The Supreme Court of Georgia has held that an appraisal clause in an insurance policy can only resolve “a disputed issue of value…it cannot be invoked to resolve broader issues of liability.”1 This probably sounds familiar, because courts across the country generally hold that the “amount of loss” can be appraised, but issues of “coverage” cannot be determined in the appraisal process.
Despite this general principle of property insurance appraisal, in March, the Court of Appeals of Georgia affirmed a trial court’s order dismissing an insured’s lawsuit, which sought to enforce the appraisal provision of the policy, for failure to state a cause of action.2
In Lam v. Allstate Indemnity Company, Allstate conceded that there was wind damage to the insured’s roof and agreed to pay for it, but the parties could not agree upon the extent of the damage—how much of the roof was damaged by the wind. Interestingly, the Court found that this was a “coverage” dispute, which is not a proper basis for appraisal.
The dissent, written by Judge McFadden, thoroughly explained why, in contrast to the Court’s majority opinion, this dispute was appropriate for the appraisal process:
The parties’ dispute in this case does not require either a construction of the insurance policy or a determination of whether the insurer should pay. The policy’s coverage provisions are clear, as is Allstate’s liability under them….There is no dispute that Lam’s dwelling incurred some loss that is covered by the policy and that Allstate is therefore liable to Lam to some degree. The dispute is the amount of that covered loss or damage – whether the covered loss or damage extends to the entire roof or only specific shingles. This dispute is subject to resolution under the policy’s appraisal provision, see State Farm Lloyds, 290 S.W.3d at 891 (“To the extent the parties disagree which shingles needed replacing, that dispute would fall within the scope of the appraisal.”, and the trial court erred in dismissing, for failure to state a claim, Lam’s action seeking to enforce that provision.
If courts continue to interpret the scope of appraisal as the Court of Appeals of Georgia did in this case, then what is the purpose of the appraisal provision? If a dispute over the amount of shingles damaged from wind is not subject to appraisal then the scope of appraisal is limited to mere pricing disputes. Courts should consider the value that the appraisal provision provides insureds and insurers alike – resolving disputes without the necessity of costly, drawn-out litigation.