The Form and Substance of the Appraisal Award and the Authoritative Cases that have Argued the Details

The form and substance of the appraisal award have been the subject of numerous legal challenges over the years. Appraisal awards must be in writing, itemized, and signed by any two of the umpire and two appraisers, following a prescribed method agreed upon by the parties. If there is a deviation from the general procedure, it must be unanimously agreed upon by the appraisers. The purpose of an appraisal award is to determine the amount of loss, not its specific allocation. While an award does not have to explain the means by which the umpire reached the award, it must contain basic explanations and adjustments, including the necessary facts, figures, and calculations to account for any adjustments.

In many cases, the lack of detailed itemization invalidated an award. An itemization must be provided for damage to each item covered by the policy. The appraisal award should not be a lump-sum award and should contain an itemized list of losses and damages for each item. Where policy language differs from the Standard Fire Policy and expressly mandates itemization with requirements that the appraisers state “separately” and “in detail” the actual cash value of “each item,” an award that is stated as a lump sum is invalid. The award must be segregated by category of coverage in order to be considered adequate.

The degree of itemization required varies by state, but in general, the award must adequately specify the value and loss of each item insured. It has been held that an appraisal award will not be invalidated because of the appraisers’ failure to itemize unless prejudice or injustice is shown. In some states, insurers are not allowed to draft a policy less favorable to the insured than those found in the Standard Fire Policy. Therefore, the carrier can be deemed to have waived the terms of the policy if the appraisal agreement terms are significantly different from the procedure.

The award should include allowances for debris removal and/or demolition costs, and these expenses should be considered and included in the award. The appraisal agreement or the panel should not focus exclusively on costs and calculations of repair and replacement and fail to consider additional coverages in the award.

Quotient awards, arrived at when each of the appraisers and/or the umpire renders an opinion, each added together and divided to determine the average, are inappropriate and have been held to be invalid.

An umpire in an insurance appraisal pursuant to the policy is not obliged to articulate the reasons for the award. However, when they choose to do so, these explanations become part of the award for judicial review. The appraisal process is confidential, and the appraisers may refuse to provide explanations or documents related to their activities during the appraisal process.

Explanations of the award or any documentation created during the appraisal process are not subject to discovery due to the fact that appraisal deliberations subject to the process are sacrosanct and confidential. The purpose of the appraisal process is to provide a final and binding decision on the value of the loss, not to provide detailed explanations of how the appraisers reached their decision. In most cases, the lack of detailed itemization will invalidate the award unless the appraisers unanimously agree on the deviation from the general procedure. The award should also contain an itemized list of damages and losses for each item covered by the policy. A lump-sum award is generally insufficient. The degree of itemization required varies by state, but in general, the award must adequately specify the value and loss of each item insured. The majority view is that an award which does not separately state the value of the property insured and the amount of damages is void. As stated above, the appraisal process is confidential, and appraisers may refuse to provide explanations or documents related to their activities during the appraisal process.

In conclusion, the form and substance of the appraisal award are crucial elements of the appraisal process. Appraisal awards must comply with the policy requirements, including being in writing, itemized, and signed.

1. State Auto Property and Cas. Ins. Co. v. Nunez, 46 So.3d 81 (Fla. 3d DCA 2010)
  In this case, the court held that the appraisal award must contain a specific determination of the value of the loss for each item and the overall amount of the loss. The award must also be signed by the appraisers, and not by the umpire, as the appraisers are the ones who make the determination of values.
2. Mercury Ins. Co. v. Ready, 917 So.2d 311 (Fla. 2d DCA 2005Co.
  The court in this case held that the appraisal award must contain a detailed breakdown of the values assigned to each item in dispute. The award must also provide a clear basis for how the appraisers arrived at their values.
3. State Frm Fla. Ins. Co. v. Lime Bay Condo., Inc., 187 So.3d 924 (Fla. 4th DCA 2016)
  In this case, the court held that the appraisal award must be final and complete, meaning that it must resolve all issues in dispute. The award must also be based on competent and substantial evidence, not arbitrary or capricious.
4. Higgins v. State Farm Fire and Cas. Co., 894 So.2d 5 (Fla. 2d DCA 2004)
  The court in this case held that the appraisal award must be clear and unambiguous. If the award is unclear or ambiguous, the parties may need to seek clarification or challenge the award in court.
5. Phoenix Assur. Co. of New York v. Singer, Mitchell v. Aetna Cas. & Sur. Co., and Atlas Const. Co. v. Indiana Ins. Co.
  All hold that an appraisal award must be based on actual physical damage, not speculative or hypothetical damage.
6. Campbell v. Union Mut. Fire Ins. Co.
  Holds that an appraisal award must be rendered by appraisers who are impartial and independent.
7. Mound City Roofing Tile Co. v. Springfield Fire and Marine Ins. Co.
  Holds that an appraisal award must contain a clear and detailed analysis of the disputed issues and the rationale for the appraisers’ conclusions.
8. Glenn Houle Co. v. State of New York and Matter of Acquisition of Real Property by County of Duchess
  Both hold that an appraisal award must be supported by facts and analysis that show how the appraisers arrived at their conclusions.
9. Northville Ind. Corp. v. Board of Assessors of Town of Riverhead
  Holds that an appraisal award must be a final and binding determination of the dispute.
10. Steiner v. Middlesex Mut. Assur. Co.
  Holds that an appraisal award must be based on the evidence presented by the parties or on the appraisers’ own knowledge of the subject matter.
11. Aetna Ins. Co. v. Murray and Azar v. Eureka-Security Fire & Marine Ins. Co.
  Both hold that an appraisal award must be based on actual physical damage, not hypothetical or conjectural damages.
12. Patriotic Order Sons of America Hall Ass’n. v. Hartford Fire Ins. Co.
  Holds that for an appraisal award to be binding, the parties must have agreed to the appraisal process beforehand.
13. Mitchell v. Aetna Cas. & Sur. Co.
  Holds that an appraisal award must be based on actual physical damage and not speculative or hypothetical damage, and the scope of appraisal is limited to determining the amount of loss, not the issue of coverage.
14. Rescenzo v. Capital Mut. Ins. Co.
  Holds that an appraisal award must be based on competent and substantial evidence, and the appraisers must provide a clear rationale for the values they assign.
15. Standard form statutes in Connecticut, New York, and Ontario provide a standardized process for the appraisal clause in insurance policies.
16. Lane v. Security Mut. Ins. Co. and Slayco v. Security Mut. Ins. Co.
  Both pertain to cases involving fire damage and hold that an appraisal award must only address physical damage caused by the covered peril, not damage that could have occurred regardless of the covered peril.
17. Commercial Union Ins. Co. v. Ryals
  Holds that an appraisal award is final and binding, and the parties must comply with its terms.
18. DeCrescenzo, 187 A.D.2d 730, and DeCrescenzo, 187 A.D.2d 794
  Hold that an appraisal award must be based on competent and substantial evidence that supports the appraisers’ rationale for determining the value of the loss.
19. Security Printing Co. v. Westchester Fire Ins. Co. of New York City
  Holds that an appraisal award must be based on actual physical damage, not hypothetical or conjectural damages.
20. Caledonian Ins. Co. v. North Dutch Reformed Church, McQuaid Market House Co. v. Home Ins. Co., Innis v. Fireman’s Fund Ins. Co., and Melton Bros. v. Philadelphia Fire & Marine Ins. Co.
  All hold that an appraisal award must be based on actual physical damage, not hypothetical or conjectural damages.
21. Davis v. Atlas Assur. Co.
  Holds that an appraisal award is binding and enforceable, and the parties must comply with its terms.
22. Azar v. Eureka-Security Fire & Marine Ins. Co., Branch v. Springfield Fire & Marine Ins. Co., Lee v. Farmer’s Ins. Co. of Minnehaha County, Continental Ins. Co. v. Garrett, and Quinn v. New York Fire Ins. Co.
  All hold that an appraisal award must be based on the actual cash value or sound value of the loss.
23. Standard policy provisions and state regulations in Pennsylvania and New York provide guidance on the appraisal process in insurance policies.
24. Richardson v. Allstate Texas Lloyds
  Holds that an appraisal award is a final and binding determination of the dispute and is not subject to judicial review.
25. Aetna Ins. Co. v. Murray
  Holds that an appraisal award must be based on actual physical damage, not speculative or hypothetical damage.
26. Atlas Const. Co., Inc. v. Indiana Ins. Co. Inc., Woerner, and North Carolina Farm Bureau Mut. Ins. Co. v. Floyd Harrell
  All hold that an appraisal award must be based on competent and substantial evidence that supports it.
27. Biscayne Supermarket, Inc. v. The Travelers Ins. Co., 485 So.2d 861 (Fla. Dist. Ct. App. 3d Dist. 1986)
  Involved a dispute over the appraisal award process. The insurer and the insured each appointed an appraiser, who then appointed an umpire. After inspection of the damage, the umpire and both appraisers signed an award that was later challenged by the insurer as not complying with the terms of the insurance policy. Specifically, the insurer argued that the award failed to list or apportion damages to individual items, resulting in a lack of specificity and defeating the purpose of the appraisal process. The court disagreed and upheld the appraisal award, finding that the award did not have to apportion damages as requested by the insurer. Instead, the purpose of the appraisal process is to determine the amount of loss, not its specific allocation. The court held that the award satisfied the policy requirement of an appraisal and was enforceable.
28. Liberty Mut. Ins. Co. v. Alvarez, 785 So.2d 700 (Fla. Dist. Ct. App. 3d Dist. 2001)
  Another case involving a challenge to an appraisal award. In this case, the insurer challenged the award on the grounds that one of the appraisers was biased in favor of the insured. The insurer argued that this bias invalidated the award and required a new appraisal. The court disagreed and upheld the award, finding that the insurer failed to provide evidence of actual bias or partiality on the part of the appraiser. Mere suspicion or speculation of bias was not enough to invalidate the award. The court held that the appraisal process was designed to resolve disputes and that the parties must accept the results absent a showing of fraud, misconduct, or bias.
29. Linford Lounge, Inc. v. Michigan Basic Property Ins. Ass’n., 77 Mich. App. 710, 259 N.W.2d 201 (1977) and R.D. Management Corp. v. Philadelphia Ind. Ins. Co., 302 F. Supp.2d 728 (E.D. Mich 2004)
  Both cases that required a court to determine whether an appraisal award was binding. In Linford Lounge, the insurer challenged the award on the grounds that the umpire exceeded his authority and the award was therefore invalid. The court disagreed and held that the appraisal process was intended to resolve disputes and that the award was binding on both parties.
30. Similarly, in R.D. Management Corp., the insurer challenged the award on the grounds that it was not final and binding because it was subject to further adjustment based on calculation errors. The court rejected this argument and held that the award was binding because the parties agreed to the appraisal process and the errors were not material or substantial enough to invalidate the award.
31. Griswald Properties, L.L.C. v. Lexington Ins. Co., 275 Mich. App. 543, 740 N.W.2d 656 (2007)
  A case that involved a dispute over the form and substance of an appraisal award. The insurer challenged the award on the grounds that it lacked finality and enforceability because it failed to allocate damages to specific items and contained shared responsibility for certain damages. The court agreed and held that the award did not meet the policy requirement that it be in writing and contain a specific determination of damages. The court also held that the shared responsibility provision violated public policy and was unenforceable. The case was ultimately remanded for a new appraisal.

Overall, these cases emphasize the importance of a detailed, clear, and final appraisal award that provides a specific determination of values, a clear basis for how those values were arrived at, and resolves all issues in dispute. The award must also be signed by the appraisers, based on competent and substantial evidence, and be clear and unambiguous.