Most insurance policies contain an appraisal clause to resolve a dispute over the amount of loss for a claim for property damage. This amount is typically considered binding on the parties. Interestingly, the state of Illinois analogizes the appraisal process to arbitration and places great emphasis on an individual’s access to court to resolve disputes and clear language in the policy if the carrier takes the position that no suit can be brought after participation in appraisal. This analogy laid the groundwork for an Illinois’ Appellate Court’s opinion in DeGroot v. Farmers Mutual Hail Insurance Company of Iowa.1
Paul DeGroot, brought suit against Farmers Mutual Hail Insurance Company, seeking redress for damage sustained to his vegetable crop. The parties disagreed over the amount of the loss and an appraisal ensued. After the appraisal award was entered, DeGroot filed suit because the carrier underpayed his claim. Farmers Mutual moved to dismiss the complaint on the basis that the policy’s appraisal remedy was binding upon the parties. The trial court denied the motion, and Farmers Mutual filed an appeal.
The sole issue on appeal was whether the trial court erred in determining the appraisers’ decision was not binding on the parties.
The appellate court reasoned that:
Given the fact that the common law placed great importance upon the individual’s right to seek redress in court, we conclude that any waiver of that right must be clear and unambiguous. In other words, the defendant could not require the plaintiff to accept the appraisers’ decision as final without telling the plaintiff that the decision would be final.
Because the policy at issue did not clearly provide that the plaintiff gave up his right to file suit by seeking appraisal, the appellate court held the appraisers’ decision was not binding upon the parties and the trial court did not err in refusing to dismiss DeGroot’s claim.
In Illinois, any waiver of one’s right to seek redress in court must be clear and unambiguous. This ruling places a greater burden on carriers to clearly state within the policy that the appraisal process is binding on the parties and no suit can be brought against the carrier over the amount of loss determined through appraisal. Language that the amount of loss is binding appears insufficient under Illinois law.
1 DeGroot v. Farmers Mut. Hail Ins. Co. of Iowa, 643 N.E.2d 875 (Ill. App. 3d. 1994).