Bob Norton of the Insurance Appraisal and Umpire Association (IAUA) loves to play with the audience with the types of questions in the title of this post. Bob will ask for a show of hands on how many say “yes” or “no”. Then pause and ask, how many say the answer is “it depends.” Then he will ask the people who raised their hands and said, “It depends,” why they gave that answer. It is a fun and effective learning exercise for many questions that arise during evaluations.
The answer to the first question in today’s title is “it depends.”; State law varies as to whether causation of injury may be considered in an assessment process. Some states also take a very limited view of what a review panel can determine. Alabama is one of those “very limited” states when it comes to everything an adjudication panel can do.
For example, in an Alabama court decision announced this week1, the court noted the dispute between the parties regarding an assessment:
According to Enclave, it properly invoked the appraisal provision under the policy, and although the insurers have admitted this, they have significantly delayed this process under the guise of requiring additional inspections prior to appraisal. Enclave argues that because the policy defines no timeline for the parties to name appraisers, the insurers can delay the process until it becomes impossible or impractical for the appraisers to attempt to select an arbitrator within a reasonable time.
The insurers argue that the parties’ dispute in this case concerns issues of causation and coverage that are not covered by the appraisal provision. According to the insurers, Enclave claims that Hurricane Sally caused damage to many other parts of its buildings, which must be repaired and replaced, while the insurers believe that the other parts were either not damaged at all or were not damaged by Hurricane Sally; is therefore not covered by the insurance. The insurers argue that because the parties have not agreed on causation or coverage, and the court has not yet decided the issues of causation and coverage, the adjudication process is not available at this time.
The court then ruled that insurers noted the Alabama rule:
Existing Alabama case law makes clear that “adjudications do not have the authority to decide questions of coverage and liability’ in insurance disputes.” Caribbean I Owners Assoc. Inc. v. Great Am. ins. Co., 619 F.Supp. 2d 1178, 1188 (SD Ala. 2008) (citing Rogers v. State Farm Fire & Cas. Co., 984 So. 2d 382, 392 (Ala. 2007)). In denying the insured’s request to invoke the appraisal process, the court held that the insured was not entitled to invoke the appraisal process set forth in the policy because any appraisal made in this case would involve assessments of causation and liability that are within the sole jurisdiction of the courts, not insurance appraisers.
In Enclave’s response brief, it acknowledges that there is a factual dispute as to whether some or all of its alleged damages were actually caused by a covered loss. And at the scheduling conference held on June 16, 2023, Enclave’s counsel admitted that the issue of whether all alleged damages are covered is highly contested. Since the parties’ dispute is not only about the amount of loss, but the cause of the damage, the assessment is therefore not appropriate at this time. Enclave’s claim is therefore rejected.
Which states allow causation to be considered? Merlin Law Group attorney Ashley Harris is a specialist in this assessment issue and wrote a court-cited law review article, noted in Ashley Harris cited by the Iowa Supreme Court regarding causation issues in appraisal proceedings.
IAUA has a special course in beautiful Park City, Utah. The event features insurance company attorney Steve Badger and yours truly, who will be speaking in the Rockies about the raging issues of appraisal. You can also get IAUA certification as an appraiser or judge at this event, which is next month, July 20-21.
Those who participate will receive a special bonus from me that is only available to people who participate in personal evaluation presentations that I participate in.
Here is the link to register https://www.iaua.us/events
Success is nothing more than a few simple disciplines practiced every day.
– John Rohn
1 QBE Specialty Ins. Co. v. The Enclave at Oak Hill Owners Assoc., No 23-100, 2023 WL 4112935 (SD Ala. June 21, 2023).