Maryland Federal Court Holds Appraisal Subject to Federal Arbitration Act

    The Maryland Federal District Court granted the insured's motion to dismiss because the matter was appropriate for arbitration. Travelers Cas. Ins. Co. of Am. v. Papagiannopoulous, 2023 U.S. Dist. LEXIS 130876 (D. Md. July 27, 2023). 

    The insured's property was damaged by fire. A claim was filed with Travelers. Both Travelers and the insured had inspectors conduct estimates of damage. The insured demanded arbitration and appointed its inspector as appraiser. Travelers declined to name an appraiser, arguing that the insured's appraiser was not impartial. 

    Travelers filed suit seeking a declaratory judgment disqualifying the insured's choice as appraiser. The insured filed a motion to compel appraisal and to stay the action pending an appraised award. The insured also moved to dismiss for improper venue. 

    The court acknowledged that other courts had long interpreted appraisal to be analogous to arbitration. Further, a court could not entertain an attack upon the qualifications or partiality of arbitrators until after the conclusion of the arbitration and rendition of an award. The Federal Arbitration Act (FAA) contained no provision expressly granting courts the authority to remove a party-appointed arbitrator prior to the conclusion of the arbitration.

    The insured's motion to dismiss argued that the appraisal dispute should be referred to an arbitration panel pursuant to the FAA. The court agreed. It did not have subject-matter jurisdiction to consider the dispute, because the parties' appraisal dispute was subject to the FAA. In addition, Travelers' challenge to the insured's appraiser was premature because such a challenge could not be raised until after the party had completed the appraisal process. Therefore, the insured's motion to compel arbitration and motion to dismiss were granted.