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FTI International, Inc. v. CinCinnati Insurance Co.

May 27, 2003

FTI INTERNATIONAL, INC., PLAINTIFF-APPELLANT,
v.
CINCINNATI INSURANCE COMPANY, DEFENDANT-APPELLEE.



Appeal from the Circuit Court of Winnebago County. No. 02-L-2 Honorable Ronald L. Pirrello, Judge, Presiding.

The opinion of the court was delivered by: Justice Grometer

UNPUBLISHED

Plaintiff, FTI International, Inc., appeals an order of the circuit court of Winnebago County granting the motion of defendant, Cincinnati Insurance Company, to stay the proceeding below pending the outcome of an appraisal. The sole issue raised in this appeal is whether the trial court's grant of the motion was consistent with the provisions of the insurance contract. For the reasons that follow, we reverse and remand.

The dispute arises out of the destruction by intruders of three pieces of equipment on plaintiff's premises. Plaintiff manufactures this equipment for sale. Plaintiff claims that it is entitled to an amount in excess of $500,000 by virtue of its policy with defendant. Defendant has paid less than $100,000 on the claim, relying on a portion of the policy that it asserts limits its liability to the amount necessary to repair or replace the equipment. Plaintiff, on the other hand, relies on a portion of the policy by which it claims it is entitled to the sales prices of the three items.

Defendant demanded that the case be submitted to appraisers and moved to stay the proceedings. The policy contains the following provision:

"If we and you disagree on the value of the property or 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 value of the property and the amount of 'loss'. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any of the two will be binding."

Defendant contends that the proceeding below was properly stayed based on the terms of the policy.

An order to compel arbitration is injunctive in nature. Salsitz v. Kreiss, 198 Ill. 2d 1, 11 (2001). Such an order is subject to interlocutory appeal. Salsitz, 198 Ill. 2d at 11. The sole question for a court of review is whether there was a sufficient showing before the trial court to sustain its order. J&K Cement Construction, Inc. v. Montalbano Builders, Inc., 119 Ill. App. 3d 663, 667 (1983). However, the construction of a contract presents a question of law and is thus subject to de novo review. Fitzwilliam v. 1220 Iroquois Venture, 233 Ill. App. 3d 221, 237 (1992).

The present case requires that we construe the portion of the insurance contract providing for appraisal. The main goal in the construction of a contract is to ascertain and give effect to the intent of the parties. Omnitrus Merging Corp. v. Illinois Tool Works, Inc., 256 Ill. App. 3d 31, 34 (1993). If a contract is clear and unambiguous, the intent of the parties must be determined solely from its plain language. Owens v. McDermott, Will & Emery, 316 Ill. App. 3d 340, 344 (2000). Additionally, Illinois public policy favors the resolution of disputes through informal procedures like arbitration. Reed v. Doctor's Associates, Inc., 331 Ill. App. 3d 618, 621 (2002).

The interpretation of the following sentence is key to resolving this appeal: "If we and you disagree on the value of the property or the amount of 'loss', either may make written demand for an appraisal of the 'loss'." For a stay to be appropriate, the dispute must be of a sort that the parties intended would fall within the scope of the appraisal process. Lundy v. Farmers Group, Inc., 322 Ill. App. 3d 214, 219 (2001). Thus, the question before us concerns what the parties meant by "appraisal."

We conclude that the plain meaning of "appraisal" does not encompass the type of dispute in which the parties are presently engaged. Black's Law Dictionary defines "appraisal" as "1. The determination of what constitutes a fair price; valuation; estimation of worth. 2. The report of such a determination." Black's Law Dictionary 97 (7th ed. 1999). Webster's Third New International Dictionary provides the following definitions: "1: an act of estimating or evaluating (as quality, status, or character) esp. by one fitted to judge *** 2: a valuation of property by the estimate of an authorized person." Webster's Third New International Dictionary 105 (2002). Thus, the definitions of "appraisal" in two common sources suggest that an appraisal is primarily concerned with ascertaining the value of something. There is no indication in either definition that resolving questions of law is something that takes place during an appraisal.

Furthermore, a leading treatise explains the difference between arbitration and appraisal this way:

"It is important to note at the outset that, as addressed below in detail, appraisal and arbitration are two distinct procedures. Appraisal calls for the mere determination of a particular fact or set of facts. In the insurance context, appraisal is most often used to determine the amount of the loss sustained under a property insurance policy. Arbitration is a more far-reaching proceeding, by which the parties agree ...


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