Appraisal provisions in property insurance policies typically provide for a judge of a court of record in the state in which the insured property is located to select an umpire if the parties cannot agree upon one. What happens if one party fails to respond to the appraisal demand? Can a judge select an umpire without notice to the non-responding party?
That was the issue in Witcher v. State Farm Fire and Casualty Company.1 There, the insureds demanded an appraisal following a fire loss. State Farm received notice of the written appraisal demand, but did not respond to it within 20 days of receipt as required by its homeowner’s policy. The subsequent 15-day deadline in the appraisal provision for the parties’ appraisers to agree on an umpire also passed without the selection of an umpire and without State Farm’s designation of an appraiser. The insureds then filed a petition in Illinois circuit court for the judicial appointment of an umpire. However, they never requested that the petition and summons be served on State Farm. The circuit court granted the petition the same day it was filed, and appointed an umpire listed in the petition. The insureds’ appraiser and the umpire eventually signed an appraisal award, which the circuit court confirmed.
Prior to the appraisal award being confirmed, State Farm learned of the petition to appoint an umpire. It moved to vacate the appointment of the umpire, which motion was denied. It also objected to the petition to confirm the award, which the circuit court overruled. State Farm appealed these rulings.
On appeal, an Illinois appellate court vacated the circuit court’s rulings appointing an umpire and confirming the appraisal award. It agreed with State Farm that the circuit court lacked personal jurisdiction when it entered the order appointing the umpire because no summons was issued, and State Farm was not served with the petition for appointment of an umpire.
In reaching its decision, the appellate court rejected the insureds’ contention that summons and notice were not required because this was not an action at law, and the appraisal provision did not require the issuance of summons and service of the petition for appointment of an umpire. According to the insureds, all they were required to do was present their petition to a judge of a court of record in the state. The appellate court disagreed, reasoning that the language in the appraisal provision – “you or we can ask a judge of a court of record in the state where the residence premises is located to select an umpire” – contemplated filing a petition and a judicial action, which the insureds did. Having elected to invoke judicial action, the insureds were bound to follow the established rules of civil procedure; meaning, they were required to give State Farm notice of the petition seeking appointment of an umpire and an opportunity to be heard before the circuit court ruled on the petition, which they failed to do.
1 Witcher v. State Farm Fire and Cas. Co., 2018 IL App (5th) 170001-U (Ill. App. Jan. 26, 2018).