California property insurance and public adjusters know better than that disputes over “amount of loss” rarely travel alone. They arrive hand in hand with causation fights, coverage questions, and a healthy dose of creativity from both sides. A recent federal court decision involving a Colorado construction project shows just how strong California’s pro-appraisal framework is, even when the loss happened in another state. 1
What surprised me reading through the briefs was how little attention the parties paid to the conflict-of-laws minefield. The policy covered a Colorado project, yet the question of appraisal enforceability was decided under California law without much resistance. Parties dealing with multi-state risks might want to take note of how important and nuanced each state law is regarding how and what can be argued in an appraisal.
The dispute arose from a major water-damage claim in which the parties could not agree on repair costs, claim-preparation expenses, and, most hotly contested, the length and cost of the delay in business opening following the loss. The policyholder moved to compel appraisal, framing the disagreement exactly the way California courts prefer: this is a measurement problem, not a legal problem. Their argument smartly leaned on the Federal Arbitration Act and California Insurance Code section 2071, both of which treat appraisal as a species of arbitration. Once the disagreement concerns quantifying loss into dollars, days, and scope, California courts typically step aside and let appraisers do their job. The motion also used the insurer’s own correspondence against it, highlighting repeated references to disputes over “how to measure” the delay rather than whether delay was a coverage issue at all.
The insurer countered with a narrower reading of the policy. It argued that the appraisal clause governed “LOSS,” defined as accidental physical damage, while the Delay in Opening Endorsement dealt with “DELAY,” a different creature entirely. In the insurer’s view, no appraisal could proceed until a court ruled on whether the exclusionary endorsements applied, because delay has its own exclusions and conditions. That argument had surface appeal, especially given the insurer’s causation expert, who blamed the delay on construction issues rather than water damage.
The insurer also pointed to the insured’s separate lawsuit against the project’s architect, citing it as evidence that the delay stemmed from design complications, not from the insured loss. Those arguments offered the court a perfectly respectable pathway to finding that this was a coverage fight dressed up as a valuation fight.
But the judge didn’t buy it. Applying California law, the court held that appraisal provisions in first-party property policies are enforceable arbitration agreements and that the only threshold questions are whether a valid provision exists and whether the dispute falls within its scope. On both counts, the insurer fell short.
The court reasoned that disputes over repair costs, delay duration, and claim-preparation expenses are exactly the kind of valuation disagreements that appraisal panels are designed to decide. The existence of a coverage dispute, whether the delay was caused by the water damage or by construction issues, did not bar appraisal. Appraisers decide amounts. Judges decide coverage. That division of labor is central in California, and the insurer’s effort to collapse the two categories simply failed to persuade the judge.
The court also made clear that parties do not get discovery as a precondition to appraisal. California appraisal is informal by design. Allowing discovery demands to halt the process would undermine the very efficiency for which the appraisal system was built. For claims professionals, this should serve as a reminder that California courts expect insurers to evaluate and document causation early; waiting to demand discovery after appraisal is triggered will not keep the dispute out of appraisal. It is a throwback to an era when the trial may be the first time a party gets to know all the facts.
Practitioners should remember that there is a special California statute governing appraisals. These are different than the classic appraisals in other states. California appraisals are conducted like arbitrations, with attorneys providing evidence to a panel. I discussed this in Do Typical Insurance Appraisers Follow California Code of Civil Procedure 1282.2.
Accordingly, what continues to intrigue me is how quickly both sides and the court slid into California law despite a Colorado loss and Colorado-specific policy endorsements. This is the kind of scenario where conflict-of-laws issues should be flashing like hazard lights. Yet the insurer barely touched the topic. By conceding California law, or at least not contesting it, they walked straight into a jurisdiction where appraisal is favored, coverage disputes do not block valuation, and judges are comfortable letting appraisers put numbers on disputed damage even when coverage remains contested. If the insurer believed Colorado law offered a narrower appraisal scope, that argument never showed up in any meaningful way.
For adjusters, claims managers, and other insurance professionals handling California claims, especially complex construction losses, the lesson is straightforward. California courts compel appraisal broadly. They do not tolerate procedural stalling. When the dispute involves intertwined questions of how much damage occurred, how long the delays lasted, and which portion of the claimed expenses are reasonable, the odds heavily favor an appraisal proceeding first, with coverage questions sorted out later.
Thought For The Day
“If you don’t know where you are going, you’ll end up someplace else.”
—Yogi Berra
1 K4 Dev v. Ace American Ins. Co., No. 8:25-cv-01540, 2025 WL 2995024 (C.D. Cal. Oct 6, 2025).
