As I have noted in the past, the appraisal process has become a hot topic in the property insurance world in the past few years. Colorado has become ground zero for many of these disputes. While many states have statutory or appellate precedent to define the scope and workings of the appraisal process, Colorado is one of the few that does not.
In a previous post I discussed a recent case in which a federal court in Colorado had written an extensive opinion discussing the appraisal process and the definition of the phase “amount of loss.” An important follow-up point, however, is this decision does not stand alone.
As early as 2011, Colorado courts were wrestling with whether determining the “amount of loss” includes a determination of the causation of damages. State trial courts in multiple districts found it did.1
While I have never seen a state trial court opinion going the other way on this issue, it appears that many insurers decided to take their chances on the issue in the Colorado federal courts. Since the decision mentioned in my previous blog, other courts in the District of Colorado have come down the same way.2
Colorado courts are following the logic and reasoning of the majority of other states. Courts in approximately thirty states have either directly found that determining the amount of loss includes a determination of the cause of the damage, or have upheld appraisal awards where disputes over the extent of damage was disputed. Only ten states hold that causation is not for the appraisal panel to determine.3
While one may think that the large number of Colorado decisions (from both state and federal courts) would get the point across, this does not appear to be the case. While many insurers recognize their obligation to participate in the appraisal process, others continue to refuse. This is unfortunately leading to an unnecessary increase in litigation and a further burden on the court system.
1 See Rooftop Roofing, Inc. v. Fire Ins. Exchange, No. 10CV243 (Elbert County, Colo. Dist. Ct. Apr. 8, 2011); Cochran v. Auto-Owners Ins. Co., No. 11CV8434 (Denver County, Colo. Dist. Ct. (Oct. 22, 2012); Ikeako v. Fire Ins. Exchange, No. 12CV2127 (Arapahoe County, Colo. Dist Ct. Apr. 19, 2013).
2 See El Toledo, LLC v. Sequoia Insurance Company, 2015 WL 3457475 (D. Colo. May 29, 2015); Laredo Landing Owners Association, Inc. v. Sequoia Insurance Company, 2015 WL 3619205 (D. Colo. June 10, 2015); Colorado Hospitality Services, Inc. v. Owners Ins. Co., Case No. 1-14-cv-01859-RBJ (June 23, 2015)(“If the appraisal process was conducted in compliance with the insurance contract, then the Court’s interpretation of the contract as a matter of law is that the appraisal is binding with respect to the amount of the loss and the cause of that loss. . .”).
3 The remaining states either do not permit appraisal or do not have any known decision on the issue.
