August 18, 2017

Colorado Court of Appeals: Petition to Vacate Appraisal Award Properly Denied

The Colorado Court of Appeals issued its opinion in Owners Insurance Co. v. Dakota Station II Condominium Association, Inc. on Thursday, July 27, 2017.

Appraisal Award in Insurance Dispute—Impartial Appraiser Standard.

Owners Insurance Company (Owners) issued a property damage policy to Dakota Station II Condominium Association, Inc. (Dakota). Wind and hail storms damaged buildings in the residential community owned by Dakota. The losses were combined into a single insurance claim, but there was a dispute about the total amount of damages. The parties invoked the insurance policy’s appraisal provision. Each party selected an appraiser. They submitted proposed awards of different amounts and then nominated a neutral umpire as provided in the insurance policy. The final award of about $3 million was a mix of four damage estimates from Owners’ appraiser, Burns, and two estimates form Dakota’s appraiser, Haber. Burns refused to sign the final determination of costs. Haber and the umpire agreed and signed the award, and Owners paid Dakota.

Dakota then sued Owners in federal court for breach of contract and unreasonable delay in paying insurance benefits. During discovery, Owners learned several facts about Haber that it alleged demonstrated she was not an impartial appraiser. Owners filed a petition to vacate the appraisal award under C.R.S. § 13-22-223. Following a hearing, the trial court denied the petition.

On appeal, Owners argued that the trial court erred by not analyzing the insurance policy’s appraisal dispute provision, as well as the conduct and hiring of Haber, under the Colorado Uniform Arbitration Act’s (CUAA) standards for a neutral arbitrator in C.R.S. § 13-22-211(2). The Colorado Court of Appeals found no error because the policy did not incorporate CUAA’s standards and the parties’ stipulation that CUAA applied did not specifically state whether the appraisers were to be held to the statutory standard.

Owners then argued that Haber was not an “impartial appraiser” under the insurance policy. This term was not defined in the policy and has not been construed by a Colorado appellate court. The trial court interpreted it as an appraiser who applies appraisal principles with fairness, good faith, and lack of bias. The court agreed that this was the correct reading of the policy provision and its intent. The trial court’s application of this standard was supported by the record.

The judgment was affirmed.

Summary provided courtesy of The Colorado Lawyer.

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