Bob Norton of the Insurance Appraisal and Umpire Association (IAUA) loves to play with the audience with the types of questions found in the title of this post. Bob will ask for a show of hands about how many say “yes” or “no.” Then pause and ask, how many say the answer is “it depends.” Then he will ask the people who raised their hands, saying, “It depends,” why they gave that answer. It is a fun and effective learning exercise for many issues which arise during appraisals. 

The answer to the first question of today’s title is—“it depends.” State law varies about whether causation of damage can be considered in an appraisal process. Some states also have a very limited view about anything an appraisal panel can determine. Alabama is one of those “very limited” states when it comes to anything that an appraisal panel can do. 

For example, in an Alabama trial court decision announced this week,1 the court noted the dispute between the parties regarding an appraisal:

According to Enclave, it has properly invoked the appraisal provision under the policy, and although the Insurers have acknowledged such, they have extensively delayed this process under the guise of demanding further inspections prior to appraisal. Enclave asserts that because the policy does not define any timeline for the parties to name appraisers, the Insurers could delay the process until it would to impossible or impractical for the appraisers to attempt to select an umpire within any reasonable time. 

The Insurers contend that the parties’ dispute in this case involve issues of causation and coverage which are not subject to the appraisal provision. According to the Insurers, Enclave contends that Hurricane Sally caused damage to many other parts of its buildings, which must be repaired and replaced, while the Insurers opine that those other parts either were not damaged at all or were not damaged by Hurricane Sally; thus, are not covered under the policy. The Insurers contend that because the parties have not agreed on causation or coverage, and the Court has not yet decided the issues of causation and coverage, the appraisal process is not available at this juncture.

The court then ruled for the insurance companies noting the rule in Alabama:

Extant Alabama case law makes clear that “appraises are not vested with the authority to decide questions of coverage and liability” in insurance disputes.” Caribbean I Owners Assoc. Inc. v. Great Am. Ins. Co., 619 F. Supp. 2d 1178, 1188 (S.D. Ala. 2008) (citing Rogers v. State Farm Fire & Cas. Co., 984 So. 2d 382, 392 (Ala. 2007)). In denying the insured’s request to invoke the appraisal process, the court held that the insured was not entitled to invoke the appraisal process set forth in the insurance policy because any appraisal performed in this case would entail determinations of causation and liability that lie within the sole purview of the courts, not insurance appraisers. 

In Enclave’s reply brief, it acknowledges that there are factual disputes about whether some or all of its claimed damages were in fact caused by a covered loss. And, at the scheduling conference conducted on June 16, 2023, counsel for Enclave conceded that the issue of whether all of the claimed damages are covered is very much in dispute. Accordingly, because the parties’ dispute does not merely involve the amount of the loss, but the cause of the loss, appraisal is not appropriate at this time. Enclave’s motion is thus denied.

What states allow causation to be considered? Merlin Law Group attorney Ashley Harris is a specialist on this appraisal issue and wrote a court-cited law review article, noted in Ashley Harris Cited by Iowa Supreme Court Regarding Causation Issues in Appraisal Proceedings

The IAUA is having a special course in beautiful Park City, Utah. The event features insurance company attorney Steve Badger and yours truly, who will square off in the Rocky Mountains about the raging issues of appraisal. You can also obtain IAUA certification as an appraiser or umpire at this event, which is next month, July 20-21.  

Those attending will get a special bonus from me which is available only for people who attend in-person appraisal presentations I participate in. 

Here is the link to register

Thought For The Day

Success is nothing more than a few simple disciplines, practiced every day.

—John Rohn 

1 QBE Specialty Ins. Co. v. The Enclave at Oak Hill Owners Assoc., No 23-100, 2023 WL 4112935 (S.D. Ala. June 21, 2023).