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Lyon v. American Family Mutual Insurance Co.

May 27, 2009

DONNA LYON, PLAINTIFF,
v.
AMERICAN FAMILY MUTUAL INSURANCE COMPANY, DEFENDANT.



The opinion of the court was delivered by: Milton I. Shadur Senior United States District Judge

MEMORANDUM OPINION AND ORDER

Donna Lyon ("Lyon") was the owner of a dwelling in South Barrington, Illinois when that residence and some of her personal property were damaged or destroyed early in 2008 due to a "severe water loss." At that time Lyon was insured by American Family Mutual Insurance Company ("American Family"). Lyon sued American Family eleven months later--on December 23, 2008--arguing essentially that it had failed to compensate her fully for her losses.

Lyon's insurance policy ("Policy") contained this Appraisal Clause:*fn1

Appraisal: If you [Lyon] and we [American Family] fail to agree on the amount of loss, either may demand an appraisal of the loss. In the event, each party will choose a competent appraiser within 20 days after receiving a written request from the other. The two appraisers will choose an umpire. If they cannot agree upon an umpire within 15 days, you or we may request that the choice be made by a judge of a court of record in the state where the insured premises is located. The appraisers will separately set the amount of loss. If the appraisers submit a written report of an agreement to us, the amount agreed upon will be 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 set the amount of loss.

a. Each party will pay its own appraiser and bear the other expenses of the appraisal and umpire equally, except as provided in b. below.

b. We will pay your appraiser's fee and the umpire's fee, if the following conditions exist:

(1) You demand the appraisal; and

(2) The full amount of loss, as set by your appraiser, is agreed on by our appraiser or the umpire.

American Family invoked the Appraisal Clause in a March 3, 2009 letter to Lyon and again on March 27, 2009 with the filing of "Defendant's Motion To Dismiss or Stay the Proceeding and To Compel Appraisal."

This Court has earlier denied American Family's motion to the extent that it sought dismissal due to an asserted lack of subject matter jurisdiction. This memorandum opinion and order addresses the remaining issues: whether to order appraisal and, relatedly, to stay the proceedings pending the outcome of the appraisal procedure.

Background

On January 22, 2008*fn2 a "severe water loss" was said to have so damaged Lyon's South Barrington, Illinois home that it became uninhabitable, at the same time damaging and destroying a large amount of Lyon's personal property. On April 18 Lyon submitted an estimate of $580,823.83 to American Family, her homeowner's insurance carrier, to cover the repair and replacement of her personal property. On April 25 Lyon's general contractor estimated the cost of restoring the dwelling at $2,763,572.10, and Lyon delivered a copy of that estimate to American Family.

In sharp contrast to Lyon's estimates, American Family estimated the cost to repair the dwelling at $334,242.72. Soon thereafter, after first subtracting Lyon's deductible and withholding an amount for depreciation, American Family issued Lyon an "actual cash value" payment of $255,398.04 as to the residence (American Family has neither provided an estimate nor made any payment to cover the loss of Lyon's personal property). On July 17 Lyon wrote American Family claims adjuster Luster Drink ("Drink") that the American Family payment for damage to her dwelling was inadequate and that she had retained legal counsel to assist her in resolving the dispute.

According to Lyon, "[n]o substantive negotiations or communications ensued between American Family and Ms. Lyon between July 11, 2008 and December 17, 2008." American Family disputes that there were no substantive communications during that time, though it acknowledges that whatever communications took place were not with Lyon directly but with her counsel, for she had advised that she had retained representation for negotiation purposes. American Family attests that its representatives communicated with Lyon's attorneys on August 18, October 1 and November 11 and that on each of those occasions Lyon's attorneys responded that they were not prepared to discuss the matter thoroughly because they had not completed review of their case ...


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