The Rhode Island Supreme Court docket lately issued a big choice holding that an insurance coverage appraisal is akin to arbitration and topic to arbitration guidelines. 1 This ruling aligns with Rhode Island’s prior stance on value determinations famous in our publish, Rhode Island Value determinations—The Arbitration Act Applies to Decide the Partiality of Appraisers and Umpires, however contrasts sharply with how different states, akin to Utah and Alabama, deal with the appraisal course of. This choice has vital implications for these concerned with the appraisal course of in Rhode Island. It reminds events to appraisal, appraisers, and umpires that states don’t deal with appraisal and its course of the identical.
The case arose when New England Property Providers Group, LLC (NEPSG), as an assignee of a home-owner’s insurance coverage declare, sought to problem an appraisal award following a dispute over storm harm protection. NEPSG argued that the award must be modified attributable to a later improve in labor prices for vinyl siding or, alternatively, {that a} second appraisal must be performed. The insurer, NGM, contended that the appraisal course of had been correctly executed and that the award was last and binding below arbitration ideas. The Rhode Island Supreme Court docket sided with NGM, affirming that value determinations within the state perform as arbitration and are topic to restricted judicial assessment.
This ruling reinforces Rhode Island’s longstanding therapy of value determinations below the guise of arbitrations, which contrasts with how different states method the problem. In Utah, for instance, courts have explicitly dominated that appraisal shouldn’t be ruled by arbitration guidelines, permitting for broader judicial oversight of appraisal outcomes. Equally, Alabama has held that value determinations are distinct from arbitration, which means they aren’t essentially certain by the identical procedural limitations that courts apply to arbitration awards. These variations can have penalties for insured events and insurers, as they have an effect on the flexibility and course of to problem or modify appraisal determinations.
The Rhode Island Supreme Court docket’s holding emphasizes that value determinations are supposed to offer a last and environment friendly decision of disputes concerning the quantity of loss. Most states agree with this view of appraisal. The courtroom famous that whereas an arbitration award might be modified in circumstances of clear mathematical miscalculations, it can’t be altered primarily based on new data that arises after the actual fact. NEPSG’s declare for extra compensation attributable to elevated labor prices was subsequently dismissed, because the up to date price figures have been revealed solely after the appraisal award had been finalized. The courtroom additionally rejected NEPSG’s request for a second appraisal, underscoring that dissatisfaction with an appraisal consequence shouldn’t be a adequate foundation for reopening the method.
Along with its findings on the finality of value determinations, the courtroom addressed NEPSG’s allegations of breach of contract, dangerous religion, unjust enrichment, and tortious interference. The justices decided that NGM had not breached the insurance coverage contract, because it adopted the coverage’s appraisal clause, performed a full reinspection, and promptly paid the agreed-upon award.
The declare of dangerous religion was additionally dismissed, with the courtroom ruling that using unlicensed appraisers with out additional proof of misconduct didn’t represent dangerous religion. Equally, the unjust enrichment declare was rejected on the grounds that market fluctuations occurring after the appraisal couldn’t be used to justify extra compensation. Lastly, the courtroom discovered no proof that NGM had improperly interfered with NEPSG’s task contract by speaking with the insureds who assigned the declare concerning the settlement of the declare.
This choice highlights the vital variations in how states method insurance coverage value determinations. In jurisdictions like Rhode Island, the place value determinations are seen as arbitrations, challenges to an appraisal award are restricted to arbitration guidelines, and courts will typically uphold the finality of the method. In states with a view like Rhode Island, it is very important assessment the state-specific legal guidelines concerning arbitration and presumably the federal arbitration act, as recommended in Is Appraisal Ruled Beneath the Federal Arbitration Act.
For these concerned in insurance coverage value determinations, this ruling serves as a reminder that the authorized framework governing value determinations varies broadly throughout america. Policyholders, insurers, and appraisal professionals should pay attention to how their state treats value determinations and modify accordingly. In states like Rhode Island, events ought to anticipate that appraisal choices shall be reviewed below arbitration guidelines. The principles concerning the eligibility to be a part of an appraisal panel are typically extra stringent concerning arbitration and must be rigorously reviewed earlier than deciding on appraisers or umpires.
I shall be talking about these appraisal points with different notable audio system, akin to Steve Badger, on the five-day P.L.A.N. Property Loss Appraiser & Umpire Certification Course being held in New Orleans April 28 – Could 2.
Thought For The Day
“Rhode Island is just like the cool basement of New England—small, kinda darkish, and all the time just a little damp, however everybody loves hanging on the market.”
—Conan O’Brien
1 New England Prop. Providers Group v. NGM Ins. Co., 329 A.3d 889 (R.I. 2025).