Can Appraisal Determine Which Hailstorm Caused the Damage?

Insurance companies and their experts have a long and growing checklist of excuses not to pay hailstorm losses. Many of those excuses center on allegations that the observed damage was not caused by the particular hailstorm being adjusted. When insurers say the alleged hailstorm damage occurred outside the policy time frame, can the matter still be appraised? 

While the answer may call upon specific state law, a Kentucky federal judge compelled appraisal last month with this ruling:1

The appraisers and umpire shall determine whether the property damage at issue in this case was caused by a hailstorm that occurred on June 17, 2019. If the appraisers and umpire determine that the property damage at issue was caused by a hailstorm that occurred on June 17, 2019, then the appraisers and umpire shall determine the value of loss. In determining the value of the loss, the appraisers and umpire shall consider only damage resulting directly from the June 17, 2019 hailstorm. Under no circumstances shall the appraisers or the umpire consider the value of loss to include any damage that occurred outside the policy’s effective period, February 26, 2019 to February 26, 2020.

Before doing so, the federal judge noted Kentucky law:

Although some courts in other jurisdictions hold that causation is part of the coverage analysis and a legal question for the court, see, e.g., Rogers v. State Farm Fire & Cas. Co., 984 So. 2d 382, 392 (Ala. 2007), federal courts in Kentucky have repeatedly said that ‘the court may let the appraiser determine both the cause of loss and the amount of loss.’ Motorists Mut., 2005 U.S. Dist. LEXIS 24415, 2005 WL 2674987, (citing CIGNA Ins. Co. v. Didimoi Prop. Holdings, 110 F. Supp. 2d 259, 268-69 (D. Del. 2000); see Woods Apts. v. United States Fire Ins. Co., 2012 U.S. Dist. LEXIS 207483, 2012 WL 12996188 (W.D. Ky. May 30, 2012); Cincinnati Specialty Underwriters Ins. Co. v. C.F.L.P. 1, LLC, 2015 WL 5793951, (W.D. Ky. Sept. 30, 2015) (‘The cause of damage and amount of loss are for the umpire to resolve.’). This is true even if the appraisal provision does not expressly say that the appraisers can determine the cause of loss.

The lesson is that the appraisal panels can make those determinations if the state law allows it. Alabama does not, and Kentucky does. Always look to the state law because laws vary between the states.

I know that this may seem that the insurance system is flawed because there is not a set rule but depends on state law. Yet, even Congress has passed laws allowing each state to regulate insurance as the state seems fit to do.        

Thought For The Friday

Work hard. I got tenure a year early. Junior faculty members used to say to me: ‘Wow, what’s your secret?’ I said: ‘It’s pretty simple. Call me any Friday night in my office at 10 o’clock, and I’ll tell you.’

—Randy Pausch

1 Estate of Mattingly v. State Auto Prop. & Cas. Ins. Co., No. 3:21-cv-274, 2023 U.S. Dist. LEXIS 9275, 2023 WL 320004 (W.D. Ky. Jan. 19. 2023).