Summary
granting motion to compel appraisal
Summary of this case from State Farm Fire & Cas. Co. v. HarperOpinion
1:21-CV-00133-DCLC-CHS
03-22-2022
Norma MORROW, Plaintiff, v. STATE FARM FIRE & CASUALTY CO., Defendant.
Emily S. Alcorn, J. Brandon McWherter, Jonathan L. Bobbitt, Gilbert McWherter Scott Bobbitt PLC, Franklin, TN, for Plaintiff. Nina Musinovic Eiler, Kay, Griffin, Enkema & Colbert, PLLC, Nashville, TN, Adam R. Duggan, Breeding Olinzock Carter Crippen, P.C., Daniel C. Headrick, Matthew J. Evans, Kay Griffin PLLC, Knoxville, TN, for Defendant.
Emily S. Alcorn, J. Brandon McWherter, Jonathan L. Bobbitt, Gilbert McWherter Scott Bobbitt PLC, Franklin, TN, for Plaintiff.
Nina Musinovic Eiler, Kay, Griffin, Enkema & Colbert, PLLC, Nashville, TN, Adam R. Duggan, Breeding Olinzock Carter Crippen, P.C., Daniel C. Headrick, Matthew J. Evans, Kay Griffin PLLC, Knoxville, TN, for Defendant.
ORDER
Clifton L. Corker, United States District Judge
This matter is before the Court on Plaintiff Norma Morrow's Motion to Compel Appraisal [Doc. 29]. Defendant State Farm Fire and Casualty Company ("State Farm") responded [Doc. 31], and Morrow replied [Doc. 32]. This matter is now ripe for resolution.
I. BACKGROUND
On May 3, 2020, a severe storm with strong winds and tornadic activity damaged Morrow's home in Manchester, Tennessee [Doc. 27, pgs. 1-3]. Morrow insured her home with State Farm and had an active policy ("the Policy") at the time of the storm [Id. , pg. 2]. The Policy covered direct physical loss to Morrow's home, other structures on her property, and her personal property [Id. ]. After the May 2020 storm, Morrow promptly reported the damage to her home to State Farm [Id. , pg. 3]. State Farm acknowledged that the damage to Morrow's home was covered under the Policy and made a payment, following its own estimate of the damage, for her loss [Id. ]. Morrow, however, alleged that State Farm failed to determine the actual cost of the damage her home suffered [Id. ]. She informed State Farm that its payment was insufficient to cover all of the damage and restore her home to its condition before the May 2020 storm [Id. ].
On June 17, 2020, Morrow informed State Farm, in writing, that she was invoking the Policy's appraisal clause because of their dispute about the proper amount of loss State Farm was required to pay [Id. ]. The appraisal clause states that:
Morrow does not attach the letter she sent to State Farm invoking the appraisal clause, but State Farm attaches a subsequent letter it sent to Morrow that acknowledged it received her June 2020 letter [Doc. 31-4].
If you [Morrow] and we [State Farm] fail to agree on the amount of the loss, either one can demand that the amount of the 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 are unable to 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 empire. The appraisers shall then set 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.
[Docs. 27, pg. 4; 27-1, pg. 20] (emphasis added). Morrow selected an appraiser, but State Farm denied her demand for appraisal on July 7, 2020 [Doc. 27, pg. 4]. State Farm told Morrow that her estimate of the damage to her home represented a dispute in coverage rather than a dispute in the amount of loss, which could not be settled under the appraisal clause in the Policy [Id. ].
Morrow files the instant suit to recover the insurance proceeds she believes she is entitled [Id. , pg. 5]. In her Second Amended Complaint, Morrow asserts two causes of action [Id. , pgs. 5-9]. First, Morrow asserts a breach of contract claim for State Farm's alleged material breach of the Policy by failing to pay her the amount she believes necessary and failing to engage in the appraisal process [Id. , pgs. 5-7]. Second, Morrow contends that State Farm engaged in bad faith refusal to pay under Tennessee law [Id. , pgs. 7-9].
Morrow now moves to compel State Farm to engage in the appraisal process contemplated by the Policy [Doc. 29]. She explains that, after she reported the damage from the May 2020 storm to State Farm, State Farm acknowledged coverage and determined that it would cost approximately $5,000 to fix her home [Doc. 30, pg. 4]. Morrow then hired her own contractor, who estimated that it would cost more than $90,000 to fix her home to its condition before the storm [Id. , pgs. 4-5]. She argues that appraisal is mandatory under the Policy and that she has satisfied the requirements to invoke the appraisal clause because there is a disagreement about the amount of loss, and she made a written demand for appraisal [Id. , pg. 5]. According to Morrow, the only dispute between her and State Farm is about the pricing and methods of the necessary work to repair her home [Id. , pg. 8].
State Farm responds that there is a coverage dispute between it and Morrow, not a disagreement about the amount of loss [Doc. 31, pg. 1]. It admits that it acknowledged coverage over Morrow's claim and paid her for its estimate of the damage to her home [Id. , pg. 2]. State Farm explains that its own contractor concluded that there was no other storm damage to her home beyond what it initially acknowledged [Id. ]. Moreover, State Farm informed Morrow that the Policy "does not provide coverage for the damages to [her] property" identified by her contractor [Id. ]. It contends that its initial estimate and payment were the only amounts due to Morrow under the Policy [Id. , pg. 3]. State Farm characterizes its dispute with Morrow as one about coverage rather than amount of loss or the scope of work for a covered loss [Id. ]. Lastly, State Farm contends that the Court should deny Morrow's motion because it was not brought under a Federal Rule of Civil Procedure [Id. , pg. 7]. Morrow replies, reiterating her arguments from her initial motion [Doc. 32].
II. ANALYSIS
"A federal court sitting in diversity applies the substantive law of the state in which it sits." Hayes v. Equitable Energy Res. Co. , 266 F.3d 560, 566 (6th Cir. 2001) (citing Klaxon Co. v. Stentor Elec. Mfg. Co. , 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941) ). Tennessee law presumes a contract is governed by the "law of the jurisdiction in which it was executed absent a contrary intent." Carbon Processing & Reclamation, LLC v. Valero Mktg. & Supply Co. , 823 F. Supp. 2d 786, 801 (W.D. Tenn. 2011) (citing Se. Tex. Inns Inc. v. Prime Hosp. Corp. , 462 F.3d 666, 672 (6th Cir. 2006) (applying Tennessee law) ); Ohio Cas. Ins. Co. v. Travelers Indem. Co. , 493 S.W.2d 465, 467 (Tenn. 1973). Here, the Court will apply Tennessee substantive law because the contract was executed in Tennessee, and there is no evidence of a contrary intent in the contract.
The Court's analysis begins with the Policy's language. "In general, courts should construe insurance contracts in the same manner as any other contract." Am. Just. Ins. Reciprocal v. Hutchison , 15 S.W.3d 811, 814 (Tenn. 2000). "The language of the policy must be taken and understood in its plain, ordinary, and popular sense." Id. (citing Bob Pearsall Motors, Inc. v. Regal Chrysler-Plymouth, Inc. , 521 S.W.2d 578, 580 (Tenn. 1975) ). In Tennessee, the guiding principle of contract interpretation "is to ascertain and give effect to the intent of the parties." Clark v. Sputniks, LLC , 368 S.W.3d 431, 441 (Tenn. 2012).
Here, the Policy explicitly provides for appraisal, and the provision is mandatory if invoked by one of the parties. The Policy states: "If [Morrow] and [State Farm] fail to agree on the amount of loss, either one can demand that the amount of the loss be set by appraisal. If either makes a written demand for appraisal, each shall select a competent, disinterested appraiser." [Docs. 27, pg. 4; 27-1, pg. 20] (emphasis added). Morrow invoked the appraisal provision on June 17, 2020. [Doc. 27, pg. 3]. The provision is mandatory if invoked, as evidenced by the language "each shall select a competent, disinterested appraiser." [Docs. 27, pg. 4; 27-1, pg. 20] (emphasis added). This type of appraisal provision is valid in Tennessee. Harowitz v. Concordia Fire Ins. Co. , 129 Tenn. 691, 168 S.W. 163, 165 (1914). Courts "regularly compel appraisal pursuant to such provisions," even though these motions are not brought under any particular Federal Rule of Civil Procedure. J. Wise Smith & Assocs., Inc. v. Nationwide Mut. Ins. Co. , 925 F. Supp. 528, 530 (W.D. Tenn. 1995) (collecting cases); see also Bard's Apparel Mfg., Inc. v. Bituminous Fire & Marine Ins. Co. , 849 F.2d 245, 249 (6th Cir. 1988) (applying Tennessee law) ; Glob. Aerospace, Inc. v. Phillips & Jordan, Inc. , No. 3:15-CV-105-PLR-CCS, 2015 WL 5514627 (E.D. Tenn. Sept. 17, 2015) ; Kush Enters., LLC v. Mass. Bay Ins. Co. , No. 3:18-CV-00492, 2019 WL 13117568, at *1 (E.D. Tenn. Nov. 7, 2019) ("while Plaintiff did not cite a particular Federal Rule of Civil Procedure, courts regularly compel appraisal pursuant to such provisions ... the Court will not treat Plaintiff's motion as one for summary judgment" (internal citation and quotation marks omitted)). Consequently, if there is a disputed amount of loss, State Farm must move forward with the Policy's appraisal process.
State Farm seeks to avoid enforcement of the appraisal provision by claiming there is a dispute as to coverage, rather than loss. [Doc. 31, pgs. 1-3]. It is true that "the object of appraisal in cases of casualty insurance is to quantify the monetary value of a property loss," rather than to decide issues of coverage or causation. Merrimack Mut. Fire Ins. Co. v. Batts , 59 S.W.3d 142, 149 (Tenn. Ct. App. 2001). But the parties do not dispute that Morrow's damage is covered as a general matter; they instead argue over the extent and the amount of the loss. [Docs. 27, pg. 3; 31, pg. 2]. Indeed, both parties concede that the Policy covers some damage, and State Farm has made a payment for the damage. Morrow contends that there is additional loss unaccounted for in State Farm's estimate, while State Farm contends that its initial payment represents the full value of the damage caused by the May 2020 storm. [Doc. 31, pg. 3]. The Court fails to see how State Farm's argument in this instance that it is denying coverage for certain repairs in Morrow's estimate is any different than a dispute about the scope of work a repair requires, as was the case in Kush Enters., LLC and Ingram v. State Farm Fire & Casualty Co. , No. 1:21-CV-00075, 2021 WL 6133771, at *1-*3 (E.D. Tenn. Dec. 14, 2021).
This dispute necessarily must be treated as one regarding the total amount of loss, rather than coverage, as State Farm has already conceded that at least some storm damage is covered. See, e.g., Kush Enters., LLC , 2019 WL 13117568, at *2 ("By contesting whether there is additional covered loss, however, Defendant necessarily disagrees with Plaintiff that the total amount of loss Plaintiff incurred includes any additional loss."). To decide otherwise in this instance would allow insurance agencies to avoid appraisal by claiming there is a coverage issue, even when the dispute concerns additional amounts of loss. Consequently, the Court determines that this dispute falls within the Policy's appraisal clause.
Accordingly, in this case, it is proper to order an appraisal. First, the parties consented to a mandatory appraisal provision in the Policy—a provision that State Farm wrote—and these provisions are enforceable in Tennessee. See Harowitz , 168 S.W. at 165. There is a dispute as to the amount of loss, and the Policy has been properly invoked. Further, judicial economy will be served by ordering an appraisal now, rather than later in this litigation. Once the parties have determined the amount of loss, they can evaluate whether it is prudent to continue litigating, or whether settlement is warranted. Finally, State Farm will not waive any of its coverage or causation contentions by obtaining an appraisal, as these may be raised to the Court afterwards. "An appraiser's authority is limited to the authority granted in the insurance policy or granted by some other express agreement of the parties." Merrimack , 59 S.W.3d at 152. In the absence of an agreement to the contrary, authority to decide disputes of liability and coverage lies in the courts, and not with the appraisers. Id. at 153 ; Harowitz , 168 S.W. at 165 ; see also Pear Tree Props., LLC v. Acuity , No. 3:16-cv-00551, 2017 WL 3674845 (M.D. Tenn. Aug. 25, 2017). The Policy's appraisal provision permits the appraisers and the umpire to decide the amount of loss, rather than issues of coverage or causation. [Docs. 27, pg. 4; 27-1, pg. 20]. To that end, the appraisers in this case should take care to ensure that the appraisal is detailed and itemized. Following appraisal, the Court will be able to decide issues of coverage and causation regarding the losses that State Farm maintains are not covered by the Policy, if it wishes to raise those arguments then.
III. CONCLUSION
For the reasons stated herein, Plaintiff's Motion to Compel Appraisal [Doc. 29] is GRANTED and the parties are ORDERED to engage in the contractual appraisal process. The parties shall complete the appraisal process by May 20, 2022 . A status conference is scheduled for May 25, 2022, at 11:30 a.m. The parties shall call the Court's conference line at 866-390-1828 and enter access code 4845352 at the appointed time. This matter is STAYED pending the appraisal process.
SO ORDERED.