With the proliferation of appraisal demands, the ins and outs of appraisal in Tennessee will begin to take shape through the judiciary. In Artist Building Partners v. Auto-Owners Mut. Ins. Co., the Court of Appeals recently made clear that it will not disturb the binding nature of an appraisal award.
For a little history lesson, one of the key cases controlling insurance appraisals in Tennessee is the Merrimack Mut. Fire Ins. Co. v. Batts case, in which the Court of Appeals held that a policy giving an appraisal panel the authority to determine the "amount of the loss" does not vest the appraisers with the authority to decide questions of coverage and liability. The issue of what constitutes a true coverage question has been a gray and murky area for quite some time.
In the Artist Building Partners case, one of the issues to be decided by the appraisal panel was the "period of restoration," which the appraisal panel ultimately concluded should end approximately 2 and a half years after the loss. In reviewing that decision, the Court of Appeals noted with approval that it was appropriate for the appraisal panel to take into consideration the fact that the insurer did not pay the full amount owed prior to the appraisal award in calculating the period of restoration. The Court also seemed to give significant weight to the fact that the insurer placed restrictions on the insured’s ability to alter the damaged building for a period of time due to the possibility of a subrogation claim. In the end, the court upheld the policy’s language that the appraisal panel’s findings would be binding, and seemingly granted them broad discretion in reaching a decision without digging too deep into the bases for the panel’s decision.
This case is an important one because it shows that Tennessee courts are loathe to overturn an appraisal panel’s findings. The parties bargained and had a contract to allow appraisal to make a binding decision, and courts will generally shy away from invalidating an award just because one of the parties is unhappy. In my opinion, the Court got it right here. There were no true "coverage" issues and the parties had essentially agreed to let the appraisal end the dispute.