United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
Elaine E. Bucklo United States District Court Northern
District of Illinois
Runaway Bay Condominium Association (“Runaway
Bay”) brings this action to compel defendant
Philadelphia Indemnity Insurance Company
(“Philadelphia”) to submit the parties'
insurance coverage dispute to an appraisal. Before me is
Runaway Bay's motion to compel Philadelphia to
participate in the appraisal. Subject to the qualification
noted below, the motion is granted.
August 2, 2015 and February 19, 2016, storms caused damage to
buildings in an apartment complex owned by Runaway Bay in
Palatine, Illinois. Runaway Bay was insured under a policy
(“the Policy”) issued by Philadelphia and
submitted a claim in connection with the damage. Runaway Bay
values its loss at $2, 597, 144.28; Philadelphia's
estimate is $33, 353.87.
Bay contends that the parties' dispute should be resolved
through an appraisal process. Runaway Bay relies on the
following provision of the Policy:
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 amount of
“loss”. If they fail to agree, they will submit
their differences to the umpire.
Property Coverage Form, Ex. 1 to Def.'s Answer (Doc. No.
12-3) at 30.
has refused to appoint an appraiser or to otherwise
participate in the appraisal process. According to C 3860, 2017 WL
372308 (N.D. Ill. Jan. 26, 2017); 70th Court Condo
Ass'n v. Ohio Sec. Ins. Co., No. 16 CV 07723, 2016
WL 6582583 (N.D. Ill. Nov. 7, 2016); Maggard v. CCC Info.
Servs. Inc., No. 14 C 2368, 2015 WL 1112088 (N.D. Ill.
Mar. 10, 2015).
the motion for appraisal should be denied because Runaway
Bay's claim raises issues of coverage under the Policy.
According to Philadelphia, such questions can be resolved
only by the court. It maintains that the appraisal process is
strictly limited to determining the value of an insured's
loss. Philadelphia identifies five such “coverage
issues” that it believes require denial of Runaway
Bay's motion to compel appraisal: (1) the extent to which
the damage to Runaway Bay's property was actually caused
by the storms on the dates in question; (2) whether the
Policy requires that certain undamaged portions of the
property be replaced so that they are visually
indistinguishable from portions of the property to which
repairs are made; (3) whether the property sustained physical
loss or damage; (4) whether Runaway Bay is entitled to
recover for overhead and profit costs associated with hiring
a contractor; and (5) whether Runaway Bay provided
Philadelphia with prompt notice of its loss as required under
the Policy. As discussed below, while Philadelphia is correct
that some of these issues indeed relate to coverage, most do
not; and in any event, none of the issues requires denial of
Runaway Bay's motion to compel.
notes that the parties dispute whether and to what extent the
damage to Runaway Bay's buildings was caused by the
storms on the dates in question. For example, Philadelphia
maintains that certain portions of the property showed signs
of preexisting mechanical damage and thus were not damaged,
or were damaged only minimally, by the storms. According to
Philadelphia, questions about what caused the damage are not
appropriately addressed by appraisers.
argument assumes that the task of determining the value of
the damage can be meaningfully separated from the task of
determining what caused the damage. Philadelphia fails to
explain how this bifurcation might be achieved as a practical
matter. Philadelphia also fails to explain why, even assuming
the two inquiries could be separated in practice, the issue
of causation is not appropriately addressed by an appraiser.
Philadelphia cites no provision of the Policy suggesting that
appraisers are forbidden from addressing questions of
causation; nor does Philadelphia provide any reason for
thinking that determinations regarding causation are beyond
the appraiser's ken.
fact, the argument Philadelphia presents here has frequently
been advanced by parties opposing motions to compel
appraisal, and courts have routinely rejected it. See,
e.g., Philadelphia Indemnity Insurance Company v.
Northstar Condominium Association, No. 15 C 10798 (N.D.
Ill. Oct. 18, 2016) (“[I]t seems inherent to an
appraiser's duty when assessing damage to assess what
caused the damage.”); 201 N. Wells, Inc. v.
Fidelity and Guaranty Ins. Co., No. 00 C 3855 (N.D. Ill.
Jan. 24, 2001) (“The court finds that determining the
cause of the damages is inherent to the appraiser's
duties.”); see also Travelers Indem. Co. of Am. v.
BonBeck Parker, LLC, No. 1:14-CV-02059-RM-MJW, 2016 WL
7733000, at *4 (D. Colo. Oct. 24, 2016) (“[T]he Court
holds that appraisers may determine the issue of
causation.”); Zarour v. Pac. Indem. Co., No.
15-CV-2663 JSR, 2015 WL 4385758, at *3 (S.D.N.Y. July 6,
2015) (“The Second Circuit, however, has found that the
question of ‘[a]pportioning damage causation' is
‘essentially a factual question ... to be resolved by
making factual judgments about events in the world, not legal
analyses of the meaning of the insurance contract.'
Therefore, the issue of damage causation is properly subject
to appraisal.”) (citation omitted) (quoting Amerex
Grp., Inc. v. Lexington Ins. Co., 678 F.3d 193, 206 (2d
Cir.2012)); CIGNA Ins. Co. v. Didimoi Prop. Holdings,
N.V., 110 F.Supp.2d 259, 264 (D. Del. 2000)
(“[T]he Court concludes that in the insurance context,
an appraiser's assessment of the ‘amount of
loss' necessarily includes a determination of the cause
of the loss, as well as the amount it would cost to repair
that which was lost.”).
cites only one case in which a court has held that the issue
of causation was not appropriately decided by appraisal,
Spearman Industries, Inc. v. St. Paul Fire & Marine
Ins. Co., 109 F.Supp.2d 905 (N.D. Ill.
2000). However, Spearman's
discussion of the issue is very brief and does not disclose
the basis for its conclusion. In any event, for the reasons
already explained, I conclude ...