Pallarito et al v. American Family Mutual Insurance Company

Filing 37

ORDER granting 32 Motion to Compel by Judge R. Brooke Jackson on 4/26/21.(jdyne, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge R. Brooke Jackson

Civil Action No. 1:20-cv-03041-RBJ
ALLAN PALLARITO and SATOKO PALLARITO,
Plaintiffs,
v.
AMERICAN FAMILY MUTUAL INSURANCE COMPANY,
Defendant.

ORDER re APPRAISAL

Plaintiff moves to compel an appraisal and to stay proceedings pending the appraisal.
ECF No. 32. The motion is opposed and has been fully briefed. The motion is granted.
BACKGROUND
On September 6, 2019 a hailstorm damaged the Pallaritos’ home in Douglas County,
Colorado. Plaintiffs submitted a claim under the property damage coverage in their
homeowner’s policy. When the parties could not agree on what damage was caused by the storm
and the cost of repairing the damage, plaintiffs submitted a demand for an appraisal under the
appraisal clause of the policy. Defendant has not agreed to proceed with an appraisal.
Plaintiffs cite numerous cases in which both state and federal courts in Colorado have
held that appraisals under the typical appraisal clause in the standard form contract address both
what damage was caused and the amount of the loss. I agree with those cases. One cannot be
expected to assess the amount of the loss without knowing what damage was caused by the
event.
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Defendant argues that those cases were decided under different appraisal clauses, and that
the specific appraisal language in this policy authorizes defendant, not the appraisers, to
determine what damage was caused by the storm. I disagree. The appraisal clause in this policy
states,
This applies after we confirm that the damage due to a loss is covered. If you and
we fail to agree on the dollar amount of the damage, either may demand that such
amount be set by appraisal. In this event, each party will choose a competent and
disinterested appraiser within 20 days after receiving a written request from the
other. Each appraiser will separately set the dollar amount of the damage. Such
amounts must be determined according to all terms of this policy including those
in Section I - How We Settle Losses. If both appraisers submit written reports to
us of their agreement of the amount, such amount will be the dollar amount of the
damage. If they fail to agree within 20 days, they must choose a competent and
disinterested umpire. If they cannot agree on the choice within 20 days, you and
we must jointly request that the choice of umpire be made by a judge of a court of
record in the state where the residence premises is located. The appraisers will
then submit their differences to the umpire. Written agreement signed by any two
of these three will set the dollar amount of the damage. The appraisal
determination of damage or valuation is binding upon you and us. This appraisal
process and authority granted to appraisers and the Umpire can only be expanded
and modified by written mutual consent signed by you and us. We will pay our
appraiser. You will pay your appraiser. Other expenses and the compensation of
the umpire will be paid equally by you and us. Appraisal does not waive our
rights.
ECF No. 32-1 at 19 (Policy, Section I-Conditions, ⁋3) (emphasis added).

The Court construes terms of a contract, including an insurance contract, according to
their plain meaning. If the language in an insurance clause is ambiguous, then the ambiguity is
resolved in favor of the insured. Here, the appraisal clause states that it “applies after we
confirm that the damage due to a loss is covered.” This language does not unambiguously
reserve to the insurer the question whether the damage was due to (caused by) the storm. Rather,
it reserves to the insurer the determination whether the damage caused by the loss is covered by
the policy. For example, the damage caused by the loss might be excluded by an exclusion in the
policy. Thus, if the insurer determines that a loss was not covered because of a term in the
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policy, then the amount assigned by the appraisers to that loss will not be payable. At a
minimum, the highlighted language is ambiguous, and the ambiguity would be construed in
favor of the insured.
The insureds can, of course, challenge the insurer’s determination of what was covered
by the policy. But the appraisers’ duty is simply to determine what dollar amount of loss was
caused by the storm. While worded differently than the standard appraisal clause, I conclude
that its effect is the same.
ORDER
Accordingly, the motion, ECF No. 32, is GRANTED. The parties will participate in an
appraisal as provided in the appraisal clause. The appraisal will determine the damage caused by
the storm and the dollar amount of the damage. The insurer has not waived any coverage
argument or defense. The case will be stayed and administratively closed pending completion of
the appraisal. The stay also moots ECF No. 36.

DATED this 26th day of April, 2021.
BY THE COURT:

___________________________________
R. Brooke Jackson
United States District Judge

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