Appraisal provisions in property insurance policies are intended to provide an alternative dispute resolution process for resolving property insurance claim disputes involving the amount of loss. The amount awarded by the appraisal panel is, with limited exceptions, binding on both parties under the terms of the policy. While the appraisal process is intended to bring finality to a dispute, what happens when the appraisal panel fails to consider certain items due to limitations or restrictions on the scope of the appraisal or unanticipated factual issues not considered by the panel? Such a situation poses the question of whether Colorado appraisal awards preclude any further breach of contract claims for unanticipated circumstances.

Judge David Ebel of the United District Court for Colorado recently discussed such a situation in his 2016 order granting summary judgment in the case of Concept Restaurants, Inc. v. Travelers Indemnity Company.1 Located in Boulder, Colorado, Concept had suffered hail damage to its roof following a large hailstorm in the spring of 2011. Concept invoked the appraisal provision of the policy when the parties could not agree on the amount of loss caused by the hailstorm. Following the appraisal panel’s determination of the amount of loss, Concept alleged newly discovered costs (scaffolding, traffic control, and permitting). The carrier moved to dismiss, arguing that the appraisal award was binding and precluded litigation as to those matters within the scope of the appraisal.

While it was ultimately determined that Concept had offered nothing to demonstrate that the newly discovered costs had not been considered in the appraisal, Judge Ebel discussed an exception to the binding nature of appraisal awards for matters outside the scope of the appraisal. Judge Ebel first determined whether the additional items were appraisable, i.e., whether scaffolding, traffic control, and permitting were within the scope of the appraisal. Having determined these items were appraisable, the court next considered whether these items were actually appraised. In determining that the appraisal panel considered scaffolding, permitting, and traffic control costs, the trial court noted that Concept proposed no limitation on the scope of issues to be considered by the appraisers, exchanged notes on these costs, and finally, certification by the panel that they had heard and seen all of the evidence offered by both the insured and the insurance company and determined the amount of loss without offering qualifications, restrictions, or exceptions.

While appraisal awards in Colorado are typically binding on the parties as to the amount of loss,2 appraisal awards do not necessarily preclude any further breach of contract claims in Colorado.3 Judge Ebel’s order demonstrates the two-step analysis required to determine if an exception exists for matters outside the scope of appraisal such as unanticipated factual issues.
1 Concept Restaurants, Inc. v. Travelers Indemnity Co., No. 1:16-cv-450, 2016 WL 8737773 (D. Colo. Dec. 2, 2016).
2 Wagner v. Phoenix Ins. Co., 348 P.2d 150, 152 (Colo. 1960); Tae Hyung Lim v. Am. Econ. Ins. Co., No. 13-cv-02063, 2014 WL 1464400, at *3 (D. Colo. Apr. 14, 2014) (unreported).
3 Hometown Community Association, Inc. v. Philadelphia Indemnity Ins. Co., No. 17-cv-00777, 2017 WL 6335656, at *4 (D. Colo. Dec. 12, 2017).