Over the past few posts, I’ve explored a couple of recent opinions from federal courts in the Eastern and Middle Districts of Tennessee that explored the appropriate use of appraisal in resolving disputes about the “scope” of a loss. For this next installment, we move to West Tennessee for yet another recent case on the same topic.
In Smith v. State Farm Fire & Cas. Co., my client’s home was damaged by the March 3, 2020 tornado, made a claim with State Farm, disagreed with State Farm’s assessment of the amount of loss, and ultimately invoked the insurance policy’s appraisal clause. Just like in Ingram and Harper, State Farm refused to allow an appraisal of the loss to occur. After filing suit, we quickly filed a Motion to Compel Appraisal. State Farm, of course, opposed the motion, reasoning that the dispute was about “scope” and requesting that if an appraisal was allowed it should be limited to the scope of work approved by State Farm. Long story short, State Farm lost.
On October 27, 2021, Magistrate Judge York issued an Order Granting Motion to Compel Appraisal (copy here), ruling that State Farm’s attempts to avoid and limit appraisal were improper. Refreshingly, Judge York’s analysis was simple — State Farm’s policy mandates appraisal when: (1) there is a dispute about the amount of loss; and (2) a written demand appraisal is made. Thus, because there was no dispute that Ms. Smith properly invoked appraisal, “the only issue the Court must decide is whether the parties disagree on the amount of loss.” The answer was yes and appraisal was ordered to proceed.
Below is the substantive portion of the Court’s ruling:
[State Farm] contends the parties disagree only on the scope of covered loss, not the amount of loss. Specifically, Plaintiff claims there is residual damage to the buildings that has not, but should have been, covered, and [State Farm] asserts there is no additional covered loss as there is no residual damage. “By contesting whether there is additional loss, however, [a Defendant] necessarily disagree with [a Plaintiff] that the total amount of loss Plaintiff incurred includes any additional loss.” Kush Enters., LLC v. Mass. Bay Ins. Co., (3:18-cv-00492-CLC-DCP, J. Collier Opinion (D.E. 16-4). Additionally, “the plain language of the provision allows either party to demand appraisal when there is a disagreement on the amount of loss.” Id. Here, as [State Farm] is contesting Plaintiff’s assertion that additional loss should be covered, the total amount of loss is in dispute. Therefore, the Court finds that the criteria are satisfied and appraisal is appropriate.
Notably, State Farm filed a motion with the District Judge for review of Magistrate Judge York’s Order. Spoiler alert – – Judge Breen affirmed Judge York’s decision. I’ll explore Judge Breen’s opinion in my next post.