corp. v. Galeria Villas Condominium Ass’n Inc., 48 So.3d 188 (Fla.3d DCA 2010).
Id.
Covey v. National Union Fire Ins. Co. of Pittsburgh, 31 Cal. App. 579, 161 P. 35 (3d Dist. 1915).
by the other party. The insured contended that the insurer should have notified him within 20 days of filing its initial motion to compel appraisal or when the hearing was held on this motion, and believed the insurer had identified its appraiser one day late. However, the court did not find the carrier’s conduct to be “so inconsistent with the time provided for notification under the policy that its failure to so act constituted a waiver.” Further, the insurer had the right to wait for a court to issue a written order.519
The prevailing New York view states that an appraisal must be demanded within a reasonable time and that it is usually too late to demand an appraisal after the time for the payment of loss following submission of proofs has expired.520
It has been held that “elapsed time” does not in itself make a demand unreasonable under the circumstances, and appraisal may even be demanded after litigation has commenced if the circumstances make it appropriate.521
Diaz v. Am. Bankers Ins. Co. of Florida, 662 So.2d 416 (Fla.3d DCA 1995).
Max Gwertzman, A Legal Analysis of the Appraisal Agreement, Roberts Publishing
Corp., 4th ed. 1972.
Chainless Cycle Mfg. Co. v. Security Ins. Co., 169 N.Y. 304, 62 N.E. 392 (1901); Peck
v. Planet Ins. Co., 1994 WL 381544 (S.D.N.Y. 1994).
The carrier would be deemed to have waived its right to an appraisal where it delayed demanding an appraisal until after a portion of the damaged property had been sold, making the appraisal impossible.522
Little judicial support can be found for the proposition that the filing of a lawsuit necessarily cuts off recourse to the appraisal process,523 though several cases have stated a contrary position.524
It has been held that the insurer had waived the appraisal provision when it first requested appraisal 23 months after receiving notice of plaintiff’s loss. In Hodges v. Pennsylvania Miller’s Mut. Ins. Co.,525 the court considered the circumstances of the case including the fact that a trial date had actually been set and concluded that the insurer’s request was untimely and did not bar plaintiff’s claim in litigation.
Chainless Cycle, Id.
Terra Ind. Inc., 981 F.Supp. 581; Clinton, 38 Conn. App. 555; Meineke, 181 Az. 576;
Martinez, 643 So.2d 1101, 1102-03; Backstage, Inc., 537 N.E.2d 528, 529; Keesling, 10
Wash. App. 841, 847-48 (Wash. Ct. App. 1974); Hanby, 265 A.2d 28; School District, 146
Mont. 208, 214; Bard’s Apparel, 849 F.2d 245.
Littrell v. Allemania Fire Ins. Co. of Pittsburgh, Pa., 222 A.D. 302, 226 N.Y.S.343 (3d
Dept. 1928), modified on other grounds, 224 A.D. 523, 231 N.Y.S. 520 (3d Dept. 1928)
rev’d on other grounds, 250 N.Y. 628, 166 N.E. 350 (1929); Davis v. Imperial Ins. Co., 16
Wash. 241, 47 P. 439 (1896); Hayes v. Allstate Ins. Co., 722 F.2d 1332, 1335 (7th Cir.
1983); But see, Backstage, Inc., 537 N.E.2d 528.
525 449 Pa. Super. 341, 673 A.2d 973, 975 (1996).
In Michigan, it has been held that appraisal was appropriate and no accord and satisfaction had occurred where an insurer, in allegedly attempting to settle a business income claim, did not write “final payment” on the check to the insured or provide an accompanying letter indicating the check was a final payment or settlement of the business income claim. Thus, because there was no proof that the matter had in fact been settled, the insurer had no defense to the insured’s motion for an order to compel appraisal.526
King v. Hartford Cas. Ins. Co., 2010 WL 5390135 (E.D.Mich., 2010).
Responding To The Demand For Appraisal
Once appraisal is demanded, the party upon whom the appraisal demand has been served generally has 20 days within which to
SABAre!spond by appointing anappraiser.
Where the policy or statute does not set a time limit for a response, a response is required within a reasonable time.527 The failure to respond within a reasonable period of time is a material breach of the policy.528 In Saxena v. New York Property Insurance Und. Ass’n.529 for example, one year was held to be too long to wait before responding to a demand for appraisal.
Where a party to the policy fails to respond to a demand within 20 days, it has been held that the demanding party may proceed to court for the appointment of an umpire whereupon an agreement between the umpire and the single appraiser would properly resolve the loss.530
In Smith v. Civil Service Employee’s Ins.
Saxena v. New York Property Ins. Und. Ass’n., 232 A.D.2d 622, 648 N.Y.S.2d 689 (2d
Dept. 1996).
Id.; Chainless Cycle, 169 N.Y. 304.
Id.
Saba v. Homeland Ins. Co. of America, 159 Ohio St. 237, 112 N.E.2d 1 (1953).
No. 33217
Supreme Court of Ohio
Saba v. Homeland Ins. Co. of America
159 Ohio St. 237 (Ohio 1953) • 112 N.E.2d 1
Decided Apr 22, 1953
Weygandt, C.J.
Each of the four policies contains the following provisions:
"Appraisal. 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 *239 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. * * *
"Suit. No suit or action on this policy for the recovery of any claim shall be sustainable in any court of law or equity unless all the requirements of this policy shall have been complied with, and unless commenced within twelve months next after inception of the loss."
The parties were unable to agree on the amount of the loss. Acting under the appraisal clause, the plaintiff made a written demand on the defendants for an appraisal, and he notified them of the appraiser he had selected. The defendants ignored the notice. After waiting the stipulated period of twenty days, the plaintiff asked the defendants the name of the appraiser they had chosen. They informed the plaintiff that they had selected none and would take no such action. The plaintiff then waited the further required period of fifteen days before filing his motion for the appointment of an umpire by the Court of Probate. After the umpire was appointed, he and the plaintiff's appraiser duly made an award. Subsequently an action thereon was instituted in the Court of Common Pleas and later removed to the federal trial court.
The defendants in the instant case contend that the appraisal provisions are binding on the plaintiff insured but not on themselves as insurers. They urge that the provisions are revocable by themselves but not by the plaintiff insured.
The above quoted language of the policies is in part that "in case the insured and this company shall fail to agree as to the actual cash value or the amount of the 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 *240 twenty days of such demand." (Italics supplied.) This provision is not an involved one, the words are simple, and the
Saba v. Homeland Ins. Co. of America 112 N.E.2d 1 (Ohio 1953)
meaning is clear. Appraisers are to be selected on the demand of either party. In none of the policies is there the slightest intimation that the selection is to be made on the demand of the insurer and not on the demand of the insured. If this were the import of the provision, there could be no excuse for the use of the word "either."
This view is sustained by the succeeding word "each." There is no suggestion that the insured alone shall select an appraiser on demand. As indicated by Ballentine's Law Dictionary, the obvious meaning of the word "each" is "every one of the two or more comprising the whole."
Nor is there doubt about the use of the next succeeding word "shall." It clearly is employed in its ordinary mandatory sense. Furthermore, there is nothing in the context to warrant an inference that the word is used in a mandatory sense as to the insured alone and not as to the insurer. The provisions are not revocable by either.
Hence, unless these words are held to signify the exact opposite of their obvious meaning, the appraisers must be selected when demanded by the insured or by the insurer.
Many decisions are cited in the briefs for the purpose of assisting in the interpretation of these appraisal provisions. However, it is not necessary to interpret language that is simple and unambiguous. The rule with reference to such appraisal provisions is summarized as follows in 45 Corpus Juris Secundum, 1353, Section 1110:
"Their purpose is to provide a plain, speedy, inexpensive and just determination of the extent of the loss, and
insured has the right to have the amount of *241 the loss settled as provided in the arbitration clause of his policy even though insurer denies liability or refuses to participate in the arbitration. The clause does not require the parties to do anything but appoint their appraisers, notify them and hand them the policy."
In the case of Fire Association of Philadelphia v. Agresta, 115 Ohio St. 426, 154 N.E. 723, a different question was involved but the policy contained provisions similar to those in the present policies. In the discussion in the opinion, it was observed that the provisions were applicable alike to both the insurer and the insured.
The defendants insist further that if they refuse to select an appraiser, the plaintiff has no recourse except to file suits on his policies.
This is equivalent to telling the plaintiff that, although he paid a premium for policies containing the advantage of the appraisal provisions, he in fact received nothing therefor, and that the sole result of the insertion of the appraisal provisions in the policies was that the defendants gave themselves the advantageous right to compel the plaintiff to select an appraiser before he could sue on the policies. Hence, under this theory the appraisal provisions were a detriment instead of a benefit to the plaintiff, inasmuch as even without the appraisal provisions he, of course, had the right to sue. The plaintiff was led to believe that he was purchasing policies giving him the right to an appraisal and a prompt settlement of his loss so he would have the insurance money with which to reconstruct his building without the expense and delay incident to litigation. Obviously this is a valuable right which he should not be denied. The failure and refusal of the defendants to select an appraiser as
required by the provisions of the policies *242 constituted a failure to agree on an umpire just as effectively as if they had selected an appraiser and instructed him not to agree on an umpire. Under these circumstances the plaintiff was authorized to request the court to select such umpire.
That this view of the policy provisions is consistent with the legislative policy of this state is demonstrated by the provisions of Section 12148-1 et seq., General Code, to the effect that such arbitration provisions in a written contract "shall be valid, irrevocable and enforceable." Section 12148-4, General Code, reads as follows:
Saba v. Homeland Ins. Co. of America 112 N.E.2d 1 (Ohio 1953)
"If, in the agreement, provision be made for a method of naming or appointing an arbitrator or arbitrators or an umpire, such method shall be followed; but if no method be provided therein, or if a method be provided and any party thereto shall fail to avail himself of such method, or if for any other reason there shall be a lapse in the naming of an arbitrator or arbitrators or an umpire, or in filling a vacancy, then upon the application of either party to the controversy the Court of Common Pleas in and for the county in which the arbitration is to be held shall, within fifteen (15) days after such application is made, designate and appoint an arbitrator or arbitrators or umpire, as the case may require, who shall act under the said agreement with the same force and effect as if he or they had been specifically named therein; and, unless otherwise provided in the agreement, the arbitration shall be by a single arbitrator."
It is a further contention of the defendants that the appraisal provisions are separate and not a part of the insurance policies. A study of the policies discloses no basis whatsoever for this view. The appraisal provisions
are an integral part of the body of each policy precisely the same as every other paragraph. *243 Were there doubt as to this, the elementary rule of construction would require that the ambiguity be resolved in favor of the plaintiff and against the defendants, since the language is that of the defendant insurers.
Like the lower courts, this court can discover no reason for holding the plaintiff to the agreement but excusing the defendants from their obligations under the plain, inescapable language they themselves chose to use when they sold the policies to the plaintiff. The Court of Probate was not in error in appointing an umpire to serve in conformity with the provisions of the policies.
Judgment affirmed.
MIDDLETON, TAFT, ZIMMERMAN and STEWART, JJ., concur.
MATTHIAS and HART, JJ., dissent.
MATTHIAS, J., dissenting.
The insurers, desiring that the amount of the loss in question be determined by a jury in an action on the policies, refused to appoint an appraiser or participate in an appraisal. The only question of law presented is the consequence of such negative action of the insurers.
In the situation disclosed, was the order of the Probate Court appointing an umpire valid, and are the insurers precluded by the appraisal and award made by the appraiser selected by the insured and the umpire appointed by the Probate Court?
It is the contention of the insurers that the insured's demand for an appraisal does not make such proceeding mandatory and thus deprive the insurers of the option of having the amount of the fire loss determined by a jury in an action on the policies.
The provision of the policies, giving rise to the controversy, *244 is contained in the so-called standard form policy long used throughout the United States, but diligence of counsel has failed to disclose a decision of any court of last resort of the question clearly presented in the instant case.
Notwithstanding the mandatory language employed, which is emphasized in the majority opinion, the fact must be recognized that, although it is expressely provided that no suit on the policies may be sustained unless all requirements thereof shall have been complied with, such condition is applicable only to the insured, and there is no express provision authorizing an action based on the appraisal and award as made herein, such proceeding being predicated upon the refusal of the insurers to participate in such appraisal.
Saba v. Homeland Ins. Co. of America 112 N.E.2d 1 (Ohio 1953)
With the exception of a Minnesota Supreme Court decision, applying a specific statutory provision of that state which prescribes the procedure to be followed, we find no authority contrary to the principle, generally adopted and applied, that the waiver of the appraisal provision of a policy by the insurer, whether resulting from inaction or by express refusal to participate in such appraisement, should be accorded no effect or consequence other than the authorization of immediate suit on the policy by the insured.
The judgment should be reversed.
HART, J., dissenting.
I dissent because, in my opinion, the remedy afforded to the plaintiff by the Probate Court and now finally approved by the majority opinion in this court is not legally available to him.
"At common law the authority of an arbitrator is, in its nature, revocable, and the general rule is that a naked
executory agreement, not under authority of *245 statute or rule of court, to submit to arbitration existing or prospective matters of difference is revocable by express act of either party or by implication of law at any time before the submission is consummated by a valid award." (Italics supplied.) 3 American Jurisprudence, 891, Section 59; 29 American Jurisprudence, 926, Section 1240; 45 Corpus Juris Secundum, 1375, Section 1131; Lewis, Admr., v. Brotherhood Accident Co., 194 Mass. 1, 79 N.E. 802, 17 L.R.A. (N.S.), 714; State, Knaus, Pros., v. Jenkins, 40 N.J. Law, 288, 29 Am. Rep., 237; Williams v. Branning Mfg. Co., 153 N.C. 7, 68 S.E. 902, 31 L.R.A. (N.S.), 679, 138 Am. St. Rep., 637; annotations, 42 A.L.R., 732, and 69 A.L.R., 817.
Again, it is stated as follows in 29 American Jurisprudence, 926, Section 1240:
"In accordance with general principles applicable to all contracts, it is the rule that a provision in an insurance policy that all disputes arising under the policy shall be submitted to arbitrators, or a provision similar in substance and effect, is not binding." (Italics supplied.) Lewis, Admr., v. Brotherhood Accident Co., supra; Niagara Fire Ins. Co. v. Bishop, 154 Ill. 9, 39 N.E. 1102, 45 Am. St. Rep., 105; annotation, 47 L.R.A. (N.S.),
354.
The position of the courts is that, although a contract to arbitrate is valid, it is not binding and irrevocable so long as it remains executory and has not been carried through to an award or decision. First Ecclesiastical Society v. Besse, 98 Conn. 616, 119 A. 903; Martin v. Vansant, 99 Wn. 106, 168 P. 990, Ann. Cas., 1918D,
1147.
The reason for this rule is that courts of law refuse to enforce any contract which tends to oust the jurisdiction
of the court. "On the other hand, the view prevailing in nearly all jurisdictions is that a *246 stipulation not ousting the jurisdiction of the courts, but leaving the general question of liability for a loss to be judicially determined, and simply providing a reasonable method of estimating and ascertaining the amount of the loss, is valid." (Italics supplied.) 29 American Jurisprudence, 926, Section 1240; Royal Ins. Co. v. Ries, 80 Ohio St. 272, 283 to 289, 88 N.E. 638; Hamilton v. Liverpool, London Globe Ins. Co., 136 U.S. 242, 34 L. Ed., 419, 10
S. Ct., 945; Norwich Union Fire Ins. Soc. v. Cohn, 68 F.2d 42, 94 A.L.R., 494, certiorari denied, 291 U.S. 665, 78 L. Ed., 1056, 54 S. Ct., 440; Niagara Fire Ins. Co. v. Bishop, supra; Second Society of Universalists v. Royal Ins. Co., 221 Mass. 518, 109 N.E. 384, Ann. Cas., 1917E, 491; Chapman v. Rockford Ins. Co., 89 Wis. 572, 62 N.W. 422, 28 L.R.A., 405.
In 45 Corpus Juris Secundum, 1352, Section 1110, it is likewise stated:
Saba v. Homeland Ins. Co. of America 112 N.E.2d 1 (Ohio 1953)
"Although a general arbitration clause requiring submission to arbitrators of the liability of the insurer is invalid, a clause requiring submission of disagreement as to amount of loss is valid, such clause being construed as requiring appraisal of the amount of loss, but not determination of other matters, as a condition precedent to recovery."
The provisions in the policies in the instant case do not call for the determination of the liabilities of the parties to the contracts, but only for the determination of a single question of fact — the amount of the loss sustained. The provisions, therefore, are an appraisal clause and not an arbitration clause, and this difference is significant in the determination of the rights of the parties as to the remedy which they may pursue upon the breach of the agreement by any party to appraise the loss. 29 American Jurisprudence, 935, Section 1252. Where the amount
of loss is involved, *247 an appraisal is involved. Second Society of Universalists v. Royal Ins. Co., supra; Omaha Water Co. v. City of Omaha, 162 F., 225; Sebree v. Board of Edn., 254 Ill. 438, 98 N.E. 931.
In 47 L.R.A. (N.S.), 382, the rule supported by many authorities is stated as follows:
"All agreements to submit to the judgment and decision of third persons, as prerequisites to litigations, questions that relate merely to prices, values, sums recoverable, amounts of losses or damages payable, quantities, or quality — all of which come under the category of auxiliary, collateral and incidental issues — are considered not to oust the courts of their jurisdiction, and when not waived or abrogated, are respected and enforced judicially as valid and effectual." See Royal Ins. Co. v. Ries, supra; Myers v. Jenkins, Admr., 63 Ohio St. 101 to 120, 57 N.E. 1089, 81 Am. St. Rep., 613.
The issue involved in this proceeding, as I see it, is mainly one of procedure. Assuming that the contracts to appoint appraisers to determine the amount of loss under the insurance contracts, as distinguished from a contract to arbitrate the controversy, are valid and binding, what are the remedies of the insured in case the insurers breach their contracts by refusing to appoint an appraiser? May the insured, in the absence of a controlling statute, have specific performance of the contracts? Does he have an action for damages for the breach, or does he have the remedy sought to be enforced in this action?
Clearly, a court will not compel specific performance of a contract to submit a matter to arbitration or to an appraisal. In the early case of Conner v. Drake, 1 Ohio St. 166, 168, wherein there was a failure of one of the
parties to a contract for arbitration to appoint an arbitrator, this court held that "a court *248 of equity will not force the specific performance of an agreement to refer any matter in controversy between adverse parties to arbitrators. Nor will they compel arbitrators to make an award."
On the other hand, damages for a breach of contract to appraise is an appropriate remedy. The capacity to breach a contract exists whenever the circumstances are such that courts will not decree specific performance, but the right to do so depends upon some justification recognized in the law. 12 American Jurisprudence, 961, Section 385.
At common law, the revocation of, or the failure or refusal to perform, a valid arbitration agreement by a party thereto ordinarily leaves the opposite party the sole remedy of an action for a breach of the agreement to arbitrate, wherein he may recover whatever actual loss he may prove, just as he could do for the breach of any other contract. Red Cross Line v. Atlantic Fruit Co., 264 U.S. 109, 68 L. Ed., 582, 44 S. Ct., 274; Hamilton v. Home Ins. Co., 137 U.S. 370, 34 L. Ed., 708, 11 S. Ct., 133; Atkieselskabet Korn-Og v. Rederiaktiebolaget
Atlanten, 250 F., 935, Ann. Cas. 1918E, 491, affirmed, The Atlanten, 252 U.S. 313, 64 L. Ed., 586, 40 S. Ct.,
332; Read v. State Ins. Co., 103 Iowa 307, 72 N.W. 665, 64 Am. St. Rep., 180; Hartford Fire Ins. Co. v. Hon,
66 Neb. 555, 92 N.W. 746, 103 Am. St. Rep., 725, 60 L.R.A., 436; Goerke Kirch Co. v. Goerke Kirch Holding
Saba v. Homeland Ins. Co. of America 112 N.E.2d 1 (Ohio 1953)
Co., 118 N.J. Eq. 1, 176 A. 902; Haggart v. Morgan, 5 N.Y., 422, 55 Am. Dec., 350; Grady v. Home Fire Marine Ins. Co., 27 R.I. 435, 63 A. 173; Martin v. Vansant, supra; Kinney v. Balt. Ohio Emp. Rel. Assn., 35 W. Va. 385, 14 S.E. 8, 15 L.R.A., 142; Kahn v. Traders Ins. Co., 4 Wyo. 419, 34 P. 1059, 62 Am. St. Rep., 47;
Wynne v. Greenleaf-Johnson Lumber Co., 179 N.C. 320, 102 S.E. 403, 8 A.L.R., 1081, annotations, *249 15 L.R.A., 142; 47 L.R.A. (N.S.), 408, 409, 447. Damages may be recovered for such breach. See Union Ins. Co. v. Central Trust Co., 157 N.Y. 633, 52 N.E. 671, 44 L.R.A., 227; annotation, 47 L.R.A. (N.S.), 409, 410.
A party wrongfully revoking an agreement for submission to an appraisal renders himself liable to the other party in an action for damages. Dolman v. Board of County Commrs., 116 Kan. 201, 206, 226 P. 240; Goerke Kirch Co. v. Goerke Kirch Holding Co., supra. A party is entitled to such damages as he may directly and proximately suffer as a consequence of such a breach. Bullock v. Mason, 194 Ala. 663, 69 So. 882. He is entitled at least to nominal damages. Atkieselskabet Korn-Og v. Rederiaktiebolaget Atlanten, supra; Electrical Research Products, Inc., v. Vitaphone Corp., 20 Del. Ch. 417, 171 A. 738. Doubtless, such damages for breach of contract to appraise, aside from the right to sue on the policy, would be measured by the cost or additional expense, if any, incurred in establishing the issue of loss under the policy in an action at law (See Union Ins.
Co. v. Central Trust Co., supra; annotation, 47 L.R.A. [N.S.], 409, 410) and any expense of appraisal, prior to revocation.
In the instant case, does the insured have any other remedy. In my opinion, there is no warrant for the procedure adopted in this case. A court, upon which a private contract bestows authority to appoint an appraiser or umpire for the parties in case of their inability to agree on some question of fact concerning their contractual relationship, acts purely as an agent of the parties. The person designated in the insurance contracts here involved to appoint an umpire might well have been a county officer, a banker, a lawyer, or any other private
individual, who in such instance would have been clothed with exactly the same *250 power and authority as the court in the instant case. In the absence of statute, the court in the exercise of such function has no jurisdiction to perform any act other than that specifically authorized and set out in the contract. It can not render judgments or decrees affecting the rights of the parties. The utmost that the Probate Court could do in the instant case was to "select" an umpire under and in accordance with the terms of the contract, whereupon the authority of appointment ceased. Apparently, the Probate Court in the instant case, appreciating that its contractual authority to represent the parties to the insurance policies in appointing an umpire had been curtailed and thwarted by the failure of the insurers to name an appraiser, conceived the idea that since it was a court it could judicially expand the scope of its authority to make the appointment. Otherwise, there was no occasion, as a substitute for its authority to "select" an umpire at "the request" of the parties, for the court to take judicial jurisdiction of a motion to appoint, issue summons on the motion directed to the parties defendant, hear the motion and make the appointment of the umpire by a court order duly journalized. There was no necessity, occasion or authority for the court to issue a summons upon the motion for such appointment and to undertake to exercise judicial jurisdiction in naming an umpire outside the terms of the contracts. The rights of the parties beyond the mere appointment of an umpire, when authorized, were wholly within the authority of a court of general jurisdiction.
Under the terms of the contracts there was no authority whatever for the appointment of an umpire until each party had appointed his or its appraiser. These two were first charged with the appointment of the umpire. Only
after they had failed to make an *251 appointment did the designated agent have the power to do so. The failure of the insurers to appoint their appraiser resulted in the breach of the contracts, but the designated agent was without authority to appoint an umpire until such appraiser was first appointed. Where failure of appraisers appointed by the parties to agree is the occasion for the appointment of an umpire, the court or other party
Saba v. Homeland Ins. Co. of America 112 N.E.2d 1 (Ohio 1953)
designated to appoint such umpire is not authorized to do so because of the insurer's failure to appoint. In other words, the insurer's failure to appoint an appraiser will not warrant a court in appointing an umpire to act solely with the appraiser appointed by the insured. ( National Fire Ins. Co. v. Shuman, 44 Ga. App. 819, 163 S.E. 306, and 50 Ga. App. 846, 178 S.E. 758.) This situation or possibility was apparently overlooked in the preparation of the contracts but because of the omission the appraisal clause became ineffective and inoperative. Neither the insured nor the designated agent could rewrite the contracts.
In Ohio, as well as in many other states, there exists an arbitration act or arbitration code which gives some court of general jurisdiction authority to require compulsory performance of a pure arbitration agreement as distinguished from an appraisal. In this state, a written contract to arbitrate, with certain exceptions, may be enforced by compulsory orders of the Common Pleas Court having jurisdiction over a party failing to perform the agreement, and such court may require him to appoint his appraiser in accordance with the procedure provided in the contract, if so provided, or otherwise if not so provided, and the court may then confirm, modify, or vacate the award of the arbitrators when made, and enter judgment thereon. See Sections 12148-1 to 12148-16, inclusive, General Code. Although there is a similar statute in at least one state relating to
"appraisals" (see Glidden Co. v. Retail Hardware *252 Mut. Fire Ins. Co., 181 Minn. 518, 233 N.W. 310, 77 A.L.R., 616, affirmed, 284 U.S. 151, 76 L. Ed., 214, 52 S. Ct., 68), there is no such statute in Ohio, and in my opinion this arbitration act can have no application here. The writer of this dissent has made search of the authorities on this subject and is unable to find any case in which the procedure adopted in this case, namely, the appointment of an umpire before the two appraisers were appointed, has been attempted or remotely followed.
Even if the arbitration statute is invoked as to the basis for action, the court in this case failed to proceed in accordance therewith. Section 12148-4, General Code, provides that, if for any reason there is a lapse in the naming of an arbitrator or an umpire, or in filling a vacancy, then upon the application of either party to the controversy, the Court of Common Pleas of the county in which the arbitration is to be held shall, within 15 days after such application, appoint an arbitrator or umpire. Although I am of the opinion that this statute has no application to the instant case, nevertheless no attempt was made in appointing the umpire to proceed under it.
The judgment of the Court of Appeals should be reversed and the action dismissed.
Co.,531 when faced with the carrier’s refusal to appoint an appraiser in response to a demand for appraisal, the Court issued an order giving the carrier 10 days to select and employ an appraiser and to notify the court and the insured of the name and contact information and upon a failure to abide by the directive, the court indicated a willingness to consider a request for the court to appoint an appraiser and for an imposition of sanctions upon the insurer.
If the responding party is of a mind to either contest coverage and argue that the loss is not covered under the policy, or contest whether the dispute is subject to the appraisal process, these issues should be asserted forthwith. Some states require those special defenses to be asserted in a timely manner, such as when the party answers a motion to compel the appraisal.
For example, Connecticut requires this be done within 5 days of the receipt of a complaint seeking to compel the appraisal.532
Under the laws of the Province of Ontario, the responding party has 7 days to appoint an appraiser after being served with a written
531 2005 WL 2620537 (D. Ariz. 2005).
532 Fishman v. Middlesex Mut. Assur. Co., 4 Conn. App. 339, 494 A.2d 606 (1985).
notice to do so.533 The focus of the appraisal statute in the Province of Ontario is on speed, as each provision of the Insurance Act enhances expediency in the appraisal process. Within 30 days of the appraisal option being exercised, the claim should either be resolved or be in the hands of the umpire pending resolution.
The overriding considerations should be speed and good communication. If for example, additional time is necessary to locate an appropriate appraiser, an effort should be made to communicate the need for additional time to the demanding party with a request for an extension of time to respond. On the other hand, reasonable requests for extensions of time should be reasonably reviewed and granted when appropriate as the process is intended to be a cooperative one.
Once acknowledging that the appraisal process is appropriate in a particular claim, any unnecessary delay thwarts the intent of the provision and does a disservice to both of the parties to the process.
Timing has also been addressed with respect to challenging an appraiser. In Florida, it has been held that the matter of an
533 Ins. Act R.S.O. 1990 Ch. I-8 §128 (1990) (Ontario, Can.).
appraiser’s incompetence must be raised promptly once the grounds for disqualification are discovered. In a case where an insured learned early on of such incompetence but did not seek the appraiser’s disqualification in its complaint nor did the insured address the issue by motion approximately two years later, the Court declined to award attorney’s fees to the insured on this issue. The Court also discussed the procedure for raising an appraiser’s incompetence: a written demand for replacement of the insurer must be made, and if declined, a complaint must be filed in circuit court seeking the appraiser’s removal.534
However, over-aggressiveness can also lead to pretty unfortunate results. In a Texas case, the insured waited only 8 days before commencing an action to appoint an umpire.
The court, accepting the representations made, appointed the umpire and an award was subsequently rendered. The matter was then removed to federal court and a motion was made to set aside the appraisal award and discharge the umpire due to the fact that the state court was without authority to appoint an umpire inasmuch as the 15 day period for consultation and umpire appointment by the appraisers had not yet run. By failing to wait
534 Travelers of Florida v. Stormont, 43 So.3d 941 (Fla. 3d DCA 2010).
the 15 days referenced in the policy (“if they cannot agree upon an umpire within 15 days, you or we may request that the choice be made by a judge...”) the claim’s resolution was delayed at least 6 months pending the federal court’s decision after which the parties presumably would have to start from scratch. This court saw the 15 day policy language as jurisdictional and concluded that in the absence of jurisdiction to appoint the umpire, the subsequent award had to be vacated. While this decision seems extreme, practitioners need to wait the 15 days prior to seeking judicial assistance with respect to umpire appointment.535
535 Friedrichs v. Geovera Specialty Ins. Co., 2013 WL 674021 (S.D. Tex. 2013)
The Order Of Priority Between Appraisal And Litigation
Where the amount of loss to items for which coverage has been admitted is substantial in relation to the total amount of the claim, the parties should be compelled to proceed to appraisal prior to the onset of litigation in order that the parties may recognize the scope of their disagreement prior to litigation. Furthermore, once an award is rendered on those matters not subject to a coverage dispute, the insured may collect this undisputed amount without the need to litigate for it. However, logic dictates that this not be
the case where the amount of loss admittedly subject to appraisal is de minimis in relation to the balance of the claim as neither party should be compelled to incur the expense of appraisal where the majority of the claim will nevertheless be subject to litigation as a result of a coverage issue.
An additional rational for compelling appraisal under the aforementioned circumstances is the practical reality that upon conclusion of litigation, often years after the loss, the damaged property may no longer be available for inspection by the appraisal team or the condition of such damaged property may have substantially changed in the interim prejudicing one or both parties in their
presentation of proof during the eventual appraisal.536
Where the outcome of the appraisal may have a significant bearing on the outcome of a coverage issue, it has been held that the coverage issue is thus not yet ripe for adjudication. In this situation, the appraisal should proceed to a conclusion as the coverage issue has not “matured enough to warrant judicial intervention.” In Vine Street Ltd. Partnership v. QBE International Ins. Ltd.,537 the parties disagreed as to the sub-limit of coverage for soft costs. The court determined that the appraisal should proceed and that the legal issue was not ripe until the value of the loss is known and the court need not make a determination as to the applicability of the sub- limit until such time.
Consistently, where a factual dispute
existed as to whether an insured had complied with post-loss obligations, a Florida court stated that, “Before a circuit court can compel appraisal under an insurance policy, it must make a preliminary determination as to whether the demand for appraisal is ripe. ‘Until these [post-loss] conditions are met and the
536 “Before or After: The Interplay of Litigation and Appraisal, The Brief, Winter 2004 ed. by Lon A. Berk, Christopher Poverman and Erik M. Figlio.
537 2004 WL 2526420 (Minn. 2004).
insurer has a reasonable opportunity to investigate and adjust the claim, there is no ‘disagreement’...regarding the value of the property or the amount of loss’ to be appraised”. It held that, “[o]nce the trial court determines that a demand for appraisal is ripe, the court has the discretion to control the order in which an appraisal and coverage determinations proceed.”538
Mandamus relief may be available where there is an abuse of discretion by the trial court “either in resolving factual issues or in determining legal principles, when there is no other adequate remedy at law.” In Texas, “[t]he refusal to enforce a contract according to its terms constitutes an abuse of discretion that may be subject to mandamus relief”. More specifically, Texas supreme court precedent provides that “failure to enforce an appraisal clause is an error of law constituting an abuse of discretion that cannot be remedied by appeal.” A case which considered such relief did so where it ultimately observed an abuse of discretion by a trial court which had deemed appraisal waived, in the absence of evidence of the requisite intent to establish waiver.539
Citizens Prop. Ins. Corp. v. Admiralty House, Inc., 66 So.3d 342 (2011).
In re Continental Cas.Co., 2010 WL 3703664 (Tex.App-Houston [14th Dist] 2010).
The Texas Court of Appeals has held that while mandamus relief is appropriate to enforce an appraisal clause in a policy because “denying an appraisal would vitiate the insurer’s right to defend its breach of contract claim,” mandamus relief is not appropriate regarding the grant or denial of a motion to abate the litigation proceedings.540 This is because in Texas, litigation proceedings need not be abated while appraisal moves forward.541
A Texas court denied an insurer’s petition in a decision where it examined mandamus relief in the context of appraisal issues, setting forth several established principles. While differentiating the circumstances before it from those directly applicable to this rule since enforcement of appraisal was not at issue in the instant case, it asserted a state supreme court holding that “mandamus relief is appropriate to enforce an appraisal clause because denying an appraisal would vitiate the insurer’s right to defend its breach of contract claim.” A more recent supreme court decision held that “mandamus will not lie regarding the grant or denial of a motion to abate” and with respect to insurance appraisal, “failure to grant [a] motion to abate
In re Liberty Mut. Group, Inc., 2011 WL 2149482 (Tex. App.-Houston [14 Dist.] 2011).
See In re Universal Und. of Texas Ins. Co., 2011 WL 1713278 (Tex.2011).
is not subject to mandamus, and the proceedings need not be abated while appraisal goes forward.”542
In the state of Florida, it is within the trial court’s discretion to determine the order in which property insurance coverage and loss issues are considered. However, the court must first make a determination as to whether an arbitrable issue exists. Therefore, before arbitration or appraisal under a policy can be compelled, the party seeking appraisal must demonstrate that a disagreement or arbitrable issue exists.543
In Florida, a covenant for appraisal within an insurance policy to determine an amount of loss has been deemed binding. In a case where the subject policy provided that “the sum for which the insurer is liable shall not become payable until 60 days after an award by such arbitrators has been received by the insurer, when an appraisal has been required, or that no suit upon the policy shall be sustainable until after full compliance by the insured with all of such requirements,” then
In re Liberty Mut. Group Inc., 2011 WL 2149482, citing In re Allstate Cnty. Mut. Ins. Co., 85 S.W.3d 193, 196 (Tex. 2002) and In re Universal Und. of Texas Ins. Co., 2011 WL 1713278 at *7 n.5 (Tex., 2011).
See Citizens Prop. Ins. Corp. v. Mango Hill Condominium Ass’n 12, Inc., 54 So.3d 578, 36 Fla L. Weekly D298 (Fla. 3d DCA 2011).
arbitration and award are conditions precedent to an insured’s right to pursue an action on the policy. In that case, an insurer promptly demanded appraisal pursuant to the policy but the request was declined by the insureds without reason. Thus, conditions precedent were not met in order for insureds’ right to maintain an action under the policy.544
In Massachusetts, both state and federal courts applying state law require a reference to a three-person panel of disinterested referees to evaluate the amount of loss, a factual question, in the event of a disagreement between parties. Under circumstances where an insured did not request such proceedings before commencing an action, a court deemed compliance with this reference provision “a condition precedent to ‘any right of action in law or equity to recover for such loss.’” In that case, summary judgment was properly awarded by the lower court based on this affirmative defense as raised by the adjuster and insurer.545
This ruling is consistent with that of another Florida case which provided additional explanation where coverage was contested and insureds sought to compel
Southern Home Ins, Co. v. Faulkner, 49 So.2d 542 (Fla. 1909).
L & B Realty, Inc. v. Certuse Adjustment, Inc., 929 N.E.2d 358 (Mass. App. Ct. 1988),
citing G.L. c. 175, §99, Twelfth, amended by St. 1985,c. 137, § 2.
appraisal. The Court relied upon a state supreme court holding in stating, “once the court establishes that the losses are covered by a policy, then those losses may be appraised.” It stated that the trial court “must resolve all underlying coverage disputes prior to ordering an appraisal,” and reversed and remanded because the trial court there had not resolved any factual dispute as to the insured’s compliance with policy terms.546
In Florida, where the insured started suit prematurely, the notice requirement advising the insured of the right to mediation pursuant to Fla. Stat. §627.7015(I) does not apply (as it describes mediation as a viable option before an insured resorts to litigation), the insured cannot rely on the statute to avoid appraisal where her premature filing of the lawsuit rendered the statute inapplicable.547
In Pennsylvania, where the insured elected to sue when the carrier denied the claim, there is no prohibition against the recovery of damages in the litigation without satisfying the policy’s appraisal clause.548
Sunshine State Ins. Co. v. Corridori, 28 So.3d 129, 35 Fla. L. Weekly D289 (Fla. 4th DCA 2010).
American Integrity Ins. Co. v. Gainey, 100 So.3d 720, 37 Fla. L. Weekly D 2297 (Fla.2d DCA 2012).
James F. Campenella Const. Co. v. Great Am. Ins. Co. of N.Y., 2010 WL 2076089 (E.D. Pa.).
Indeed, in Pennsylvania the insured may not be denied his right ... “to sue for damages.”549
An insured was judged to have been fully warranted in resorting to the Court “in view of [an insurer’s] neglect to actively avail itself of [the insured’s] offer of an appraisement, and of the dilatory tactics it was pursuing in the adjustment of his loss.” There, an insured’s suggestion of appraisal was actually accepted by his insurer but subsequently, “no serious effort” to cooperate with the request was made. To the contrary, the insurer’s practice was to engage in delay by making and withdrawing a series of appraiser appointments, until finally the insured sold the property at issue when he believed obtaining an appraisal would be impossible. The insurer insisted upon appraisal after it was sold and then repaired by the purchaser.550
Where the insurer has denied a claim in its entirety on the ground that it is not covered by the insurance policy, the issue is one for the court and should generally be determined prior to the onset of appraisal. The appraisal sought by the insureds after denial of the claim was the wrong remedy and was premature absent
Ice City Inc. v. Ins. Co. of North America, 456 Pa 210, 314 A.2d 236 (Pa.1974); Id.
Talbert v. Northwestern Nat. Ins. Co., 120 So. 24 (1929).
a determination that coverage existed. It was held that the insureds remained free to file suit on the policy and at that time reassert their claim to appraisal.551
In North Carolina, the necessity of pursuing appraisal prior to commencing litigation was influenced by pertinent language within the insurance policy. Where policy language which is fairly common in the market, specifically provided that an insurer was not obligated to make a payment to its insured until the parties had agreed to an amount of loss or appraisal was complete, completion of the appraisal process was deemed a condition precedent to litigation. Because the insured did not complete appraisal before filing an action against the insurer, he could not commence an action at that point. The Court held that the lower court should have stayed proceedings following the insured’s complaint and ordered them to participate in appraisal rather than dismissing the insured’s claim for fai lure to comply with apprai sal requirements.552
A Pennsylvania court found that
Corzo v. American Superior Ins. Co., 847 So.2d 584, 28 Fla. L. Weekly D 1432 (Fla. App. 3 Dist. 2003); Landmark American Ins. Co. v. Hacienda Village Homeowners Ass’n, Inc., 2008 WL 4371325 (M.D.Fla. 2008).
Patel v. Scottsdale Ins. Co., 728 S.E.2d 394 (N.C. Ct. App. 2012).
appraisal was not triggered where an insurer had not admitted that the insured suffered a covered loss under the policy. The dispute involved policy coverage rather than loss calculation. Pennsylvania law sets forth that an appraisal provision “can only be invoked when the insurer admits liability and the sole issue is a dispute over the valuation of the loss.” In making this assertion, the Court nonetheless recognized the state’s preference for appraisal: “Appraisal clauses in insurance contracts are enforceable and recognized under Pennsylvania law as favored alternative dispute resolution mechanisms.”553
The Federal District Court sitting in the Eastern District of Pennsylvania has stated that where an insured fails to comply with an appraisal clause they may not seek resolution through litigation and such an action was dismissed for failure to state a valid claim upon which relief could be granted.554
In Missouri, the Court stayed appraisal where it found the dispute was primarily concerned with coverage rather than amount of loss. The Court reasoned that an absence of coverage would result in denial of a claim and time and money spent on appraisal would be
Keystone Asset Mgmt., Inc. v. West American Ins. Co., 2010 WL 4159249 (E.D. Pa. 2010).
Sydney v. Pacific Ind. Co., 2012 WL 3135529 (E.D. Pa. 2012).
wasteful. Alternatively, if neither was the case but exclusions applied to certain aspects of coverage, appraisal would be limited in scope. The Court stated that if appraisal took place prior to a coverage determination, modification of the appraisal award or additional appraisal may be warranted, resulting in financial hardship for both parties involved. The Court found further support for staying appraisal until a coverage determination was complete in that no damage would be suffered by the petitioner for appraisal and that judicial economy would be served by the stay.555
In California, where disagreement surrounded the nature of a dispute and thus appraisal’ s applicability under the circumstances, it was concluded that the decision of whether to stay appraisal fell within the trial court’s discretion. The Court relied upon a precedential matter in which appraisal was deferred until after contractual and statutory interpretation issues not determinable by appraisers were settled by the trial court. It supported its decision by equating the rules applicable to arbitration to those applicable to insurance appraisal; a court could defer appraisal where appropriate, “just as it has ‘the power to sever arbitrable claims from
SSDD, LLC v. Underwriters at Lloyd’s, London, 2013 WL 2420676 (E.D. Mo. 2013).
inarbitrable ones and to stay either the arbitration or the judicial proceedings pending the outcome of the other.’” The Appellate Court further addressed abuse of discretion, finding none where the trial court deferred appraisal until the parties’ rights under the policy and statutes were determined.556
A California case was stayed pending the conclusion of appraisal where factual disputes existed as to whether an insurer had failed to pay the actual cash value of property and misrepresented that its settlement reflected the actual cash value. There, insureds had raised an issue as to the calculation method to determine depreciation on its property claims and the insurer’s concealment of the standard used. In spite of the insured’s contention that statutory and regulatory questions must be clarified prior to appraisal, a California court found that they had not presented facts and circumstances implicating such a controversy that needed to be decided by appraisal. The Court stated, “‘[t]he propriety of declaratory relief in a particular case will depend upon a circumspect sense of its fitness informed by the teachings and experience
Alexander v. Farmers Ins.Co., Inc., 219 Cal.App.4th 1183, 162 Cal Rptr.3d 455, citing Kirkwood v. California State Auto. Ass’n Inter-Ins. Bureau, 193 Cal.App. 49 at 58-60, 122 Cal.Rptr.3d 480 (Cal. App. 2011) and Doan v. State Farm. Gen. Ins. Co., 195 Cal.App.4th at 1092-99, 125 Cal.Rptr.3d 793 (2011).
concerning the functions and extent of federal judicial power’...‘[b]asically, the question in each case is whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.’”557
In Colorado, a stay of litigation pending appraisal was also deemed appropriate on the basis that appraisal would resolve “key issues that are in dispute,” having the potential to limit the need for discovery and costs to both parties. For example, if the storm at issue in that instance did not cause damage to the insured’s property, then no coverage issue would result and there would be no need for the case to continue; in contrast, if it did cause the damage claimed, appraisal would resolve the extent of damage.558
In North Carolina, an insurer’s motion to stay an action and compel appraisal was denied where a disagreement had arisen as to the order of appraisal and litigation. The Court
Pivonka v. Allstate Ins. Co., 2011 WL 6153611 (E.D.Cal. 2011), citing Public Serv. Comm’n of Utah v. Wycoff Co. Inc., 344 U.S. 237, 243, 73 S.Ct. 236, 97 L.Ed. 291 (1952)
and Maryland Cas. Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273, 61 S.Ct. 510, 85 L.Ed.
826 (1941).
Auto-Owners Ins. Co. v. Summit Park Townhome Ass’n, 2015 U.S. Dist. LEXIS 48854.
determined North Carolina law requires that an appraiser’s authority “is limited to the valuation of loss, and does not include deciding legal questions of policy interpretation or scope of coverage.” While the insurer argued that appraisal was a condition precedent to the initiation of a lawsuit against it, the insured insisted that issues of coverage and bad faith by the insurer were not resolvable by appraisal and must be dealt with prior to the appraisal process. The court distinguished the instant facts from a Court of Appeals precedent which stood for the proposition that appraisal is a condition precedent to filing suit. In contrast to the circumstances in that matter, the present issues clearly pertained to coverage under state law. They included the number of occurrences, coverage existence and scope for equipment breakdowns, and the appropriateness of repair or replacement coverage and alleged bad faith conduct.559
However, where litigation was commenced as a direct result of an insurer’s failure to proceed with appraisal, the question of whether completion of the appraisal process was a condition precedent to suit was deemed a question of fact.560
Otto Industries North America, Inc. v. The Phoenix Ins. Co., 2013 WL 2124163 (W.D.N.C. 2013).
Gilbert v. Southern Trust Ins, Co., 555 S.E.2d 69 (Ga. Ct. App. 2001).
In Washington, it has been clarified that the stay of an action for the purpose of appraisal must not preclude parties from filing motions related to appraisal. In that case, proper valuation computations related to the appraisal process were in dispute. The court’s holding was supported by the insurer’s contention that the parties should not be ordered to participate in appraisal without resolving related disputes first.561
Where the insured was pursuing both appraisal and litigation of issues of bad faith, it was held that bifurcation was inappropriate as it would be inconvenient and would only serve to further delay litigation.562
Trident Seafoods Corp. v. Commonwealth Ins. Co., 2010 WL 3894111 (W.D.Wash. 2010).
1550 Brickell Associates v. Q.B.E. Ins. Corp., 2010 WL 4683889 (S.D.Fla. 2010).
Timing Of The Award
Interestingly, the Standard Fire Policy as well as most insurance policies fail to set forth any particular time reference with respect to the issuance of an award. This being the case, rules of contract construction would require the appraisal team to be held to a reasonableness standard, requiring the issuance of their award within a reasonable period of time from the beginning of the process.
It is clear from a careful reading of the appraisal provision that the drafters had as their primary objective, a speedy conclusion to the appraisal.
For this reason, the absence of a contractual time constraint should be viewed as an effort to give the participants flexibility and discretion in carrying out their appointed duties, not as a license for unnecessary delay or dilatory conduct.
It is fundamental to a successful conclusion to the appraisal that the award be rendered within a reasonable period of time and as soon as possible under the circumstances.
The parties to the appraisal may wish to consider including a proposed schedule for the
conduct of the appraisal within the appraisal agreement so as to encourage responsible conduct. However, care should be taken in setting the deadlines, as the process often tends to be more protracted than anticipated even with the exercise of diligence. Allowances should be made for scheduling difficulties, inclement weather, the unavailability of witnesses and participants and other practical problems that make the scheduling of activities complicated.
While most policies do not define time constraints for the issuance of an award, some states have mandated time periods, the violation of which can have dire consequences to the appraisal.
In fact, in Connecticut, for example, it has been held that an award rendered after 30 days of the “completion of the hearing” has no legal effect unless the parties expressly extend the deadline.563 Though it has been held that this deadline is strictly enforced564 there is no recorded decision specifically applying this particular statute to an insurance appraisal or defining precisely what constitutes the completion of the hearing as contemplated by the statute.
Time Within Which Award Shall be Rendered; Notice, Conn. Gen. Stat. §52-416 (2003).
Fagnani v. Integrity Finance Corp., 53 Del. 193, 167 A.2d 67 (Sup. Ct. 1960); Marsala
v. Bath Corp. Of America, 157 Conn. 362, 254 A.2d 469 (1969).
When The Loss Is Payable
Pursuant to the Standard Fire Policy, a loss is payable no later than 60 days after receipt of proof and ascertainment of amount, by agreement or award.565 This provision measures the timely payment of the loss from either the insured's filing of a proof of loss after the ascertainment of the amount of that loss, either by written agreement between the insurer and the insured or when such an agreement cannot be reached, by an award growing out of the appraisal process. The provision thus recognizes a period of time within which reasonable differences between the parties to the insurance contract may be resolved by methods prescribed in the contract itself.566
The 60 day provision is not absolute. Adjustment and payment must proceed without unnecessary delay based upon the facts of the case. Payment should be made as soon as possible after the award is rendered.567
Some states regulate the period within which payment must be made after an appraisal award. For example, New York Insurance Regulation §216.6 (f) states in part
Lines 150-156 of the Standard Fire Policy; See e.g., N.Y. Ins. Law §3404.
FC&S Bulletins, The National Underwriter Co., Misc. Property, April 1995.
Providence Washington Ins. Co. v. Wolf, 168 Ind. 690, 80 N.E. 26 (1907).
that:
“Every insurer shall pay any amount finally agreed upon in settlement of all or part of any claim not later than five business days from the receipt of such agreement by the insurer, or from the date of the performance by the claimant of any condition set by such agreement, whichever is later, except as provided in §331 of the Insurance Law as respects liens by tax districts on fire insurance proceeds.”
In the state of Michigan the former statute MCL §500.2831, repealed in 1990, allowed an insurer to withhold payment until the completion of appraisal without penalty. However the new replacement statute offers no such protection. On the subject of appraisal, MCL §500.2833 (1)(m) addresses the procedure for appraisal but omits discussion of guidelines for when the loss is payable. Where the parties employ the appraisal process, the appraisal award triggers the 30-day payment mandate contained in MCL §500.2836(2). As a result, an award paid after such date was subject to an addition for statutory penalty
interest.568
Local statutes and regulations should be consulted as many jurisdictions have adopted similar provisions mandating a more expeditious payment then might be required by the insurance policy.
It has been held that for the 60-day time period to apply, there must be a valid appraisal and where the insureds rejected the joint appraisal, it was clear that the loss payment provision of the policy which mandated payment “60 days after we receive your proofs of loss and; a)reach an agreement with you; b) there is an entry of a final judgment; or c) there is a filing of an appraisal award with us”, has not been triggered such that the 60 day provision became operable.569
In jurisdictions that analogize appraisal with arbitration, it has been held that a party seeking to avoid paying on the award must challenge the appraisal award and adhere to the requirements of local statutes mandating time limits within which such a challenge must be filed. For example, in Connecticut it has been held that where there were procedural
Griswald Properties, L.L.C. v. Lexington Ins. Co., 275 Mich. App.543, 740 N.W.2d 659 (2007) rev’d by panel, aff’d in part, rev’d and remanded in part, 276 Mich. App. 551, 741 N.W.2d 549 (2007).
Nelson v. Farmer’s Union Mut. Ins. Co., 315 Mont. 268, 68 P.3d 689 (Mont. 2003).
issues concerning the adequacy of the appraisal proceeding, objections should have been raised within 30 days of the award pursuant to §52-420 of the Connecticut General Statutes.570
Where the insurer ignored an appraisal award and paid only the amount it considered due under the policy, an award of a penalty of twice the actual damage is appropriate.571
The terms of an insurance policy determine the date from which the coverage payment is due as well as when interest is due on the amounts payable. Thus, if an insurance policy provided that an insurer was required to make payment within thirty days after the filing of an appraisal award, then as long as the policy language is complied with, the insured is not entitled to pre-judgment interest from the date its property was damaged.572
The District Court of Appeal of Florida clarified the issue in its decision Jugo v.
Corriveau, et al v. Aetna Cas. & Sur. Co., 1996 WL 156109 (Conn. Super. Ct. 1996) (It has been held that this deadline is strictly enforced); Vail v. American Way Homes, 181Conn. 449, 435 A.2d 982 (1980); Kilby v. St. Paul Ins. Co., 29 Conn. Supp. 22, 269
A.2d 295 (1970).
Farber v. American National Prop. & Cas. Co., 2008 WL 5159207 (La. App. 3 Cir.).
572See Ellie’s 50's Diner, Inc. v. Citizens Prop. Ins. Corp., 54 So.3d 1081, 36 Fla. L. Weekly
D 449 (Fla.. 4th DCA 2011) ; see also Citizens Prop. Ins. Corp. v. Mallett, 7 So.3d 552 (Fla. 1st DCA 2009); Lumbermens Mut. Cas. Co. v. Percefull, 653 So.2d 389 (Fla.1995); Sunshine State Ins. Co. v. Davide, 15 So.3d 749 (Fla.3d DCA 2009); Allstate Ins. Co. v. Blanco, 791 So.2d 515, 26 Fla. L. Weekly D1737 (Fla.3d DCA 2001).
American Security Ins. Co.573 In Jugo, the insured was paid $47,000 toward the amount of loss but more was requested by the insured. After appraisal, the insured was awarded an additional $71,000 and the insured moved for pre-judgment interest from the date of loss. The court denied the insured’s request and explained when pre-judgment interest from the date of loss would be appropriate. In cases where the insurer denied coverage for all or any part of the insured’s initial claim, an insured would be entitled to pre-judgment interest from the date of the loss. In cases where the insurer admits coverage but disputes the amount of the covered loss, however, the insured is not entitled to pre-judgment interest from the date of the loss, absent some contract provision to the contrary.
In Louisiana, it has been held that an insurer’s failure to pay amounts purportedly undisputed during the appraisal process was not arbitrary or capricious.574
573 56 So.3d 94 (Fla.3d DCA 2011).
Long v. American Security Ins. Co., 52 So.3d 260, 2010-0026 (La.Ct. App. 1995).
Time To Bring Suit
Most property insurance policies contain a suit limitations provision which limits the amount of time an insured has to commence litigation against the carrier should that become necessary. In most states, this issue is also regulated by statute or regulation which mandate a minimum amount of time within which the insured has to bring suit. Typically, this provision is contained in the amendatory endorsement mandated in most states. It is not unusual for the insured to have as little as one year575 to commence litigation, although many states permit two years.576 Other states permit a one year period but toll it from the date of notice of claim until claim denial.577 Florida permits 5 years.
As the road toward the final adjustment or appraisal award can be a long and winding one, the insured and his representatives should always be mindful of this deadline, taking care to diary the date significantly in advance of the deadline in order to either get a formal
Records, Ariz. Rev. Stat. §20-153 (2003); Standard Fire Policy, Idaho Code §41-201 (2002); Standard Fire Policy, Ill. Comp. Stat. Ann. 215 5/397 (West 2003); Standard Fire Policy Required; Exceptions, Me. Rev. Stat. Ann. Tit. 24-A §3002 (West 2003); Fire Policy; Standard Form, Mass. Gen. Laws Ann. Ch. 175, §99 (West 2003); Punishment for Issuing Fire Policies Contrary to Law, N.C. Gen. Stat. §58-43-35 (2003); Penalty for Issuing Other than Standard Fire Policies, 40 Pa. Cons. Stat. §637 (2000).
See e.g., N.Y. Ins. Law §3404.
Furnishing Proofs of Loss, N.J. Stat. Ann. 17:36-6 (West 2003).
written extension from someone in authority at the carrier or to take steps to toll the running of the limitation period by filing suit, filing a summons or by taking whatever procedural step is necessary in the local jurisdiction to preserve the right to sue.
The parties should never presume that merely because negotiations are under way or the appraisal process is moving forward that the time within which to bring suit has somehow been tolled or is irrelevant. Obviously this would not pertain to those jurisdictions where time to bring suit is measured from the date of the denial of the claim. However, in other jurisdictions, care should still be taken, despite being in the midst of the appraisal process, to preserve the right to bring suit.
For example, a Washington court did not find a reasonable excuse for delay for purposes of filing an action where an insurer stopped appraisal pending the production of documents in litigation. The court determined that appraisal could have continued without the documents sought by the insurer and “no reasonable juror could conclude that [the insurer]’s actions prevented [the insureds] from timely filing suit or lured [the insured] into reasonably believing that an additional
amount would be paid.”578
In Ontario, promissory estoppel was held to preclude compliance with an otherwise required limitations period where the court observed “an express admission of liability and a clearly implied promise not to rely on the limitation period.” That case considered a statutory condition which required that any action against the insurer for recovery under the contract be barred unless brought within one year following the loss. There, a Statement of Claim was not issued until over a year after the damage. However, letters existed to substantiate the admission of liability and the implication that the insurer was not intending to rely on the limitations period.579
At least one jurisdiction, Wisconsin, provides for statutory relief. W.S. Stat.
§631.83(5) tolls the statute of limitations “during the period in which the parties conducted an appraisal or arbitration procedure prescribed by the insurance policy or by law or agreed to by the parties.” Care should be taken, however, as an informal effort of obtaining and comparing cost estimates has not been
Reed v. Allstate Ins. Co., 2012 WL 527422 (W.D. Wash. 2012).
Feist v. Gore Mut. Ins. Co., (1991) O.J. No. 67, 25 A.C.W.S. (3d) 86, 1991 CarswellOnt
1044.
equated with actual appraisal.580
In other states, the limitations period is tolled during the time it takes to complete the appraisal.581
Where a Georgia insurance policy incorporated a 12-month limitation for commencement of an action, the court stated that it was “well-settled that the policy period of limitation is tolled by the pendency of an appraisal proceeding.” Although that matter in particular did not involve a question of appraisal, the court found the issue pertinent, where circumstances involved the application of the limitations term to an insurer’s election to make repairs following a fire. There, the court deemed the policy limitation tolled and the action not barred by the 12-month limitation.582
An insured’s action to compel appraisal in Florida was found to be within the statute of limitations in light of the rule in Romay that
Weiting Funeral Home of Chilton v. Meridan Mut. Ins. Co., 277 Wis 2d.274, 690 N.W. 2d 442, 2004 WI App. 218 (Wis. Ct. App. 2002) (informal discussions not envisioned as covered); Viebrock v. Wisconsin Mut. Ins. Co., 329 Wis.2d 709, 200 WL 3001519 (Wis. App. 2010) .
See, e.g. Southern General Ins. Co. v. Kent, 187 Ga. App. 496, 499, 370 S.E.2d 663
(1988); Nat. Union Fire Ins. Co. v. Ozburn, 57 Ga.App. 90, 92, 194 S.E. 756 (Ga. Ct. App.
1937).
Zappa v. Allstate Ins. Co., 162 S.E.2d 911 (Ga. Ct. App. 1968).
appraisal could not be compelled until conditions precedent to appraisal had been performed by the insured. In finding the action timely, the court recognized that “an action to compel appraisal does not accrue until the policy conditions precedent have been performed or waived, and appraisal is then refused.” There, it stated the statute could only have begun to run when the insured offered to perform conditions precedent and such performance was refused by the insurer, both of which had occurred consistently with the action taken by the insured.583
In a perfect world it would not be necessary to discuss the suit provision of the policy, as one of the fundamentals of the appraisal process is litigation avoidance. However, in the very imperfect world of insurance, preserving the right to bring suit is a strategic imperative in order to motivate both parties to see the appraisal process through to a conclusion in a fair and reasonable manner. Litigation may be necessary in order to compel appraisal where it has been improperly avoided, or to enforce an award where payment has not been made against it, to appoint an umpire or disqualify an appraiser
Chimerakis v. Sentry Ins. Mut. Co., 804 So.2d 476, Fla. L. Weekly D 2843 (Fla. 3d DCA 2001), citing United States Fid. & Guar. Co. v. Romay, 744 So.2d 467 (Fla. 3d DCA 1999).
for good cause shown. If the right to sue has been dissipated, what recourse would the insured have upon the insurer denying coverage after its receipt of an unfavorable award?
Nevertheless, for those caught unwary or unprepared and where the time to bring suit has passed, courts should be loathe to reap a forfeiture on the insured on a technical failure to toll the running of the suit provision. However, should simple equity and fairness not be sufficient to save the insured, and it often is not, the insured’s salvation may be found in their ability to bring suit on the appraisal agreement or award itself should the carrier refuse to proceed to a conclusion of the appraisal or to pay the award upon its issuance.
The appraisal agreement, hopefully in writing, is binding as a contract in its own right. This would, in theory, be subject to the statutory period for bringing suit for breach of contract in the local jurisdiction without regard to the policy time period as the suit is not premised on breach of the policy, but on the appraisal agreement.
Ongoing discussions between the insured and its insurer did not serve to toll the running of the statute of limitations even in a state that
tolls the running of the statute where an appraisal agreement is entered into where the parties efforts never ripened into an actual agreement.584
In the state of California it has been held that the Doctrine of Equitable Tolling did not operate to suspend the statute of limitations during an appraisal proceeding where the insured had numerous opportunities to conclude that the carrier had breached the contract of insurance and that circumstances did not show an “unjust technical forfeiture” nor was an absence of prejudice established.585
In those states which have either a statutory mechanism for enforcement of insurance appraisal awards or which equate appraisal with arbitration and provide for statutory enforcement through an arbitration mechanism, the statutes themselves would provide the statutory cause of action.586 Theoretically, such a statutory cause of action would not be subject to the contractual period of limitations found in the policy.
Wieting Funeral Home of Chilton, Inc. v. Meridian Mut. Ins. Co., 277 Wis.2d 274, 690 N.W.2d 442 (Ct. of App., 2004); See W.S.A. 631.83 (5).
Bostonian v. California Fair Plan Ass’n, 2003 WL 22009361 (Cal. App.2d Dist, 2003).
See Dupree v. Auto-Owners Ins. Co., 2013 WL 3766580 (Mich. Ct. App. 2013) (in
Michigan, the statutory time period in which to challenge an arbitration, and thus an appraisal, is six years; MCL §500.2833(1)(m).
In Vaubel Farms, Inc. v. Shelby Farmer’s Mut. Ins. Co.,587 it was held that a contractual two-year period of limitation for the insured to file suit contained within a property policy was inapplicable to an appraisal/arbitration sought by the insured approximately three years after the loss stating that arbitration was not a “suit”. The court explained that such a statutory proceeding is summarily reviewable and enforceable by statute rather than by suit on the award. The court determined that because the insured’s enforcement of the award was not subject to the two-year period of limitations, his demand was subject solely to the general 6-year statute of limitations.
However, the Vaubel holding was limited in 2007 when the Court of Appeals in Minnesota distinguished a policy which refers to “appraisal” and not arbitration and in which the carrier retains the right to deny a claim after the award.588
In Utah, tolling of the statute of limitations for purposes of a lawsuit has been examined in the context of Utah Code Ann. 1953 §31A-21- 313(5), a statute which provides that the limitations term is “‘tolled during the period in which the parties conduct an appraisal or
587 679 N.W.2d 407 (Minn. App. 2004).
Johnson v. Mutual Service Cas. Ins. Co., 732 N.W.2d 340 (Ct. of App. Minn. 2007).
arbitration...procedure prescribed by the insurance policy.’” In that case, the court held that the date that a party had made a written demand for appraisal of the loss constituted the event which triggered appraisal pursuant to the policy and thus the beginning of the tolling period. It declined to accept the interpretation of the statute under which the tolling period would begin when appraisal was conducted.589
Prudence and diligence would dictate dealing with this issue ahead of time, either with a formal extension or by including a tolling provision within an appraisal agreement to avoid any ambiguity or conflict.590
It has been held that where a fire policy provides that no action shall be commenced more than a certain number of months after the fire and also that no action shall be brought until 60 days after an award by appraisers, the provisions are to be construed as meaning that in the event of appraisal, the time to sue is extended until 60 days after an award. However absent any reason for the extension growing out of the appraisal, the action must be brought within the statutorily prescribed time or the policy, whichever is
Stone Flood and Fire Restoration, Inc. v. Safeco Ins. Co. of America, 268 P.3d 170, 699 Utah Adv. Rep. 72, 2011 Ut. 83 (Utah 2011).
See Appendix A, Form I[A].
greater.591
It has been held that an insured’s action seeking to enforce the appraisal provision (as distinct from an appraisal agreement) was a “legal action” under the policy, such that it was subject to the policy’s limitations clause requiring suit be brought “within 2 years after the date on which the direct physical loss or damage occurred.”592
In Wisconsin, a statute tolling the limitations period while the parties are conducting an appraisal prescribed by an insurance policy or by law and agreed to by the parties protects the insured under these circumstances.593
Williams v. German Ins. Co., 90 A.D. 413, 86 N.Y.S. 98 (4th Dept. 1904).
National Refrigeration, Inc. v. Travelers Ind. Co., of America, 947 A.2d 906 (Sup. Ct.,
R.I. 2008); Marjam Supply Co., Inc. v. Hartford Steam Boiler Inspecting and Ins. Co., 2012 WL 2477963 (Conn. Super. Ct. 2012) (12 month policy provision prevented action to compel arbitration/appraisal in Connecticut); Musleh v. State Farm Fire and Cas. Co., 2012 WL 5493588 (E.D. Mich. 2012) (carrier does not owe insured any coverage because the insured’s breach of contract claim is time -barred. Therefore, the insurer was entitled to a grant of summary judgment on the insured’s claim to a statutory appraisal.).
593 W.S.A. 631.83(5).
Competing Demands
Policy conditions such as the requirements to file proofs of loss, testify at an examination under oath and other aspects of policy mandated cooperation are independent of the insured’s right to demand an appraisal, such that each party to the contract has an obligation to comply with the reasonable requests of his or her counterpart while still enforcing their own demands. For example, an insured may not resist a carrier’s reasonable demand to file a proof of loss or testify at an examination under oath in an attempt to enforce a demand for an appraisal.594 The U.S. District Court sitting in the Southern District of Florida, for example, determined that where an insurer required a proof of loss and an examination under oath in order to assist in determining loss and value, the insured was not able to obtain an appraisal until complying with those provisions of the cooperation clause. Upon a simple analysis, it would appear that this had the effect of treating the insured’s compliance as a condition precedent to the appraisal process.
In truth, each of these policy provisions are actually concurrent conditions in that each
Pando v. United States Fidelity and Guar. Co., 1998 WL 708619 (S.D. Fla. 1998), aff’d,
198 F.3d 262 (6th Cir. 1999).
must be complied with in conformity with the contract or statute and each process should proceed as contractually agreed once their invocation is ripe under the terms of the policy.
An enlightened interpretation of the court’s ruling in Pando v. United States Fidelity & Guar. Co., is that there was not yet a ripe disagreement, making the claim unready for appraisal. The decision does not stand for the proposition that the filing of a proof and appearance at an examination under oath are true conditions precedent.
Courts have been fairly uniform in holding the insured to be in compliance with the cooperation clause prior to enforcing the appraisal provision, particularly when demands are related to a full ascertainment by the carrier of the amount of loss and actual cash value.595 It is logical to conclude that a
See, Jacobs v. Nationwide Mut. Fire Ins. Co., 236 F. 3d 1282 (11th Cir. 2001); Galindo v. ARI Mut. Ins. Co., 203 F.3d 771 (11th Cir. 2000); Ferrer v. Fid. & Guar. Ins. Co., 10 F. Supp.2d 1324 (S.D. Fla. 1998); United States Fid. & Guar. Co. v. Romay, 744 So.2d 467 (Fla. 3d DCA 1999). See also; Terra Ind., Inc. v. Commonwealth Ins. Co. of Am., 981 F.Supp. 581 (N.D. Iowa 1997); Ohio Farmer’s Ins. Co. v. Titus, 82 Ohio St. 161, 92 N.E. 82 (1910); Boston Ins. Co. v. A.H. Jacobson Co., 226 Minn. 479, 33 N.W.2d 602 (1948); Insurance Co. of N. A. v. Baker, 84 Colo. 53, 268 P. 585 (1928); Jersey Ins. Co. v. Roddam, 256 Ala. 634, 56 So.2d 631 (1952); Harowitz v. Concordia Fire Ins. Co., 129 Tenn. 691, 168
S.W.163 (1914); James v. Ins. Co. of Ill, 135 Mo. App. 247, 115 S.W. 478 (1909);
Continental Ins. Co. v. Valladingham & Gentry, 116 Ky. 287, 76 S.W. 22 (1903); Citizens Prop. Ins. Corp. v. Admiralty House, Inc., 2011 WL 2586344 (Fla. 2d, DCA 2011): But see, Prudential-LMI Ins. Co. v. Promenade Condo. Ass’n, No. 98-1603 (S.D. Fla. 1998) (ruling contrary to Ferrer, 10 F. Supp.2d at 1324 so as to remain consistent with Allstate Ins. Co. v. Sierra, 705 So.2d 119 (Fla.3d DCA 1998)) and Sanchez v. Harbor Specialty Ins. Co., No. 98-1365 (S.D. Fla 1999).
reasonable understanding of the claim is a prerequisite for a true disagreement to exist.
It has been held that a question of fact for a jury exists where the insured refused a request for supplemental examinations under oath claiming the request, made after the insured’s demand for appraisal, was not reasonable in light of the fact that they had provided the carrier with all information they had regarding their claim. The matter was remanded for a trial on the issue. Should a jury find the request for an examination was reasonable, the insured’s claim will be dismissed.596
Under Florida law, before appraisal can be invoked generally the insured must comply with the policy’s post-loss conditions because such compliance enables the insurer to investigate the insured’s claims in order to reach a ripe disagreement.597 The burden of showing prejudice suffered by the insurer due to the insured’s failure to comply with a
Brethren Mut. Ins. Co. v. Thomas, 2006 WL 2376248 (M.D. Pa. 2006).
200 Leslie Condo Assn Inc. v. QBE Ins. Co., 2013 WL 4714207 (S.D. Fla. 2013) (Insured altered a proof of loss form unreasonably and without justification by striking language stating that “no articles are mentioned herein or in the annexed schedules but such as were destroyed or damaged at the time of said loss and produced a current Board President who did not adequately prepare for an examination under oath and could not respond to the insurer’s inquiries.”); See also, Biscayne Cove Condominium Ass’n. v. QBE
Ins. Co., 971 F. Supp.2d. 1121, 2013 WL4711161 (S.D. Fla. 2013)
condition subsequent is on the insurer.598
In Florida, a court found issues of material fact existed as to whether an insured had materially breached policy conditions when his appraiser terminated an umpire. Under those circumstances, the insured’s appraiser did so following continuous delays by the umpire in rendering a decision, an action for which the court found a lack of authority and observed other lawful alternatives. In evaluating this matter, the court held that “an insured’s refusal to comply with a pre-suit condition may be a willful and material breach of an insurance contract that precludes recovery as a matter of law...however, if the insured cooperates to some degree or explains his failure to comply, whether the insured materially breached the policy remains a question for the fact finder”. 599 The court continued that in the absence of such willful disregard by an insured, “‘courts have either stayed the action or dismissed the suit without prejudice in order to allow belated compliance.’”600 Here, the court found that the
200 Leslie Condo Assn Inc. Id. at p. 17
Jyurovat v. Universal Prop. & Cas. Ins. Co, , 84 So.3d 1238, 1239 (Fla.2d DCA 2012); See also, Oriole Gardens Condominiums, III v. Independence Cas. and Surety Co., 2012 WL 718803 (S.D.Fla. 2012)where an insured’s post-loss obligations to submit to an examination under oath, produce and disclose relevant documentation, and give prompt notice of a loss were deemed conditions precedent to an action against an insurer. There, a question of fact was found as to each, based on a degree of compliance by the insured as to the first two, and the insurer’s failure to meet its burden as to the third.
Id., citing El-Ad Enclave at Miramar Condo Ass’n v. Mt. Hawley Ins. Co., 752
F.Supp.2d 1282, 1287 (S.D. Fla. 2010).
insured had cooperated in the appraisal process but determined that questions of material fact existed surrounding the umpire’s termination and the filing of a declaratory judgment action as material breaches of the policy.
However, an insured was not barred from seeking an order to compel appraisal where he had complied with a provision in his insurance policy which mandated that he submit to an examination under oath (EUO) upon the insurer’s request. There, the insurer argued that the insured did not comply with policy conditions because he left his examination under oath during a break; however, the insured testified that during the examination, “he had been berated and yelled at, and subjected to two examinations, one in English and the other in Creole” and his counsel had offered resumption of the examination which the insurer refused.
The court observed its prior holding that “‘the insured must meet all of the policy’s post- loss obligations before appraisal may be compelled’…[t]his includes the obligation to submit to an EUO” and ‘[t]he failure to submit to an examination under oath is a material breach of the policy which will relieve the insurer of its liability to pay.’” Here, the offer to resume the EUO was given before the action
was filed, and the District Court agreed with the trial court that the action was not premature and appraisal could be compelled.601
Similarly, in Florida, it has been held that a property insurer may be entitled to an evidentiary hearing to determine whether the insured complied with the post-loss conditions of the insurance policy before the insurer could be compelled to participate in appraisal of the insured’s loss.602
In Louisiana, where the insured failed to respond to a demand for an examination under oath but after retaining counsel, offered full cooperation and requested rescheduling the EUO and a joint inspection of the damage, it was held summary dismissal of the case would have been a “draconian measure”.603
The United States Court of Appeals for the Seventh Circuit has declared that an insurer was not bound by the results of an appraisal from which it withdrew after the insured- restaurant owner materially breached the policy by refusing to submit to an examination under oath prior to the award being
First Home Ins. Co. v. Fleurimond, 36 So.3d 172 (Fla. 3d DCA, 2010)
See Citizens Prop. Ins. Corp. v. Maytin, 51 So.3d 591, 36 Fla. L. Weekly D 484 (Fla 3d DCA 2011); Citizens Prop. Ins. Corp. v. Gutierrez, 59 S. 3d 177 (2011).
Hayes v. Southern Fidelity Ins. Co., 2013 WL 4012745 (E.D .La. 2013).
determined and the appraisal completed.604
Neither party should be forced to proceed to appraisal until sufficient information has been exchanged so as to believe there has been a true disagreement under the terms of the policy. As stated, at times this will require the insured to comply with policy provisions in presenting and swearing to his claim. At other times, this may involve the insurer sharing its damage estimates with the insured so as to make the process meaningful and determine not only that a true disagreement exists, but the extent of that disagreement.
Query whether an interview or a recorded statement taken from the insured by the carrier’s appraiser would be appropriate. Written questions bearing on the issues of loss and value may be appropriate under a given set of circumstances in order to make the appraisal process meaningful.
Note that the New York State Legislature amended the insurance law by adding §3407- a which now requires the insurer to share with the consumer its building damage estimates upon demand.605 The author drafted and
Employers Mut. Cas. Co. v. Skoutaris, 453 F.3d 915 C.A.7 (Ind. 2006).
Property/Casualty Insurance Contract and Policy Standard Provisions, N. Y. Ins. Law
§3407-a (McKinney 2003).
lobbied for the passage of this legislation which was adopted effective March, 2002. It requires every insurance policy issued in the state of New York to contain a provision requiring the production of building damage estimates prepared on behalf of the carrier upon demand by the insured or its representatives.
In other jurisdictions, this information is routinely shared and where it is not yet the custom and practice to share the carrier’s estimates of damage with the insured, it should be.
The insurance carrier’s estimates of loss, value and damage are prepared in the ordinary course of the insurer’s business and should be shared upon request to help the parties identify areas of agreement, disagreement, as well as misunderstandings and omissions.606
Mold Maintenance Corp. v. General Acc. Fire & Life Assur. Corp., 56 A.D.2d 134, 392 N.Y.S.2d 104 (4th Dept. 1977); Millen Ind. v. American Mut. Liability Ins. Co., 37 A.D.2d 817, 324 N.Y.S.2d 930 (1st Dept. 1971); Welch v. Globe Ind. Co., 25 A.D.2d 70, 267
N.Y.S.2d 48 (3d Dept. 1966); Dikun v. N. Y. Central R.R., 58 Misc.2d 439, 295 N.Y.S.2d
830 (Sup. Ct. 1968), aff’d. by, 31A.D.2d 719, 297 N.Y.S.2d 711 (4th Dept. 1968); Kandel
v. Tocher, 22 A.D.2d 513, 256 N.Y.S.2d 898 (1st Dept. 1965); Carp’s Delicatessen v. Allcity Ins. Co., 83 A.D.2d 504 (1st Dept. 1981); Chemical Bank v. National Union Fire Ins. Co. of Pittsburgh, 70 A.D.2d 837, 418 N.Y.S.2d 23 (1st Dept. 1979).
Compliance With Post-Loss Policy Provisions
In Florida, the timing of appraisal has also been examined in the context of compliance with post-loss conditions.607 There, a District Court of Appeals reversed an order granting an insured’s motion to compel an appraisal and remanded a matter for an evidentiary hearing in finding an issue of fact as to whether an insured had complied with all post-loss obligations. The insurer contended that the insured failed to provide it with requested records and documents, respond to material inquiries during his examination under oath, or provide a sworn statement in his proof of loss, and the insured countered by asserting that he did supply sufficient information and comply with necessary post-loss obligations. The court held that “in order to make a preliminary determination that there is a disagreement between the insurer and the insured regarding the amount of loss, the trial court must be satisfied of the insured’s compliance with the policy’s post-loss conditions. Where the insurer reasonably disputes such compliance and raises a question as to the sufficiency of the insured’s compliance with post-loss obligations, a question of fact is created that must be resolved by the trial court before compelling
United Prop. and Cas. Ins. Co. v. Concepcion, 83 So.3d 908 (Fla. 3d DCA 2012).
appraisal.”608 In Concepcion, the court found there to exist a fact issue which must be resolved through examination of the evidence in an evidentiary hearing.609 However, under these circumstances the trial court never reviewed any such evidence, and in support of this holding the court noted that the argument of counsel does not constitute evidence.
The importance of compliance with post- loss conditions was further recognized in the state. Where a condominium association failed to comply with post-loss conditions before the appraisal process took place, including those pertaining to proof of loss, inventory of property and examination under oath, the court declined to compel an insurer to submit to appraisal because the insured failed to show that the insurer was not prejudiced by its failure to comply with such conditions. The court held that post-loss conditions in the policy must be complied with before invoking appraisal.610 . This “‘enables [insurers] to investigate the insureds' claims and to disagree with the loss amount before the appraisal term becomes effective.’”611 If an insured could compel
Id.
609 Id. at 909-910.
200 Leslie Condo Ass’n, Inc. v. QBE Ins. Corp., 965 F.Supp. 1386 (S.D. Fla. 2013); (citing Galindo v. ARI Mut. Ins. Co., 203 F.3d 771, 777 (11th Cir.2000) and U.S. Fid. & Guar. Co. v. Romay, 744 So.2d 467 (Fla. 3d DCA 1999)).
Id. at 1400, citing Galindo at 777.
appraisal prior to compliance with post-loss obligations, the insurer would be “at a considerable disadvantage entering the appraisal process.”612 The court clarified the rules surrounding prejudice in Florida; the law presumes prejudice to the insurer and places the burden of showing its absence on the party seeking to avoid the condition; “by contrast, in cases involving an insured's failure to comply with a condition subsequent, ‘it is proper to place the burden of showing prejudice on the insurer.’”613 The court additionally refused to grant the insured a post-trial opportunity to comply with conditions, finding no supportive basis or legal authority for doing so.
Id., citing Romay, 744 So.2d at 471 (Fla. 3d DCA 1999)
Id. at 1401, citing Bankers Ins. Co. v. Macias, 475 So.2d 1216, 10 Fla. L. Weekly 424
(1985).
I] Moving To Set Aside The Award
Individual states treat this issue differently and the local laws must be identified and complied with.
In those states that equate appraisal with arbitration, care must be taken in commencing any effort to set aside an appraisal award expeditiously and certainly within the statutory time period provided for challenging an arbitration award.614 For example, in Connecticut, where courts have traditionally equated appraisal and arbitration in certain respects, it was held that where procedural objections to the appraisal process are raised, they must be asserted in a timely fashion pursuant to §§52-418 and 420 of the Connecticut General Statutes. It has been determined that such challenges were required to be raised within 30 days of the award.
This issue was addressed in the case of Travelers Home and Marine Ins. Co. v. Kravitz in which the appellate court of Connecticut affirmed a decision by the trial court denying the insurer’s motion to vacate the appraisal award as untimely. In pointing to §52-420(b),
Corriveau, et al v. Aetna Cas. & Sur. Co., 1996 WL156109 (Conn. Super. Ct. 1996); See also, Town of East Hartford v. East Hartford Municipal Employee’s Union, Inc., 206 Conn. 643, 539 A.2d 125 (1988).
the court held that because the insurer’s motion to vacate the appraisal award was not filed within 30 days after it received notice of the award, the trial court lacked subject matter jurisdiction over the motion.615
In Kravitz, the insurer argued that the appearance of impropriety, relating to a conversation between two of the three appraisers after the appraisal had been completed, should compel the court to make an exception under the arbitration statute. The court disagreed, however, and found that despite the appearance of potential impropriety, a judicially-created exception to the 30-day time limit under §52-420(b) was not justified.616
As legal authority in Michigan has designated appraisal as “‘effectively an arbitration’”, the statutory limitation within which to challenge to arbitration (and thus, an appraisal) is six years. MCL 500.2833(1)(m).617
In Utah, for example, a party may move to modify an appraisal award within 20 days after the panel issued its award.618
See Travelers Home and Marine Ins. Co. v. Kravitz, 129 Conn.App. 166 (2011).
Id.
Dupree v. Auto-Owners Ins. Co., 2013 WL 3766580 (Mich.Ct. App. 2013).
Miller v. U.S.A.A. Cas. Ins. Co., 44 P.3d 663 (2002); See Modification of Award by
Court, Utah Code Ann. §78-31a-15 (2002).
In states which do not mandate a time limit directly, practitioners should nevertheless proceed expeditiously after the receipt of the award and a reasonableness standard would apply. Certainly, an effort should be made to commence an action to set aside the award within the time frame provided by policy or statute for payment of the award, whichever is shorter.
As appraisal is intended to be a quick and efficient process with a short time line contractually mandated, any unreasonable delay in moving to set aside the award may result in a denial of the motion, based upon the legal concept of laches. The equitable doctrine of laches is defined as:
“[U] nreasonable delay or negligence in pursing a right or claim - almost always an equitable one - in a way that prejudices the party against whom relief is sought. The equitable doctrine by which a court denies relief to a claimant who has unreasonably delayed or been negligent in asserting the claim, when that delay or negligence has prejudiced the party against whom relief is
sought.”619
It has been stated that a party may not adopt a “wait and see” approach and then complain for the first time after the award is issued.620
It has been held that the insured’s negotiation of the insurer’s checks following an appraisal award, constituted a full accord and satisfaction of the insured’s claim under the fire policy, despite the fact that no formal language to that affect was contained on the checks.621 While this rule is not universal, care should be taken in considering the consequences of such an act in the local jurisdiction.
However, an insured was determined not to have waived his right to challenge the award when he took possession of two checks from the insurer, did not cash them and made timely application to the panel to reconsider the award and to the court to vacate the award. Such a waiver only results from a clear and unmistakable acquiescence in the judgment and unconditional acceptance of
Black’s Law Dictionary (7th Ed. 1999).
Professional Team, Inc. v. Safeco Ins. Co. of America, 2006 WL 9322414 (Mich. App. 2006).
Hemingway v. State Farm Fire & Cas. Co., 187 A.D.2d 814, 589 N.Y.S.2d 956 (3d Dept.
1992).
the fruits thereof.622
Additionally, it has been held that in attempting to set aside an appraisal award after a final judgment enforcing said award has been entered, mandamus relief is not the appropriate method.623 A writ of mandamus will not be issued as the party has the ability to appeal the judgment as his adequate remedy at law.
In Florida, the court did not properly address the insurer’s defense that certain items were duplicative, deciding that “an alleged mistake of that nature raises an issue directly related to the ‘amount of loss’ sustained,” was a matter within the scope of an appraiser’s authority to evaluate and was thus entitled to respect.624
Kacha v. Allstate Ins. Co., 140 Cal. App.4th 1023, 45 Cal. Rptr.3d 92, 2006 WL
1515827 (2006).
See In re Security Nat.l Ins Co.., 2011 WL 332712 (Tex.App.-Houston [14 Dist.] 2011). 624 Citizens Prop. Ins. Corp. v. River Manor Condominium Ass’n, Inc., 125 So.3d 846 (Fla 4th DCA 2013).