In a recent decision by the United States District Court for the Eastern District of Wisconsin, a federal judge issued an order denying the property owner’s request for appraisal, holding that the insurance policy’s appraisal provision is “limited to disputes over valuation, not causation or coverage.”1
The case arose out of a fire that occurred at Plaintiffs’ dwelling. Plaintiff and State Farm each retained separate contractors to estimate the cost of repairing the fire damage. After numerous exchanges and revisions between the contractors, the Plaintiffs finally demanded appraisal. State Farm essentially rejected the request and indicated while it would enter into appraisal over the areas where the contractors had “pricing differences,” it would not enter into appraisal on areas where there were differences in “scope.”
Plaintiffs moved for summary judgment requesting that the court enter an order requiring State Farm to participate in the appraisal process. Plaintiffs asserted that the “amount of the loss” in the appraisal provision included determinations on the scope or extent of damage and the method of repair. Unfortunately, the Eastern District of Wisconsin did not agree and held that the “appraisal process is limited to circumstances where the insurer and insured disagree as to the ‘amount of loss,’ of the valuation of the loss, not the scope or extent of damage and the method of repair.” In other words, the court held that an appraiser should not consider what caused each item of damage, only the cost of repairing the damage.
It is unclear, based on the opinion, whether counsel for Plaintiffs supported its argument with the well-established case law on appraisal from the Northern District of Illinois, which sets forth that disputes as to (a) causation (whether a covered peril caused the damage), (b) the scope of damage (the extent or scope of the physical damage from the covered peril), (c) the scope of repairing or replacing the damage, and (d) the cost of repairing or replacing the damage, are disputes as to the amount of loss, not coverage, and thus appropriate for appraisal.2
While not binding upon the Eastern District of Wisconsin, the Northern District of Illinois decisions would be considered persuasive authority, which a court may consider.
Unfortunately, moving forward, it is likely that insurers in the State of Wisconsin will use this decision to support further denial of appraisal.
1 Higgins v. State Farm Fire & Cas. Co., No. 1:22-cv-00198, 2022 US Dist. LEXIS 117477 (E.D. Wis. July 5, 2022).
2 See Khaleel v. AmGuard Ins. Co., 2022 U.S. Dist. LEXIS 24851 (N.D. Ill. Feb. 11, 2022); B&D Investment Group, LLC v. Mid-Century Ins. Co., 2021 U.S. Dist. LEXIS 246853 (N.D. Ill. Dec. 28, 2021); Adam Auto Group, Inc. v. Owners Ins. Co., 2019 WL 4934597 (N.D. Ill. Oct. 7, 2019); Windridge of Naperville Condo. Ass’n v. Philadelphia Indem. Ins. Co., 2018 WL 1784140 (N.D. Ill. Apr. 13, 2018); Spring Point Condo. Ass’n v. QBE Ins. Corp., 2017 WL 8209085 (N.D. Ill. Dec. 13, 2017); Runaway Bay Condo. Ass’n v. Philadelphia Indem. Ins. Cos., 262 F.Supp.3d 599 (N.D. Ill. Apr. 25, 2017); Windridge of Naperville Condo. Ass’n v. Philadelphia Indem. Ins. Co., 2017 WL 372308 (N.D. Ill. Jan. 26, 2017); Philadelphia Indem. Ins. Co. v. Northstar Condo. Ass’n, 15 cv 10798 (N.D. Ill. Oct. 18, 2016 (D.E. 34)).