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How to get a full-scope appraisal

 

We have found that we have been successful in establishing the amount of loss a client sustained to covered property by demanding and participating in the appraisal process.

Most insurance policies contain the following appraisal provision:

Appraisal.  If we and you disagree on the amount of loss, either may make written demand for an appraisal of the loss.  In this event, each party will select a competent and impartial appraiser.  The two appraisers will select an umpire.  If they cannot agree, either may request that selection be made by a judge of a court having jurisdiction.  The appraisers will state separately the amount of loss.  If they fail to agree, they will submit their differences to the umpire.  A decision agreed to by any two will be binding.  Each party will:

  1. Pay its chosen appraiser; and,
  2. Bear the other expenses of the appraisal and umpire equally.

If there is an appraisal, we will still retain our right to deny the claim.

Many times though, we have encountered insurance companies who attempt to limit the scope of the appraisal, meaning that the insurance company attempts to dictate what the appraisers may look at and consider as part of the loss that the insured sustained.

We have been successful in ensuring that our clients’ entire losses are evaluated during the appraisal process by arguing the following principles before many courts in Colorado:

  1. The interpretation of an insurance contract is governed by contract law principles and is a question of law for the court.  Farmers Ins. Exch. V. Anderson, 260 P.3d 68, 71 (Colo. App. 2010).  The court’s obligation is to give effect to the intent of the parties and this intent should be ascertained from the plain language of the contract.  Id., at 72.
  1. Unless the insurance contract shows a contrary intent, words used in the policy must be given their plain and ordinary meaning.  Furthermore, insurance contract provisions should be read as a whole, rather than in isolation and the court may not rewrite, add, or delete provisions to extend or restrict coverage.  McGowwan v. State Farm Mut. Auto Ins. Co. v. Mendiola, 865 P.3d 909, 912 (Colo. App. 1993)
  1. The language of an insurance policy should be enforced according to its plain terms if they are clear and unambiguous.  Federal Deposit Insurance Corp. v. American Casualty Co., 843 P.2d 1285 (Colo. 1992).  A mere disagreement between the parties to an insurance contract does not create an ambiguity.  Cary v. United of Omaha Life Ins. Co., 108 P.3d 228, 290 (Colo. 2005)
  1. The term and meaning of “amount of loss” as contained in an insurance company’s policy of insurance with its insured was analyzed in the case of Cigna Ins. Co. v. Didimoi Prop. Holdings, N.V., 110 F. Supp. 2d 259 (D. Del. 2000).  In that case the insurer and the insureds disputed whether the appraisal process should simply be a valuation of the damaged property without determining the cause of the damages claimed or the amount of the covered loss.  The court in that case concluded that the phrase ‘amount of loss’ is not ambiguous as it is susceptible to only one interpretation in the context in which it was used.  The court concluded that in the insurance context an appraiser’s assessment of the ‘amount of loss’ necessarily includes a determination of the cause of the loss, as well as the amount it would cost to repair that which was lost.

Based upon the above legal principles we have been successful in arguing the following points:

  1. The cause of loss and scope of loss are the factors that determine the amount of the loss.  Insurance companies cannot limit the scope of the appraisal by merely stating that certain damages to the insured’s property were pre-existing and not caused by a covered peril.  It is the appraisers’ duty to determine the cause of the loss, what parts of building were damaged by the loss, and, based upon those two factors, what is the amount of loss.
  1. By the insurance company’s own policy language, “If there is an appraisal, we will still retain our right to deny the claim.”  Meaning that although the appraisal process is binding, the insurance company could ignore the loss calculation reached through the appraisal process for reasons not related to the appraisal, e.g. because the premium was not paid, the policy had expired, or that there was no coverage for a certain type of loss.
  1. If this Court allows an insurance company to pick and choose what the appraisers may look at during the appraisal process, it would nullify the reason that the appraisal process exists, to determine the amount of the loss.  It would also change the meaning of the phrase ‘amount of loss’.

Although the above may seem simple to a logic minded person, apparently, it is not so simple for an insurance company to allow its policyholder to go through the appraisal process to determine the policyholder’s amount of loss as it seems insurance companies cannot bring themselves to play fair or to do what is best for their policyholders.

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    David Furtado Written by:

    Mr. Furtado is licensed in Colorado, California, Alabama, Massachusetts, as well as with the United States Patent and Trademark Office. Mr. Furtado has spent his career representing people who require representation against insurance companies as well as assisting clients in patenting their ideas. Mr. Furtado graduated from the University of Denver Sturm College of Law in 1996, receiving his Juris Doctor.

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