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Insurance Companies Want You To Give Up Your Day In Court

 

If insurance companies treated their insureds fairly we would be out of a job. At times it can feel like insurance companies have tilted the scales of justice in their favor. An example of such an inequitable scenario is where Colorado District Courts fail to stay proceedings in a Civil trial until completion of an appraisal.

In most property damage litigation cases, breach of contract is one of the causes of action pled in the complaint. This is in addition to unreasonable delay and denial, bad faith breach of insurance contract, among others. In almost all insurance contracts is a limitation to bring suit within two years. These provisions are usually as follows:

“No one may bring a legal action against us under this insurance unless: a) there has been full compliance with all the terms of this insurance; and b) the action is brought within 2 years after the date on which the direct physical loss or damage occurred.”

Typically, insureds want to work with the insurance company before they seek other alternative or legal remedies. In the case of commercial property damage, it can take some time before it becomes apparent that the insured needs to seek outside help. This usually comes in the form of a public adjuster to dispute the insurance company’s initial appraisal. If that fails, public adjusters will aid the insured in seeking independent appraisal under the contract.

Appraisal provisions typically read as such: “If we and you disagree on the amount of loss, either may make written demand for 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: Pay its chose appraiser; and 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.”

Appraisal is a complicated process and can take a considerable amount of time. Perhaps nine months to even a year for some properties. Considering the complexity, difficulty, and lethargy of the appraisal process, it would seem only equitable that an insurance company would grant a tolling agreement which would allow for the insured to complete the appraisal process. Not once has an insured given this firm a tolling agreement to extend the time limit to bring suit.

At this point an insured is coming close to the two year mark. Appraisal has started and is nowhere near completed and the insurance company has refused the toll the deadline. The insured is left with no choice but to file suit as he or she has yet to be paid by the insurance company as a breach of the contract. If not suit is filed, the insured will lose their right to challenge the completed appraisal.

On top of this dilemma, insurers are consistently attempting to dismiss these suits because they believe that the appraisal is a precondition to filing in a court having jurisdiction. This is contrary to a century’s worth of settled law. In short insurance companies would have the courts force insureds to breach their contractual limitations while waiting on appraisal because appraisal would be a precondition to even filing suit to begin with!

Then, on top of even that, the insured is stuck in litigation with few opportunities in discovery without hiring expensive experts to appraise the damage in parallel with the continuing appraisal. At this point these remedial measures get quite expensive.

The proper way forward under these facts and circumstances is to request a stay from the court until the appraisal has completed. This has been standard procedure in the Federal Courts. See Auto-Owners Insurance company v. Summit Park Townhome Association, 100 F.Supp.3d 1099 (D.Colo 2015). Unfortunately, Colorado District Court Judges often refuse these requests even though the stay may resolve most and sometimes even ALL of the disputes between the parties.

The law as it stands must change. Insureds seeking appraisal must be given the opportunity to complete appraisal under the contract without losing their civil rights to a jury trial to assess damages. Circumstances like these leave insured with hefty price tag seeking a legal remedy in parallel with their continuing appraisal all of which could have been avoided by a reasonable Stay in proceedings or an equitable tolling agreement.

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    Matthew Hamblin Written by:

    Mr. Hamblin is licensed in Colorado, and has represented clients for personal injury and probate matters. Before graduating law school, Mr. Hamblin worked with Native Americans through Denver University's Tribal Wills Project, was a managing editor of the Criminal Law Review, held internships with the Colorado Senate and the Jefferson County DA's office, and represented Domestic Violence victims through Denver University's Civil Litigation Clinic. After admission to the Colorado Bar, Mr. Hamblin represented auto crash victims against insurance companies at Frank Azar and Associates. Mr. Hamblin received his undergraduate degree from the University of Iowa and his law degree from the University of Denver Sturm College of Law.

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