Hurricane Laura certainly caused significant damage. Insurance claim differences of opinion about these damages and their value may be resolved through appraisal.

One Louisiana case, St. Charles Parish Hospital Service District No. 1 v. United Fire and Casualty Company.1 is often cited for the proposition that Louisiana allows appraisal panels to consider causation. Yet, the same case clearly states that such causation determinations are not binding and may be challenged in court.

Parties to property insurance policies in Louisiana considering appraisal as a final means to resolution of their property insurance dispute should carefully read and consider the court’s discussion about causation, coverage, and the non-binding nature of causation determinations in appraisal before agreeing to invoking appraisal:

[D]efendant challenges the award on the grounds that the appraisers made improper causation determinations. It points to the appraisal award, which states that the appraisers ‘have conscientiously preformed [sic] the duties assigned to [them] in accordance with the appraisal provisions of the policy and do hereby award the amounts established below as the actual cash value of the damages as the result of Wind…’…Defendant further contends that O’Leary testified that he made improper determinations of causation in his appraisal.

Although this is the rule in other states, see, e.g., Munn v. Nat’l Fire Ins. Co. of Hartford, 237 Miss. 641, 115 So.2d 54, 58 (1959)(holding that what caused the damage ‘was not a question for the appraisers to decide’), defendant has cited no Louisiana authority standing for the proposition that appraisers may not make causation determinations. In fact, in Fourchon Docks, Inc. v. National Union Fire Insurance Company, the district court determined that ‘the appraisers and the umpire fulfilled their duty under the policy,’ even though ‘the appraisers unanimously concluded that damages caused to the reverse osmosis water treatment plant due to high watertotalled [sic] $18,940.00.’

Even if it would be improper for appraisers to make determinations as to causation under Louisiana law, the extent to which the appraisers here made such determinations would not render the award a nullity. First of all, the plain language of the policy states that ‘[i]f there is an appraisal, [defendant] will still retain [its] right to deny the claim.’ Any decisions of causation contained in the award may still be challenged, and neither defendant nor the Court is bound by them.

Additionally, the plain language of the policy requires the appraisers to determine the ‘amount of the loss.’ O’Leary testified that an appraiser needs to take causation into account to a certain extent in order to determine what the term ‘amount of the loss’ refers to. He stated that both he and Provencher ‘understood that’s the mechanics of how an ordinary appraisal is done.’…His testimony makes clear that an appraiser’s job is not to determine policy coverage or liability, but that causation must be considered in order to determine the scope of the loss that must be measured….Again, his determinations of causation are not binding, and defendant retains the right to challenge them. In light of the presumption of correctness afforded to appraisal awards…and the absence of Louisiana authorities to the contrary, the Court finds that the extent to which O’Leary considered causation in his appraisal does not by itself warrant vacating the award.

The ruling is clear that the appraisal panel could determine the causation issue. However, either party could challenge the award based on causation being a coverage issue. It clearly said that “determinations of causation are not binding.”

As I have recently said in webinars and my afternoon livestream educational sessions, Louisiana insurance law is a different breed of cat. It is more complex because while it often recites the same rules as found in other states, there are more exceptions to those rules. This does not make Louisiana Insurance law wrong. It is just a little different, a flavor requiring a little deeper study and careful consideration of how these differences impact practical decisions concerning treatment of insurance claims.

If you want further information and questions answered about causation and appraisal in Louisiana and Mississippi, please join Ashley Harris and me tomorrow at 2 PM for Tuesday at 2 With Chip Merlin.

An Afternoon Thought

Justice is the great interest of man on earth. It is a ligament which holds civilized beings and civilized nations together.
—Daniel Webster
1 St. Charles Parish Hospital Service District No. 1 v. United Fire and Cas. Co., 681 F.Supp.2d 748 (E.D. Louis. 2010).