In a major victory for policyholders, a federal Justice of the Peace in Northern California not too long ago rejected most of Federal Insurance coverage Firm’s (aka Chubb) makes an attempt to vacate a considerable appraisal award in a Glass Hearth case. The case, Pollock v. Federal Insurance coverage Firm, highlights the restricted grounds for difficult appraisal awards and reinforces the binding nature of the appraisal course of. 1
The dispute arose from the September 2020 Glass Hearth that severely broken the insureds’ St. Helena property, together with burning a visitor home to the bottom and inflicting smoke and poisonous chemical harm to the primary home. After disputes over the loss quantity, the courtroom ordered an appraisal, which resulted in a $32.1 million award for restore prices.
I used to be in Marina Del Rey yesterday for the primary day of the packed Pacific Coast Affiliation of Public Insurance coverage Adjusters (PCAPIAS) Annual Convention. I used to be listening to California legal professional Joel Gumbiner focus on how California value determinations are to be carried out as arbitrations and never like how value determinations are finished in most states. Gumbiner is an skilled professional in the case of California value determinations, and he was famous in footnote 5 of the courtroom’s order.
I famous Chubb as an insurance coverage firm that appears for methods to pay in a earlier weblog publish, Chubb Calls Rivals Low-cost And Unfair Federal Insurance coverage. Not this time. It tried to vacate the award on a number of grounds, however the courtroom rejected most of its arguments.
Chubb challenged the policyholder’s appraiser, Robert Bresee, claiming he wasn’t sufficiently impartial because of prior work with the policyholder’s counsel. The courtroom discovered that Bresee’s earlier engagements (18 over 5 years) with policyholder’s counsel didn’t disqualify him or reveal bias. This ruling reinforces that enterprise relationships between appraisers and counsel, with out extra, are inadequate to reveal partiality.
Chubb additionally argued that the appraisal panel exceeded its authority by making implicit causation determinations. Whereas the courtroom acknowledged that appraisal panels can not make protection determinations, it allowed the panel’s valuation of damages to face, recognizing the sensible necessity of contemplating causation in figuring out restore prices.
The courtroom upheld the core $32.1 million award for restore prices to return the constructions to their pre-loss situation. This represents a major victory for the policyholders and demonstrates that almost all courts are reluctant to disturb appraisal determinations absent compelling causes.
Chubb’s solely success was convincing the courtroom to vacate the $1,048,215.43 award for investigation and pre-construction prices. The courtroom discovered these prices fell outdoors the scope of figuring out the precise worth of broken constructions. I’ll focus on a case that claims you’ll be able to acquire these damages in a weblog tomorrow.
In an fascinating twist, Chubb tried to sue its personal policyholders for breach of the implied covenant of excellent religion and honest dealing. The courtroom rejected this try, reinforcing that in California, the obligation of excellent religion is “unconditional and impartial” of policyholder obligations and primarily protects policyholders from insurers, not vice versa.
This case serves as a reminder that events to an appraisal sometimes face an uphill battle when trying to vacate appraisal awards. It additionally demonstrates the significance of choosing certified appraisers and understanding the scope of the appraisal course of. Whereas appraisers should stay impartial, routine skilled relationships with counsel will not be mechanically disqualifying. A giant exception to that is the legislation in Colorado, the place your complete panel is extra akin to an unbiased jury quite than how appraisers are sometimes certified in different states.
For policyholders, this choice offers beneficial precedent supporting the finality of appraisal awards and limiting insurers’ capacity to problem them based mostly on alleged appraiser bias or exceeding authority. It additionally reinforces that insurers can not flip the tables and sue their policyholders for dangerous religion within the claims course of.
The case is especially related for giant loss claims the place substantial damages are at stake, and insurers are extra typically tempted to problem what they view as “unfavorable” appraisal awards. It exhibits that courts will usually respect the appraisal course of and its outcomes, intervening solely when there are clear violations of authority or real problems with bias.
For these focused on California value determinations, I recommend studying “Do Typical Insurance coverage Appraisers Comply with California Code of Civil Process 1282.2?”
Thought For The Day
Each champion was as soon as a contender who refused to surrender.
—Rocky Balboa
1 Pollock v. Federal Ins. Co., No. 21-cv-09975, 2024 WL 4700637 (N.D. Cal. Nov. 5, 2024).