Almost yearly (if not more frequently), insurance companies face the argument that the appraisal process provided by the typical insurance policy should be expanded. As a refresher, back in 2001, the Tennessee Court of Appeals issued its opinion in Merrimack Mutual Fire Insurance Company v. Batts, 59 S.W.3d 142 (Tenn. Ct. App. 2001), where it held that questions of coverage and causation were not appropriate for resolution through the appraisal process, and that the question of ultimate liability is something not for resolution through appraisal, but rather judicial challenge. The purpose of appraisal, as that case explained, was a determination of the monetary value of the damage. Since that time, Tennessee has produced other opinions dealing with the scope of the appraisal process, such as Artist Building Partners v. Auto-Owners Mutual Insurance Company, 435 S.W.2d 202 (Tenn. Ct. App. 2013). Basically, these opinions deal with the proper scope of appraisal, and conclude that the appraisal panel is authorized to decide only those issues which are within the scope of its authority as granted by the insurance policy.
On February 17, 2016, our Court of Appeals issued an Opinion in Thomas v. The Standard Fire Insurance Company, No. E2015-01224 –COA-R3-CV, which reaffirmed both Batts and Auto-Owners. The policy in that case indicated the appraisal panel would “set the amount of loss,” similar to the charge given to the appraisal panel in Batts. When the umpire and one other appraiser agreed on the amount of loss, the insureds sought more money. There was no allegation that the appraisal was improperly conducted, nor were there any coverage issues involved with the award. As the Court noted, the insureds simply desired more money. The Court found that, in simply ruling on the amount of loss, and not addressing any coverage issues, the appraisal panel did not exceed the scope of its authority. In so ruling, the Court once again concluded that appraisal is not arbitration.
For a copy of the opinion, download Standard Fire Opinion.