The California Court of Appeal has held that, because an appraisal panel only decided the amount of a loss, a trial court had authority to confirm the amount of the award but did not have authority to enter an actual money judgment for the award. ( Devonwood Condominium Owners Association v. Farmers Insurance Exchange (2008) WL 2102284)
Facts
After a fire damaged a unit located within the Devonwood condominium project, the Devonwood Condominium Owners Association (Devonwood) submitted a claim to its insurer, Farmers Insurance Exchange (Farmers). When the parties could not agree on the amount of the loss, Devonwood demanded appraisal. Each party selected an appraiser, and the two appraisers selected an umpire.
This appraisal panel issued a unanimous written appraisal award, which set forth two categories of replacement cost values. The first category, the “replacement cost value of fire-related structure damage, exclusive of floor coverings, ceiling coverings (including paint), and wall coverings (including paint) in the residential unit,” totaled $122,460.65. The second category, the “replacement cost value of interior painting of walls and ceilings due to fire-related structure damage,” totaled $7,479.22. The written award provided in relevant part: “Attached to this award is a breakdown which sets forth those items included herein. This breakdown sets forth the above award in detail and is made without consideration of … or any coverage or other provision of the above policy which might affect the amount of the insurer’s liability thereunder ….”
Devonwood subsequently filed a petition in superior court to confirm the appraisal award. Farmers opposed the petition, arguing that it was not obligated under the policy to pay for painting interior areas. However, the superior court confirmed the appraisal award, and entered a money judgment against Farmers in the sum of $129,939.87. Farmers appealed.
Holding
The Court of Appeal vacated the judgment, and remanded the case to the superior court with instructions to enter a new judgment that conformed to the appraisal award. The Court of Appeal reasoned that the appraisers stated on the face of the award that the award was made “ without consideration of … any coverage or other provision of the above policy which might affect the amount of the insurer’s liability thereunder ….”
In short, the Court of Appeal found that the appraisal panel merely determined the amount of the loss, and did not decide whether Farmers actually owed any amount under the policy. Thus, Court of Appeal held that the superior court’s statutory authority was limited to the issuance of a judgment which brought finality to the dollar amount of the replacement cost values—and nothing more.
Comment
This case illustrates several points. First, appraisal is a limited form of arbitration in which the appraisers decide only the amount of the loss, not whether the policy actually covers any part of the loss. Second, an insurer should always insist on an “itemized” appraisal award, as allowed by Insurance Code section 2071 and by most policies. Third, the appraisers generally should indicate right on the face of the award that they are not purporting to decide whether the policy does (or does not) actually cover the loss. Fourth, if either party files a petition in the superior court to confirm an appraisal award, it is important to ensure that any judgment the superior court renders does in fact provide that the court is only confirming the amount of the award, and not entering a money judgment for the amount of the award.