Appraisal May Be Used to Determine the Amount of a Covered Loss In Missouri

In American Family Mutual Insurance Company v. Dixon,¹ homeowners were insured by American Family. The policy contained a fairly standard appraisal provision. In April 2012, the property was damaged in a wind and hail storm and the homeowners made a claim for damages done to the driveway, porch, and deck. American Family did not find damages so they asked the homeowners if they wanted to go to appraisal. American Family then hired someone to draft an estimate of damages and later filed a motion to have an umpire appointed. Homeowners moved to dismiss the motion and filed counterclaims for breach of contract and vexatious refusal. The trial court dismissed the counterclaims and an appeal followed.

The homeowners argued that the appraisal process may not be used to resolve coverage issues because that would constitute arbitration which is not allowed in Missouri pursuant to RSMo. §435.350.² The appellate court found that the appraisal process was to be used to determine the amount of covered losses and not for coverage issues, so appraisal was not appropriate in this case.

Further, the court found that appraisal may be demanded by either party, but that right is limited to resolve differences in the amount of damages for a covered loss. It also limits the appraisers to determining actual cash value and the amount of loss.

The appraisal provision in the policy stated:

If you and we fail to agree on the amount of damages as the result of a covered loss, either may demand that the actual cash value and the amount of the loss be set by appraisal. In this event, each party will choose a competent and disinterested appraiser…The appraisers will appraise the loss, stating separately actual cash value and loss to each item.

Whether the appraisal provision applies in Missouri depends upon whether the dispute is about coverage or the amount of loss.³

---

¹ American Fam. Mut. Ins. Co. v.Dixon, 450 S.W.3d 831 (2014).
² A written agreement to submit any existing controversy to arbitration or a provision in a written contract, except contracts of insurance and contracts of adhesion, to submit to arbitration any controversy thereafter arising between the parties is valid, enforceable and irrevocable, save upon such grounds as exist at law or in equity for the revocation of any contract. Mo. Ann. Stat. § 435.350 (West)
³ Hawkinson Tread Tire Service Co. v. Indiana Lumbermens Mut. Ins. Co., 362 Mo. 823, 245 S.W.2d 24 (1951).