Can Appraisal Be Demanded If Only Estimates Rather Than Invoices Indicate a Dispute in the Amount of Loss?

Insurance companies sometimes argue that appraisal is not appropriate because documents have not been turned over by the policyholder. In a case where the insurer argued that invoices or other documents indicating the cost of repairs had not been turned over, the court still required the matter to go to appraisal. 1

The insurer argued the following:

Country Mutual argues that the Loss Payment provision establishes a condition precedent to an appraisal demand. According to Country Mutual, this provision creates three conditions precedent to appraisal in a case where repairs have been made: (1) the damaged property has actually been repaired; (2) the insured actually spent money on the repairs; and (3) the expenditure was necessary to repair or replace the damaged property. Country Mutual argues that because Silverado does not have invoices or other documents evidencing the amounts Silverado itself actually spent for repairs to be made it has failed to satisfy a condition precedent to being entitled to appraisal.

The court disagreed:

Not so. ‘Under Minnesota law, a condition precedent is an event, including the other party’s performance, that must occur before a party is required to perform a certain contractual duty…. If the event required by the condition does not occur, there is no breach of contract.’ …The Policy does not make either party’s obligation to participate in an appraisal party depend upon any event identified in the Loss Payment provision, and Country Mutual does not explain why its terms purportedly do so.

…

The Loss Payment provision does not refer to the appraisal provision. Nor does the appraisal provision mention the Loss Payment provision. Country Mutual points to no other part of the Policy that suggests participation in appraisal is contingent on this provision.

The court then stayed further litigation until the appraisal was completed:

The Court finds a stay is appropriate based on the record in this proceeding. Staying the litigation has the potential to lessen the impact on judicial resources. It is no secret that parties to insurance agreements often agree to resolve disputes following an appraisal. But even if the parties cannot settle this litigation, and if the appraisal panel determines that the amount of loss is equal to or lower than Country Mutual’s estimate, that determination could end a substantial portion of this litigation. At the same time, if the case is not stayed, Silverado will be forced to incur significant litigation expenses in pursuit of a claim that could become moot. Finally, a stay will not significantly prejudice Country Mutual. If the litigation goes forward after the appraisal is completed, Country Mutual (and Silverado) will be able to pursue discovery related to both Silverado’s claims and Country Mutual’s defenses and counterclaims. There is no reason to think that the appraisal process will be so protracted that witnesses’ memories would significantly change or that relevant documents will be unavailable. Country Mutual makes no claim that waiting until after the appraisal process to have the discovery phase of this litigation continue will cause it any financial hardship or otherwise preclude it from having its coverage defenses fully and fairly adjudicated.

The insurer may eventually prevail after the appraisal based on whatever coverage issues it raises. But for now, the matter is going to appraisal.

Thought For The Day

Don’t wait. The time will never be just right.
—Napoleon Hill

1 Silverado Park Ass’n v. Country Mut. Ins. Co., No. 23-cv-3687, 2024 WL 3565792 (D. Minn. July 29, 2024).