September 28, 2021

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Vacating Appraisal Awards in New York

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In a recent case,1 the New York Appellate Division refused to vacate an appraisal award unfavorable to an insurer because the appraisal award was made pursuant to the procedures set out in the insurance policy and there was no fraud, bias or bad faith found.

In that case, the policy had a limit of approximately $26 million for “Total Physical Damage Value.” Following a loss, the insured invoked the appraisal process within the policy when the parties were unable to agree upon the amount of the loss. Thereafter, a Final Award was entered by the appraisal panel in the amount of approximately $24 million.

Because the Final Award did not allocate the damaged property between “building” and “machinery and contents,” the insurer requested the appraisal panel provide clarification of its award. Discontent with the subsequent allocation, the insurer sought court intervention to disregard the determination of the appraisal panel by holding that none of the loss constituted buildings.

The Appellate Division ultimately refused to disturb the appraisal award. In ruling o, the Appellate Division held that by requesting that an appraisal panel allocate property damage loss between “buildings” and “machinery and contents,” the parties expressly consented to the panel’s determining which damaged items were “buildings” and which were “machinery and contents.” The court further commented that “reservation of this issue for future litigation despite submitting it to the panel for determination “would have rendered the [appraisal panel’s determination] meaningless.”

If you want to learn more about appraisal, please join Michael Duffy and me for a presentation on The Mechanics of the Appraisal Process, at the Spring Conference of the Professional Public Adjusters Association of New Jersey (“PPAANJ”) on Wednesday, May 12, 2021, at the Hotel LBI in Ship Bottom, New Jersey. If you are not a member of PPAANJ, you can join here.
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1 Certain Underwriters at Lloyd’s London v. Bioenergy Dev. Grp., LLC, 189 A.D.3d 573 N.Y.S.3d 13 (2020).

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