Colorado case law on property insurance appraisal is sparse. Colorado case law on enforcing appraisal awards is non-existent. So, if a policyholder receives a final appraisal award and the insurance company won’t pay it, a policyholder must likely file a lawsuit against the insurer to receive payment. Policyholders in Colorado are forced to look to the 10th Circuit and other states to predict how a Colorado state or federal district court will handle appraisal awards.
Many states treat appraisal awards the same as or similar to arbitration awards. For example, the Illinois Court of Appeals has issued several opinions holding that an “appraisal clause” is similar to an “arbitration clause” and recognizing an appraisal proceeding as a form of arbitration.1
Other states follow this. See Meineke v. Twin City Fire Ins. Co., 892 P.2d 1365, 1369 (Ariz. Ct. App. 1994) (“Despite some differences between arbitration and appraisal, appraisal is analogous to arbitration.”); Aetna Cas. & Sur. Co. v. Ins. Comm’r, 445 A.2d 14, 20 (Md. 1982) (“[N]otwithstanding the distinctions between an appraisal under an insurance policy appraisal clause and arbitration, appraisal is analogous to arbitration. Consequently, this Court has applied arbitration law to appraisal clauses in insurance policies.”); Hozlock v. Donegal Cos./Donegal Mut. Ins. Co., 745 A.2d 1261, 1263 (Pa. Super. Ct. 2000) (holding that for purposes of judicial review, appraisal is analogous to common law arbitration, rather than statutory arbitration).
One of the few 10th Circuit cases on this topic indicates that the 10th Circuit also views appraisals as similar to or the same as arbitration. Valid arbitration agreements may only be set aside based on traditional contract defenses such as fraud, misconduct and unconscionability.2
In Aetna Insurance Company v. Murray,3 the 10th Circuit used some of the same wording (fraud, misconduct) in describing circumstances where an appraisal award may be overturned. The Court stated,
The submission of a disagreement as to the amount of a loss to disinterested appraisers is a lawful and commendable method of determining such a controversy; the awards of such appraisers are presumptively correct, and should not be set aside except upon clear and convincing evidence of fraud, gross mistake, misconduct of the appraisers, or their failure to perform the duties committed to them by the agreement of submission.
The Court in Regional Air, Inc. v. Canal Insurance Company,4 noted a very similar holding by the lower district court:
[T]he district court agreed, ruling that the contract allowed Regional Air to avoid the appraisal award (and so obtain a greater amount for the damage done to its tractor trailer) only if it could prove at trial that the umpire’s award was a product of fraud, mistake, or misconduct. [Emphasis added]
However, this particular issue was not raised on appeal so the decision does not discuss or rule on the lower court’s holding.
Even so, given these two 10th Circuit cases, it is likely Colorado state and federal courts will view an appraisal award much like an arbitration award. It is therefore also likely Colorado policyholders can file suit against their insurer when the insurer refuses to pay an appraisal award, and successfully motion the court to enforce the appraisal award—just like it would an arbitration award.
1 See Beard v. Mount Carroll Mut. Fire Ins., 561 N.E.2d 116 (1990).
2 Doctor’s Assocs., Inc. v. Casarotto, 517 U.S. 681, 686-87 (1996).
3 66 F.2d 289, 290 (10th Cir. 1933).
4 639 F.3d 1229, 1232 (10th Cir. 2011).