Earlier this month, a federal judge sitting in the Southern District of Indiana examined the scope of the appraisal clause in the property insurance policy. Relying on many of the same cases I have discussed in earlier blogs in this series, the court found that the appraisal panel must consider causation as part of the appraisal process:

The insurance policy at issue here contains an appraisal clause that makes no mention of any exception if there is disagreement on the ‘value of the property or the amount of ‘loss.’’ Both parties concede that there is some amount of loss covered by the policy, but [the carrier] insists that the majority of the roof damage to the apartment complex is attributable to faulty construction or maintenance, rather than storm damage. We agree with [the insured] that it would be extraordinarily difficult, if not impossible, for an appraiser to determine the amount of storm damage without addressing the demarcation between ‘storm damage’ and ‘non-storm damage.’ To hold otherwise would be to say that an appraisal is never in order unless there is only one conceivable cause of damage – for example, to insist that ‘appraisals can never assess hail damage unless a roof is brand new.’1

The court’s reasoning is in line with the current trend of courts across the country, finding that the appraisal process is much less effective (arguably not effective at all) if the appraisal panel is precluded from considering the cause of damage to the insured property when determining the amount of damage.

1 Philadelphia Indem. Ins. Co. v. WE Pebble Point, No. 13-1453, 2014 WL 4390944 (S.D. Indiana Sept. 3, 2014) [Emphasis added].