Property Insurance Update – The Appraisal Process

The appraisal process has been the source of disagreement and even some confusion for insurers in Pennsylvania. While there are no clear trends emerging from the courts, we believe that some recent federal decisions have created uncertainty where there should be none.

Some states are expanding the “scope” of what appraisers can properly consider.  A 2014 Pennsylvania federal court decision found that the extent of a loss, or whether a covered peril is the cause of certain damage, is proper for appraisal.  A federal district court in Indiana, in another 2014 decision, allowed appraisers to determine the amount of loss caused by a covered peril, and to also find the amount caused by an excluded peril.  In New York, a bill was signed into law on November 21, 2014, allowing appraisers to determine the extent of the loss and to consider causation issues.  Texas courts meanwhile, are currently permitting appraisers to address causation issues.  However, in New Jersey, a trial court refused to extend appraisal to disputes over the extent of damage, the repair work required, or the cause of the loss.  The New Jersey court held – in our opinion, correctly – that appraisal is not the forum for a coverage dispute or a causation battle.

Pennsylvania coverage disputes are not appropriate for appraisal.  The Pennsylvania Supreme Court has held as much.  That said, we do concede that some well-regarded federal courts have interpreted the state of law differently.  The issue is ripe for decision by a state court of controlling authority.  Stay tuned.

Of course, if you are interested in additional detail, please contact a member of our Insurance Industry Group:  Robert T. Horst,  C. Scott Rybny,  Daniel L. Petrilli or Brian O. Phillips.


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