In a major victory for policyholders, a federal Justice of the Peace in Northern California lately 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 principle home. After disputes over the loss quantity, the court docket 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 lawyer Joel Gumbiner focus on how California value determinations are to be performed as arbitrations and never like how value determinations are accomplished in most states. Gumbiner is an skilled skilled in the case of California value determinations, and he was famous in footnote 5 of the court docket’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 court docket rejected most of its arguments.
Chubb challenged the policyholder’s appraiser, Robert Bresee, claiming he wasn’t sufficiently unbiased on account of prior work with the policyholder’s counsel. The court docket discovered that Bresee’s earlier engagements (18 over 5 years) with policyholder’s counsel didn’t disqualify him or display bias. This ruling reinforces that enterprise relationships between appraisers and counsel, with out extra, are inadequate to display partiality.
Chubb additionally argued that the appraisal panel exceeded its authority by making implicit causation determinations. Whereas the court docket 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 court docket 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 court docket to vacate the $1,048,215.43 award for investigation and pre-construction prices. The court docket 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 attention-grabbing twist, Chubb tried to sue its personal policyholders for breach of the implied covenant of fine religion and truthful dealing. The court docket rejected this try, reinforcing that in California, the obligation of fine religion is “unconditional and unbiased” of policyholder obligations and primarily protects policyholders from insurers, not vice versa.
This case serves as a reminder that events to an appraisal usually face an uphill battle when making an attempt 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 unbiased, routine skilled relationships with counsel aren’t routinely disqualifying. An enormous exception to that is the legislation in Colorado, the place your complete panel is extra akin to an unbiased jury fairly than how appraisers are sometimes certified in different states.
For policyholders, this determination gives useful precedent supporting the finality of appraisal awards and limiting insurers’ potential to problem them primarily based 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 big loss claims the place substantial damages are at stake, and insurers are extra usually tempted to problem what they view as “unfavorable” appraisal awards. It exhibits that courts will typically respect the appraisal course of and its outcomes, intervening solely when there are clear violations of authority or real problems with bias.
For these thinking about California value determinations, I counsel studying “Do Typical Insurance coverage Appraisers Observe 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).
