Summary
The Alabama Supreme Court considers whether State Farm waived its contractual right to invoke an appraisal process by delaying its demand after litigation began. The court holds that State Farm did not waive the appraisal right because the Rogerses failed to demonstrate substantial prejudice. The court also addresses the limited role of appraisers in determining the amount of loss rather than resolving coverage or causation issues, and reverses and remands.
Topics
Practice areas
Questions Presented
- Whether State Farm waived its contractual right to invoke the homeowner's policy appraisal clause by delaying its invocation and substantially participating in litigation.
- Whether the appraisal process could determine the causation of damage and other coverage or liability issues, rather than only the monetary amount of loss.
Holdings
- State Farm did not waive its right to invoke the appraisal clause because, even assuming substantial invocation of the litigation process, the Rogerses failed to prove substantial prejudice caused by the delay.
- Under the homeowner's policy appraisal clause, appraisers may determine only the amount of loss—the monetary value of the property damage—and may not decide questions of coverage, liability, or causation.
Key quotations
“Having considered the holding of other jurisdictions regarding the scope of an appraiser's rights and duties under an appraisal clause in an insurance policy, we conclude that the more persuasive authority is the authority holding that an appraiser's duty is limited to determining the "amount of loss" the monetary value of the property damage and that appraisers are not vested with the authority to decide questions of coverage and liability; we thus adopt that holding as our rule of law.” (392)
“Questions of coverage and liability should be decided only by the courts, not appraisers.” (393)
Factual background
A tornado damaged the Rogerses' residence on April 8, 1998. State Farm accepted that some storm damage was covered but disputed that the house was a total loss and contended that damage to the foundation and brick veneer resulted from settlement rather than the tornado. The Rogerses' engineer attributed that damage to storm-related stress, and the parties disputed the amount and scope of covered loss. State Farm invoked the policy's appraisal clause more than a year after the lawsuit began, and the resulting appraisal included findings concerning the disputed damage.
Procedural history
The Rogerses sued State Farm for breach of contract and bad-faith refusal to pay after State Farm disputed that their residence was a total loss and disputed whether foundation and brick-veneer damage was caused by the tornado. The trial court initially ruled that State Farm had waived appraisal, later set that ruling aside, ordered appraisal, and entered judgment for the Rogerses based on the umpire's award. After an earlier appeal and remand concerning finality, the trial court certified the judgment under Rule 54(b). The Supreme Court of Alabama held that State Farm had not waived appraisal but reversed because the appraisal process improperly encompassed causation issues.
Remand instructions
The cause was remanded for further proceedings consistent with the opinion, with causation and coverage issues to be decided by the trial court rather than by appraisers.