Many insurance policies contain an appraisal provision which provides a mechanism to insurance companies and policyholders to resolve disputes between themselves relating to the amount of the loss resulting from a storm or loss causing event without a formal lawsuit. The appraisal is “an act of estimating” or “a valuation of property by the estimate of an authorized person.”1 The provision permits a panel of qualified and disinterested individuals to review the loss and determine a fair valuation of the loss without influence or direction from the parties.
Often the stand-alone appraisal provision of an insurance policy provides:
If we and you disagree on the amount of loss, either may make written demand for an appraisal of the loss. In this event, each party will select a competent and impartial appraiser. The two appraisers will select an umpire. If they cannot agree, either may request that selection be made by a judge of a court having jurisdiction. The appraisers will state separately the amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will be binding. Each party will:
a. Pay its chosen appraiser; and
b. Bear the other expenses of the appraisal and umpire equally.
If there is an appraisal, we will still retain our right to deny the claim.
While this language is clear that each party select a competent and impartial appraiser upon the written demand for appraisal of the loss, it does not provide a timeline for when a party shall make a written demand or when a party must select an appraiser, raising a number of issues. For example, does litigation filed by an insurance company foreclose a policyholder’s ability to invoke the appraisal provision of the insurance policy? Our office recently litigated this very issue.
AKN LeClaire sustained hail damage to property located in Bettendorf, Iowa, and opened a claim with its carrier, Acuity. While the parties agreed there was damage caused by the storm, they were unable to reach an agreement on the amount of damage. AKN LeClaire demanded that Acuity either send payment, engage conversation, or name your appraiser. Acuity subsequently filed a declaratory lawsuit, asking the court to determine that it only owed the amount of damages identified by its engineer. Our office filed a counterclaim seeking an order compelling the parties to appraisal, which Acuity argued had been waived by AKN LeClaire’s response to the lawsuit.
Judge Robert Pratt of the Southern District of Iowa issued an order that the parties shall participate in an appraisal:
‘[W]hen appraisal is not demanded until after suit is filed, the question is whether the demand for appraisal was waived or instead was made within a reasonable time after impasse was reached.’ Terra Indus., Inc., 981 F. Supp. at 599.
. . . .
Under Iowa law, waiver is ‘the voluntary or intentional relinquishment of a known right.’ Scheetz v. IMT Ins. Co. (Mut.), 324 N.W.2d 302, 304 (Iowa 1982) (quoting Travelers Indem. Co. v. Fields, 317 N.W.2d 176, 186 (Iowa 1982)). ‘Waiver can be shown by the affirmative acts of a party, or can be inferred from conduct that supports the conclusion waiver was intended.’ Id. ‘When the waiver is implied, intent is inferred from the facts and circumstances constituting the waiver.’ Id. Here, Defendant did not expressly waive its right to invoke the appraisal provision. Thus, the Court must examine the facts and circumstances to determine whether it can infer that Defendant intended to waive its right to an appraisal. See id.
. . . .
In determining whether a party has waived appraisal, courts consider ‘the timeliness of the demand in light of the circumstances as they existed at the time the demand was made’ and ‘whether there would be any prejudice to the other party resulting from the delay in demanding an appraisal.’ Id.
. . . .
Although the fact that litigation has begun is a relevant factor in determining whether Defendant waived its right to an appraisal, Terra Indus., Inc., 981 F. Supp. at 602, in this case, it was not the party now asserting a right to appraisal that filed suit, but rather, the party refusing to participate. Defendant made clear it was pursuing an appraisal at its first opportunity, i.e., when it filed its Answer to Plaintiff’s Amended Complaint and Counterclaims. See ECF No. 8 at 15– 17, 19–20. Further, the Court notes that only four months passed between the time Plaintiff filed its complaint and Defendant’s next written demand for an appraisal. The fact that Defendant complied with the Court’s procedural rules rather than subjecting itself to a default judgment should not be held against it. Thus, the Court concludes Defendant made its demand for appraisal within a reasonable time.2
Judge Pratt’s order thoroughly discusses the pitfalls that an inexperienced policyholder can face when dealing their insurance company. Had our client not expressly demanded appraisal prior to, and in response to the lawsuit filed by Acuity, there is a strong likelihood that remedy would have been waived. Please do not hesitate to reach out to our office if you are facing a similar scenario or have questions generally pertaining to your Iowa property insurance claim.
1 Unetco Indus. Exch. v. Homestead Ins. Co., 57 Cal.App.4th 1459 (1997).
2 Acuity Mutual Ins. Co. v. AKN LeClaire, No. 3-20-cv-99 (S.D. Iowa May 17, 2021).