In 2021, courts across Tennessee issued a handful of decisions that continue to define the nuances of the Tennessee Court of Appeals’ opinion in Merrimack v. Batts that is now twenty years old. Suffice it to say the landscape is quickly changing and I’m excited to share the new developments. The next few posts will explore these decisions and their importance on insurance appraisals in Tennessee. First up is Ingram v. State Farm Fire & Cas. Co., a case pending in the Eastern District of Tennessee at Chattanooga.
In Ingram, my firm represents Mr. Ingram, whose home was damage in the April 2020 storms that impacted Hamilton County. After he made a claim with State Farm, a disagreement arose between he and State Farm concerning the amount of loss so he invoked his insurance policy’s appraisal clause. As has become rather commonplace over the last few years, State Farm refused to allow the appraisal process to proceed. Instead, State Farm sent a letter to Mr. Ingram declining to move forward with appraisal, stating as follows:
“After reviewing the estimate provided to us on December 1, 2020, and comparing it to the State Farm estimate, we determined there are both price and scope differences present between the two estimates. The appraisal provision in the policy is to resolve differences in the price of the repairs which State Farm determined were covered. Appraisal cannot be used to resolve disputes regarding covered damages. Therefore, appraisal would not be appropriate [as the appraisal panel has] no authority to decide questions of coverage.”
In response to State Farm’s refusal to appraise the amount of loss, Mr. Ingram filed suit asserting breach of contract and quickly filed a Motion to Compel Appraisal. State Farm of course opposed the motion and on December 14, 2021, the Court issued its ruling and ordered the appraisal process to proceed. In issuing his opinion, Judge McDonough made several key common-sense points that run contrary to many insurance companies’ routine handling of appraisal demands.
First, the Court rejected State Farm’s contention that the dispute was about “coverage” rather than amount of loss. Instead, the Court noted that because the parties agreed that there was coverage for Mr. Ingram’s loss as a general matter (State Farm had previously estimated and issued a partial payment for the storm damage), the real question was the extent and amount of the loss. Judge McDonough ruled:
“Ingram contends that that there is additional loss that is eligible for coverage, while State Farm contends that this is an issue of scope of coverage. However, this dispute must necessarily be treated as one regarding the total amount of loss, rather than coverage, as State Farm has already conceded that at least some storm damage is covered. . . . To decide otherwise in this instance would allow insurance [companies] to avoid appraisal by claiming there is a coverage issue, even when the dispute concerns additional amounts of loss. Consequently, the Court determines that this dispute falls within the appraisal provision’s ambit.”
Second, the Court was not unmindful that State Farm itself wrote the insurance policy’s appraisal clause, which is mandatory if there is a dispute about the amount of loss and appraisal is properly invoked.
Lastly, the Court cautioned the appraisal panel to be sure its appraisal of the loss is detailed and itemized so that State Farm can challenge any portions of the award that it may later determine are not covered by the terms of its insurance policies.
This case was a big win not only for Mr. Ingram but also for policyholders across Tennessee. For years, State Farm and other insurers have tried to make a distinction between “scope of loss” and “amount of loss,” a distinction that doesn’t exist in reality. The Ingram opinion, and a few others I’ll discuss in future posts, make clear that no such distinction exists.