The Rhode Island Supreme Court docket not too long ago issued a big resolution 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 submit, Rhode Island Value determinations—The Arbitration Act Applies to Decide the Partiality of Appraisers and Umpires, however contrasts sharply with how different states, corresponding to Utah and Alabama, deal with the appraisal course of. This resolution 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 Companies 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 injury protection. NEPSG argued that the award must be modified as a consequence of a later enhance in labor prices for vinyl siding or, alternatively, {that a} second appraisal must be carried out. The insurer, NGM, contended that the appraisal course of had been correctly executed and that the award was last and binding underneath arbitration ideas. The Rhode Island Supreme Court docket sided with NGM, affirming that value determinations within the state operate as arbitration and are topic to restricted judicial evaluate.
This ruling reinforces Rhode Island’s longstanding remedy of value determinations underneath the guise of arbitrations, which contrasts with how different states method the problem. In Utah, for instance, courts have explicitly dominated that appraisal will not 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 don’t seem to be essentially sure 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 power and course of to problem or modify appraisal determinations.
The Rhode Island Supreme Court docket’s holding emphasizes that value determinations are meant 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 could be modified in circumstances of clear mathematical miscalculations, it can’t be altered based mostly on new data that arises after the very fact. NEPSG’s declare for extra compensation as a consequence of elevated labor prices was subsequently dismissed, because the up to date price figures have been printed 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 final result will not 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, unhealthy 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, carried out a full reinspection, and promptly paid the agreed-upon award.
The declare of unhealthy religion was additionally dismissed, with the courtroom ruling that the usage of unlicensed appraisers with out additional proof of misconduct didn’t represent unhealthy 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 project contract by speaking with the insureds who assigned the declare concerning the settlement of the declare.
This resolution highlights the vital variations in how states method insurance coverage value determinations. In jurisdictions like Rhode Island, the place value determinations are considered 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, you will need to evaluate the state-specific legal guidelines concerning arbitration and presumably the federal arbitration act, as prompt in Is Appraisal Ruled Underneath 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 extensively throughout the US. Policyholders, insurers, and appraisal professionals should pay attention to how their state treats value determinations and alter accordingly. In states like Rhode Island, events ought to count on that appraisal selections will probably be reviewed underneath 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 will probably be talking about these appraisal points with different notable audio system, corresponding to Steve Badger, on the five-day P.L.A.N. Property Loss Appraiser & Umpire Certification Course being held in New Orleans April 28 – Might 2.
Thought For The Day
“Rhode Island is just like the cool basement of New England—small, kinda darkish, and at all times somewhat damp, however everybody loves hanging on the market.”
—Conan O’Brien
1 New England Prop. Companies Group v. NGM Ins. Co., 329 A.3d 889 (R.I. 2025).
