The appraisal process is to provide a plain, speedy, inexpensive and just determination to an insurance dispute. However, as many first party property lawyers and homeowners have experienced, appraisal is not necessarily speedy, inexpensive or just. In fact, many times the insurer will refuse to participate in the appraisal process requiring the insured to bring a lawsuit to force the insured to participate.
Such a situation arose in the case of McCoy v. American Family Mutual Insurance Company.1 The McCoy’s sustained storm damage to their home and notified American Family accordingly. After conducting an inspection, American Family advised the insured of the estimated amount of the loss. The insured disagreed with American Family’s estimate and provided the insurer with its own estimate which identified additional damages. Following a second inspection, the insured and insurer continued to disagree on the amount of the loss and American Family directed the insured to the appraisal provision within the policy.
The insureds withdrew their first appraiser on the basis that the individual selected did not handle appraisals. Following the selection of their second appraiser, the insureds withdrew their demand for appraisal advising American Family that they did not understand the appraisal process and were unable to obtain information on the appraisal process from American Family Agents.
American Family advised the insureds that it would not change its prior determination as to the amount of the loss, claiming the delays in naming an appraiser and on-going repairs/additions to the insured premises hindered the insurer’s ability to obtain an independent estimate of the actual damage. As such, American Family stated that appraisal was “no longer available”.2
Following a renewed demand for appraisal which was refused by American Family, the insureds filed suit, seeking an order compelling American Family to comply with the policy’s appraisal provision. American Family asserted, in part, that it did not need to comply with the policy’s appraisal provision because the conditions of the insured property were substantially altered without notice to American Family.
After concluding that the policy’s appraisal provision had been triggered, the District Court of Minnesota found that American Family was unable to identify any legal basis that would excuse it from performance and granted the insureds’ motion to compel appraisal. In relevant part, the Court concluded that American Family had been shown the damage twice before the insureds began construction allowing American Family to make a determination as to the amount of loss at that time. Moreover, American Family was unable to substantiate its claims of impossibility of performance given the fact that its appraiser had not even looked at the insured premises since the additions. Submitting a claim to an appraisal is not inappropriate merely because performing the appraisal might be difficult.3
1 McCoy v. American Family Mut. Ins. Co., 2016 WL 3022072 (D. Minn. May 25, 2016).
2 Id. at *2.
3 Id. at *5 citing Condos of Shenandoah Place v. SECURA Ins., 2016 WL 614381 at *4 (D. Minn. Feb. 16, 2016).