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Witcher v. State Farm Fire and Casualty Co.

Court of Appeals of Illinois, Fifth District

March 6, 2018

RONALD WITCHER and JODI WITCHER, Plaintiffs-Appellees,
v.
STATE FARM FIRE AND CASUALTY COMPANY, Defendant-Appellant.

          Rule 23 order filed January 26, 2018

          Appeal from the Circuit Court of Madison County, No. 16-MR-116; the Hon. John B. Barberis Jr., Judge, presiding.

          Michael J. Bedesky, of Reed, Armstrong, Mudge & Morrissey, P.C., of Edwardsville, for appellant.

          William S. Daniel, of Collinsville, for appellees.

          Panel JUSTICE CATES delivered the judgment of the court, with opinion. Justices Welch and Moore concurred in the judgment and opinion.

          OPINION

          CATES JUSTICE.

         ¶ 1 The defendant, State Farm Fire and Casualty Company (State Farm), appeals from an order denying its motion to vacate the judicial appointment of an appraisal umpire and an order confirming the appraisal award. For the reasons that follow, we reverse and remand.

         ¶ 2 On February 1, 2015, a fire ravaged the home of the plaintiffs, Ronald and Jodi Witcher, leaving little more than rubble, debris, and ash. At that time, the plaintiffs' home and property were covered under a policy of homeowner's insurance issued by State Farm. The plaintiffs and State Farm agreed that the fire resulted in a total loss, but they could not agree on the loss valuation. The homeowner's policy provided for an appraisal process in the event of a disagreement regarding the amount of a loss. The policy is not included in the record on appeal, but the parties agree that the appraisal clause provides as follows:

"If we and you disagree on the amount of loss, either one can demand that the amount of loss be set by appraisal. If either makes a written demand for appraisal, each shall select a competent, disinterested appraiser. Each shall notify the other of the appraiser's identity within 20 days of receipt of the written demand. The two appraisers shall then select a competent, impartial umpire. If the two appraisers cannot agree upon an umpire within 15 days, you or we can ask a judge of a court of record in the state where the residence premises is located to select an umpire. The appraisers shall then set the amount of loss. If the appraisers submit a written report of an agreement to us, the amount agreed upon shall be the amount of the loss. If the appraisers fail to agree within a reasonable time, they shall submit their differences to the umpire. Written agreement signed by any two of these three shall set the amount of the loss. Each appraiser shall be paid by [the] party selecting that appraiser. Other expenses of the appraisal and the compensation of the umpire shall be paid equally by you and us."

         ¶ 3 Unable to reach an agreement on the amount of the loss, the plaintiffs sent a letter, dated Friday, March 18, 2016, to State Farm, demanding that the loss be settled by appraisal. The plaintiffs also designated Joel Adkerson as their appraiser. According to a UPS tracking document, State Farm received the plaintiffs' letter on Monday, March 21, 2016. In keeping with the terms of the appraisal clause, State Farm was required to notify the plaintiffs of the identity of its appraiser within 20 days of receipt of the appraisal demand, meaning on or before April 10, 2016. The 20-day period passed without State Farm notifying the plaintiffs of its appraiser. The subsequent 15-day deadline for the plaintiffs' and State Farm's appraisers to agree on an appraisal umpire also passed without the selection of a neutral appraisal umpire and without State Farm's designation of an appraiser.

         ¶ 4 On April 27, 2016, the plaintiffs, through their attorney, filed a petition for the judicial appointment of an appraisal umpire in the circuit court of Madison County. Therein, the plaintiffs alleged that State Farm failed to participate in the appraisal process as outlined in the homeowner's policy. The plaintiffs asserted that they had valued their total loss at $247, 121.03, while State Farm had valued the loss at $159, 601.48, a difference of $87, 519.55. The plaintiffs further asserted that they submitted a written demand for an appraisal to State Farm, and that State Farm refused to designate an appraiser. The plaintiffs claimed that State Farm refused to participate in the appraisal process in an attempt to delay or thwart the appraisal process, to deprive the insured of indemnity benefits, and to vexatiously and unreasonably delay payment under the homeowner's policy. The plaintiffs attached correspondence between their adjuster and State Farm, as well as a list of eight candidates to act as the appraisal umpire. The record indicates that at the time the plaintiffs' petition was filed, there was no request that the petition and summons be served on State Farm. There is no certificate of service or other document that shows that State Farm was served with a copy of the plaintiffs' petition.

         ¶ 5 According to the record, the circuit court was presented with and granted the plaintiffs' petition on the same date that the petition was filed. In the order entered April 27, 2016, the court appointed Dale F. Peek to serve as the appraisal umpire. Peek was one of the candidates listed by the plaintiffs. The order further provided that the court would retain jurisdiction for "filing and enforcement of a binding Appraisal Award under the insurance policy contract herein."

         ¶ 6 On May 4, 2016, State Farm filed an entry of appearance and a reply to the plaintiffs' petition for the judicial appointment of an appraisal umpire. In its reply, State Farm asserted that its adjuster, Mike Hartkop, had been in contact with the plaintiffs' agent, Dan Long, in an attempt to resolve the claim outside of the appraisal process; that Hartkop had attempted to contact Long by phone for two weeks; and that Long refused to respond to multiple phone calls. State Farm further represented that it had selected an appraiser, Steve Ricker, and that if the parties' designated appraisers were unable or unwilling to agree on an appraisal umpire, State Farm would submit a list of proposed names to the court for a selection of an umpire. State Farm requested that the court "allow State Farm's input, specifically a list of potential umpires, " before making the appointment.

         ¶ 7 On May 9, 2016, Dale F. Peek filed a formal "Acceptance of Appraisal Umpire Appointment" in the circuit court of Madison County. On that same date, State Farm filed a motion to vacate the April 27, 2016, order appointing Dale F. Peek as the appraisal umpire. State Farm asserted that its counsel did not receive a copy of the appointment order until May 9, 2016. State Farm further asserted that it had no prior notice of the circuit court's actions, pointing out that the plaintiffs' petition for appointment of an appraisal umpire was filed on April 27, 2016, and that the order appointing Peek as the appraisal umpire was entered on that same date. State Farm noted that it had not been served with the petition and summons and that it did not enter an appearance until May 4, 2016, seven days after the order was issued. State Farm argued that it was denied due process where the ...


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