Memorandums of Appraisal, Appraisal Parameters or similarly named documents which outline the scope of the appraisal are becoming more and more common. The case of Church Mutual Insurance Company v. Circle of Light,1 is a good reminder that all appraisers should know the terms and limitations set forth in any such document before proceeding to appraisal.

Following a hail and wind claim, the insured filed a claim with Church Mutual for loss and damage to its property. Disagreeing with the amount of the loss, the parties proceeded with the appraisal process. Following the submission of separate estimates, the parties agreed to submit only certain aspects to appraisal. They entered into certain Appraisal Parameters which provided, in part, as follows:

2. …the only issue appropriate for appraisal is the value of the property or the amount of the loss, not whether or not covered damage exists.

3. In the present case, the respective appraisers and umpire shall appraise the amount of the loss to the roofing system, including any attached guttering, vents decorate additions, and/or exterior lighting related to the May 31, 2013 hail/wind event.

4. Church Mutual Insurance and Circle of Light Church previously provided their estimates for the amount of damage. The current dispute is not with regarding [sic] to scope of the damage, only the amount of loss to the roofing system, including any attached guttering, vents, decorate additions, and/or exterior lighting related to the May 31, 2013 hail/wind event.

5. The respective appraisers and umpire are not to appraise any damage to the interior, as there is a pending coverage dispute on damage to the interior.

6. Additionally, any exterior damage above and beyond the damage outlined in the parties’ respective estimates is beyond the scope of the current appraisal process.

7. However, should the appraisers locate and/or observe further damage to the exterior, which they believe have been caused by or related to the May 31, 2013 hail/wind event, the appraisers are to notify the parties’ respective attorneys, so the alleged additional exterior damage may be evaluated and inspected by Church Mutual Insurance.

An appraisal award was made and signed by the appraiser for Circle of Light and the Umpire. Church Mutual sought to set aside the appraisal award arguing that it did not comply with the Appraisal Parameters. Specifically, Church Mutual asserted that the estimate submitted on behalf of Circle of Light, upon which the award was based, included damage to the convent roof, garage roof, school roof, and storage roof – items which were not included in the original, pre-appraisal estimate.

The court granted Church Mutual’s motion and set aside the appraisal award. Specifically, the court upheld the Appraisal Parameters as a clear and unambiguous contract entered into by the Parties and signed by each appraiser. In its ruling, the court noted that the pre-appraisal agreement clearly set forth the parameters of the appraisal, which stated that the appraisal should not extend beyond the scope of the estimates previously submitted. The court further highlighted the Appraisal Parameters’ provision that provided a mechanism for either appraiser to address “additional damages” or ambiguity related to the phrase “roofing system” by notifying the parties’ respective attorneys. In essence, the court held that to the extent the appraiser on behalf of the Circle of Light thought there was an ambiguity or had a question about the scope, he should have invoked this provision and contacted counsel. Having not done so, the court found it determinative and set aside the award.

Unfortunately for the insured, this case serves as a good reminder to attorneys and appraisers alike that the terms of pre-appraisal agreement are important, should be purposefully drafted, and followed. In that regard, it is unclear whether the appraisal award would have been set aside if the insured’s appraiser had contacted counsel pursuant to the terms of the Appraisal Parameters.
__________________________
1 Church Mutual Ins. Co. v. Circle of Light, 2019 WL 4277334 (E.D. Mo. Sept. 10, 2019).

  • Noble Nerd

    The Appraisal Clause is limited in direction so in an attempt to clarify and expedite the process these “homemade” memorandum are produced and passed around. I actually collect them when sent to me. As for signing, that’s another discussion entirely. This is a great post, Thank You Christina Phillips. We recently discussed this very issue on an Insurance Appraisal Podcast. https://www.podbean.com/ea/pb-rdd2v-cc1e63

  • Gary Williams

    Thanks for a good discussion of an important issue. I have a different view.

    Why have a Memorandum of Appraisal at all? I’ve probably done 300 appraisals, either as appraiser, umpire, or counsel. I have signed a few Memoranda, but very few. Why not?

    The policy does not authorize the panel to mess with coverage in any way. In some states, the panel is barred from addressing causation. All we are authorized to do is to set the ACV and the amount of loss. If there is a coverage or causation issue, the parties need to hammer that out before the appraisers get started.

    A Memorandum of Appraisal can operate to change or limit an award where there are issues outside the appraisal being litigated. Those legal issues are not for our decision, yet we decide them when we add conditions or limit scope in a memorandum.

    So I don’t sign them. The policy governs these issues; the appraisal panel does not.

  • Edward Fako

    Thank you for a Very Discussion Worthy Topic that is debated frequently amongst our Appraisal Peers Christina.

    A solid Memorandum can be both a sword and a shield, depending on the intent, which may be selectively obliqued by the Memorandum Writing Party. I would like to express though, In My Non-Attorney Opinion, that with few exceptions, mandating a Memorandum is an Extra-Contractual Obligation. In the Standard 165 Line NY Fire Policy, which is the foundational premise of the current Appraisal Clauses, there is no direct mention of any Memorandum Requirement, although I have observed various Court Rulings feel that one may be intended by innuendo via a Declaratory Judgment Action, which could be a topic of itself for another day.

    I strongly point this out specifically, because signing a Memorandum that limits one Parties Rights, further than the Appraisal Clause was originally intended for, may have severe detrimental affects upon the unaware Party, as seemingly may have occurred in the above reported;
    “Church Mutual Insurance Company V. Circle Of Light”, Claim being Appraised.

    There has been an exponential spike by Industry Colleagues, who are newer, yet not necessarily complete novices to the Appraisal Process, whom have reached out for additional comprehensive training about Appraisal Nuances, which has led to a group of dedicated practioners collectively fostering an information library dedicated specifically toward Appraisal Trends, Localized State Regulations and a Fully Engrained Knowledge of Precedential Case Law Rulings, both State and Federally encompassing. This will be an ever evolving resource, intended to supplement the prestigious works of Attorney Jonathan Wilkofsky and his broadly encompassing Legal Treatise;
    “The Law And Procedure Of Insurance Appraisal”

    To that end, we have garnered rewarding favor from some of the most astutely fair minded principals in the industry, to create a Collaborative Unified Mission of sharing centuries worth of experiences into a joint venture to create an Ethically Principled Charter intended to pass on our individual decades of experiences to our like minded brethren on both sides of the Disputant Field. If no Association reigns in some of the deliberate gamesmanship, then the possibly conclusion would be that a Clause that has worked fairly and effectively for around one and a half centuries, could be reduced to 50 Separate States Legislature’s Nuances, rather than create uniformity, which would likely lead to chaos.

    If anyone may be interested in tuning into free Appraisal Relevant Podcasts, I would warmly embrace anyone to inquire at my Appraisal Business Email Address At;

    InsuranceClaimAppraisals@gmail.com

    We have recruited some of the most brilliant and accredited minds of those who have shown by example, what an Independent And Ethical Appraiser should strive for, to be guests and Ambassador’s Of Integrity, whom all would like to lend parts of their legacy to the upcoming younger Appraisal Advocates.

    In summation, please have an experienced Property Insurance Attorney, well versed in Insurance Appraisal and Arbitration Legalities, advise any Appraiser who does not fully comprehend the Rights or Obligations contained in any Unilaterally Produced Memorandum.

  • Edward Fako

    Thank you for a Very Discussion Worthy Topic that is debated frequently amongst our Appraisal Peers Christina.

    A solid Memorandum can be both a sword and a shield, depending on the intent, which may be selectively obliqued by the Memorandum Writing Party. I would like to express though, In My Non-Attorney Opinion, that with few exceptions, mandating a Memorandum is an Extra-Contractual Obligation. In the Standard 165 Line NY Fire Policy, which is the foundational premise of the current Appraisal Clauses, there is no direct mention of any Memorandum Requirement, although I have observed various Court Rulings feel that one may be intended by innuendo via a Declaratory Judgment Action, which could be a topic of itself for another day.

    I strongly point this out specifically, because signing a Memorandum that limits one Parties Rights, further than the Appraisal Clause was originally intended for, may have severe detrimental affects upon the unaware Party, as seemingly may have occurred in the above reported;
    “Church Mutual Insurance Company V. Circle Of Light”, Claim being Appraised.

    There has been an exponential spike by Industry Colleagues, who are newer, yet not necessarily complete novices to the Appraisal Process, whom have reached out for additional comprehensive training about Appraisal Nuances, which has led to a group of dedicated practioners collectively fostering an information library dedicated specifically toward Appraisal Trends, Localized State Regulations and a Fully Engrained Knowledge of Precedential Case Law Rulings, both State and Federally encompassing. This will be an ever evolving resource, intended to supplement the prestigious works of Attorney Jonathan Wilkofsky and his broadly encompassing Legal Treatise;
    “The Law And Procedure Of Insurance Appraisal”

    To that end, we have garnered rewarding favor from some of the most astutely fair minded principals in the industry, to create a Collaborative Unified Mission of sharing centuries worth of experiences into a joint venture to create an Ethically Principled Charter intended to pass on our individual decades of experiences to our like minded brethren on both sides of the Disputant Field. If no Association reigns in some of the deliberate gamesmanship, then the possibly conclusion would be that a Clause that has worked fairly and effectively for around one and a half centuries, could be reduced to 50 Separate States Legislature’s Nuances, rather than create uniformity, which would likely lead to chaos.

    If anyone may be interested in tuning into free Appraisal Relevant Podcasts, I would warmly embrace anyone to inquire at my Appraisal Business Email Address At;

    InsuranceClaimAppraisals@gmail.com

    We have recruited some of the most brilliant and accredited minds of those who have shown by example, what an Independent And Ethical Appraiser should strive for, to be guests and Ambassador’s Of Integrity, whom all would like to lend parts of their legacy to the upcoming younger Appraisal Advocates.

    In summation, please have an experienced Property Insurance Attorney, well versed in Insurance Appraisal and Arbitration Legalities, advise any Appraiser who does not fully comprehend the Rights or Obligations contained in any Unilaterally Produced Memorandum.