Bob Norton always raises a Pennsylvania case1 at the Insurance Appraisal and Umpire Association (IAUA) seminars that is cited in Jonathan Wilkofsky’s treatise, The Law and Procedure of Insurance Appraisal (3rd Edition).2 Everybody doing appraisals should purchase Jonathan’s book.   

Regarding this Pennsylvania appraisal case, Wilkofsky states:     

The appraisers may not exceed the authority granted to them in the appraisal agreement. The appraisal team has no authority to reopen or revisit areas of claim already agreed to or paid by the carrier. The process only pertains ‘(i)n case the insured and this company shall fail to agree.’ It is not within the scope of the appraisers’ authority to award less than an undisputed amount previously paid or agreed to by the parties. As to such amounts previously paid, the parties did not ‘disagree on the amount of loss’ and the appraisers thus exceeded their authority. The court granted the insured’s petition for an upward modification of the award in such amount.

Researching this case, I also noted that an American Bar Association law review2 states:

At issue in Maiden Creek T.V. & Appliance, Inc. v. General Casualty Insurance Co. was the impact of a voluntary agreement between the parties on the valuation of a stock loss on a subsequent appraisal. In that case, the insurer paid the agreed amount. Because it did so, the court held that that the necessary predicate to invoke the appraisal process was not met, and the appraisers had no authority to reevaluate the stock loss. Therefore, the court modified the appraisal award to reflect the agreed amount, as opposed to the lower amount set by the appraisers.

The court’s holding stated:

The first question before us is whether the amount awarded in the October 23, 2007, document for loss of stock materials, including smoke-damaged electronics, was within the scope of the appraisers’ authority. The appraisal process at hand is governed by the contract between the parties. That contract, the insurance policy, states that the parties may resort to the appraisal process only if they ‘disagree on the amount of the loss.’

Here, the loss amount of $27,557.27 for the stock materials had been agreed to and paid by defendant over three years prior to the appraisal award. The parties did not ‘disagree on the amount of the loss’ as to this item, so that the necessary predicate to invoke the appraisal process under the Policy had not been met. Thus, the reduction of the $27,557.27 to $24,801.50 exceeded the authority of the appraisers and umpire. We will grant plaintiff’s petition insofar as it requests an upward modification of the appraisal award by $2755.77 to reflect a $27,557.27 loss of stock materials.

So that everybody has a better understanding of the facts, I researched the policyholder’s brief. The brief stated:

This matter arises from a commercial fire insurance policy dispute. August 28, 2003, Plaintiff suffered fire damage to its commercial retail facility and business property located at 8261 Allentown Pike, Reading, Berks County, Pennsylvania. After a delay of more than a year and a half in paying certain aspects of the insurance claim, Plaintiff initiated the present suit by Complaint filed on or about February 14, 2005. Plaintiff’s Complaint asserts claims for Breach of Contract, Bad Faith, pursuant to 42 P.S.C.A. §8371 and violation’s of Pennsylvania’s Unfair Trade Practices Consumer Protection Law. See Plaintiff’s Complaint.

Defendant sought to have the disputed claim issues addressed through the Appraisal provisions of the insurance policy. By Order dated September 23, 2005, this Honorable Court issued a stay with respect to the litigation and directed that certain issues be addressed through the appraisal process as outlined in the insurance policy.

On or about October 27, 2007, a preliminary award was entered by Umpire Carey. With the exception of the floor electronic items discussed below, the award did not consider several items which were the subject of previous agreement as between the party’s appraisers. This is further confirmed by Mr. Carey’s letter of August 10, 2007 which outlines the very limited scope of issues that he was addressing and which does not include any of the now disputed issues. By Petition filed November 20, 2007, Plaintiff sought to modify and/or appeal the umpire’s award. The present Brief is filed in support thereof.


During the Appraisal process, Plaintiff was advised that Defendant’s appraiser was seeking to reopen portions of the claim which had already been negotiated, agreed upon, and paid by General Casualty. Specifically, one aspect of Plaintiffs claim included smoke and water damage to various display electronics such as stereos, televisions, etc. Maidencreek President, Larry Sutton, and General Casualty adjuster, Stephen Esbenson, agreed upon a fair value for these damages which reflected a reduced sales price and the cost of extended warranties. Ultimately, Maidencreek and General Casualty agreed upon a damage value of $27,557.22 and this amount was paid to Maidencreek. Maidencreek was then able to sell those items at a reduced cost.

Notwithstanding this agreement, Defendant’s appraiser, John McHenry, argued vigorously that further reductions were warranted. Ultimately, the award of October 23, 2007 included a line item for the above-referenced damaged electronics and reflected an additional reduction in value of $2,755. See Exhibit 2. General Casualty’s previous agreement and payment of this portion of the claim was confirmed by Defendant’s prior counsel, Lee Janiczek, Esquire, in his email of September 3, 2004. This email provided the first detailed breakdown of General Casualty’s payments to Maidencreek, and indicated as follows: Scott, as we discussed, the payments which have been made consist of;

$50,000 for business property (in part to satisfy the $27,557.22 reduction in sale price of the stock).

Defendant’s claim log narrative, which is identified as a series of ‘Investigative Reports’ equally confirms this agreement. Copies of the cited Investigative Reports are collectively set forth at Exhibit 4. Defendants ‘Third Investigative Report’ dated December 17, 2003, indicated as follows:


On 12/10/03, the insured has submitted a spreadsheet outlining the wholesale cost and retail selling price of the smoke damaged HDTV televisions and electronic components. The retail selling price of the smoke damaged televisions and electronic components totals $78,134.40 as detailed in the enclosed spreadsheet. I initially confirmed the quantities, wholesale and retail cost of the damaged stock during my two initial inspections of the property. The stock loss as confirmed totals $27,557.22, which represents the cost (2% discount (loss) applied) to the damaged televisions, and the cost to purchase three year warranties on the televisions. The insured has documented a stock loss in the amount of $27,557.22.

Based on these facts, it is evident to me that this portion of the loss was agreed to and not part of the dispute, which was sued upon before the court ordered the parties to appraisal.  

If one follows this case, the answer to the question is “no.” Why should an insurer not be bound by its agreements supported by consideration?

The IAUA is holding a Conference on September 7 and 8 in Lancaster, Pennsylvania. Unfortunately, I am currently scheduled to be in a trial representing a large and historic church that week. So I may not be there. But my partner, Javier Delgado, a former insurance company claims adjuster before becoming an insurance company claims slayer, will be there for me. He can add a very balanced and enlightened view about appraisal. Here is the agenda:

September 7

8-830 – Check in and breakfast, provided Welcome, ADR, Disputes in Disputes, IAUA founding Legal Issues in Appraisal – global perspective Javier Delgado, Esq and TBA Defense Counsel

Lunch, provided

Who May Serve as Appraiser, Who Should?

Adjusting vs Appraising, noteworthy distinctions and licensing implications

Repair vs Replace, is Causation Coverage?

Rendering an Effective Appraisal Award – some PR takeaway

Reception, follows discussion running 5p – 7p

September 8

8-830 – Check in and breakfast, provided Certification Class – addresses Appraiser and Umpire

1130 – 1230 – Certification Exams proctored

Here is the link for registration.

Thought For The Day

Your life works to the degree you keep your agreements.

—Werner Erhard

1 Maiden Creek T.V. & Appliance v. General Cas. Ins. Co., No. 05-667, 2008 WL 351906 (E.D. Penn. Feb. 8, 2008).

2 Wilkofsky, Jonathan, The Law and Procedure of Insurance Appraisal, 3rd Edition, Ditmas Park Legal Publ. (2015).

3 William A. Schreiner Jr., Jay M. Levin, et al., Recent Developments in Property Insurance Coverage Litigation, 44 Tort Trial & Ins. Prac. L.J. 711, 714 (2009).