Filed: Nov. 18, 2014
Latest Update: Nov. 18, 2014
Summary: PER CURIAM . After her home and much of its contents were damaged by fire, plaintiff sought coverage under the terms of a homeowners insurance policy issued by defendant. Although the parties were able to settle plaintiff's claim for damages to her dwelling, they were unable to agree on the extent of the loss incurred to plaintiff's personal property. Consequently, the parties invoked the policy's fire loss appraisal provision, which provided in relevant part as follows: If you and we [d
Summary: PER CURIAM . After her home and much of its contents were damaged by fire, plaintiff sought coverage under the terms of a homeowners insurance policy issued by defendant. Although the parties were able to settle plaintiff's claim for damages to her dwelling, they were unable to agree on the extent of the loss incurred to plaintiff's personal property. Consequently, the parties invoked the policy's fire loss appraisal provision, which provided in relevant part as follows: If you and we [de..
More
PER CURIAM.
After her home and much of its contents were damaged by fire, plaintiff sought coverage under the terms of a homeowners insurance policy issued by defendant. Although the parties were able to settle plaintiff's claim for damages to her dwelling, they were unable to agree on the extent of the loss incurred to plaintiff's personal property. Consequently, the parties invoked the policy's fire loss appraisal provision, which provided in relevant part as follows:
If you and we [defendant] fail to agree on the actual cash value or amount of loss covered by this policy, either party may make written demand for an appraisal....
The appraisers shall then appraise the loss, stating separately the actual cash value and loss to each item. If the appraisers submit a written report of an agreement to us [defendant], the amount agreed upon shall be the actual cash value or amount of loss. If they cannot agree, they will submit their differences to the umpire. A written award by two will determine the actual cash value or amount of loss.[1]
After the parties' respective appraisers submitted their differences, the umpire issued an appraisal award, which read in pertinent part:
We the undersigned, pursuant to the within appointment, DO HEREBY CERTIFY that we truly and conscientiously performed the duties assigned us, agreeably to the foregoing stipulations, and have appraised and determined and do hereby award as the Actual Cash Value of said property on the 12th day of August 2005 and the amount of loss thereto by the fire on the [sic] that day, the following sums, to wit:
(1) THE FULL COST OF REPAIR OR REPLACEMENT IS......... $167,923.60
(2) APPLICABLE DEPRECIATION.....$39,673.48
(3) THE ACTUAL CASH VALUE LOSS IS ..... $128,250.12
Defendant compensated plaintiff $128,250.12 for the actual cash value of her damaged personal property, but it refused to pay the additional depreciation amount of $39,673.28 on the basis that plaintiff had failed to comply with the policy's replacement cost provision, which provided that, as a prerequisite to payment, plaintiff submit proof that she actually replaced her damaged personal property:
If the full cost to replace all damaged covered property under the provisions of this section exceeds $500, we [defendant] will pay no more than the actual cash value of such property until actual repair or replacement of such property is completed. Actual cash value includes a deduction for depreciation.[2]
Plaintiff sued to recover the additional depreciation amount and the circuit court granted summary disposition in her favor. The Court of Appeals affirmed. Dupree v. Auto-Owners Insurance Company, unpublished opinion per curiam of the Court of Appeals, issued July 18, 2013 (Docket No. 310405), 2013 WL 3766580.
The sole issue before this Court is whether plaintiff's appraisal award entitled her to only the actual cash value of her damaged personal property or whether defendant is liable for the full replacement cost of that property, i.e., actual cash value plus the applicable depreciation amount.
To determine the extent of defendant's liability, it is necessary to ascertain the scope of the appraisal award. While matters of coverage under an insurance agreement are generally determined by the courts, the method of determining the loss is a matter reserved for the appraisers.3 And because the statutorily mandated appraisal process set forth in MCL 500.2833(1)(m) is regarded as a "substitute for judicial determination of a dispute concerning the amount of a loss,"4 "the amount of loss attributable to personal property damage, as determined by the appraisers, is conclusive."5 Given this conclusiveness, judicial review of an appraisal award is therefore "limited to instances of bad faith, fraud, misconduct, or manifest mistake."6 Applying these principles to the facts in this case, if the appraisal award is read as awarding plaintiff the replacement cost of her damaged property, then the award is conclusive in that respect and, absent bad faith, fraud, misconduct, or manifest mistake, it will supersede the insurance policy's replacement cost provision. If, however, the appraisal award is viewed as involving a matter of coverage under the insurance contract, then the award is not afforded conclusive effect, the policy language is not beyond the scope of judicial review, and the limiting terms of the insurance policy's replacement cost provision will remain determinative.
A plain reading of the appraisal award does not support the lower courts' determination that plaintiff is entitled to the full replacement cost of her damaged personal property, particularly where the informing language states, "We ... do hereby award as the Actual Cash Value of said property ..." (emphasis added). Indeed, if any part of the appraisal award constitutes a binding and conclusive judgment, it is the part that awards plaintiff the actual cash value of her damaged property. While we are mindful that review of appraisal awards is especially limited, that deference is inapplicable because the issue here pertains to a condition precedent that has not been met under the terms of the insurance policy, namely, submission of proof of actual loss. Accordingly, before it can be determined that the appraisal award constituted a conclusive judgment for replacement cost that superseded the insurance policy's replacement cost provisions, there is the preliminary question concerning whether the appraisal award entitled plaintiff to the replacement cost or the actual cash value of her damaged personal property.
Because the appraisal award cannot be read as a "conclusive" judgment for replacement cost, the terms of the replacement cost provision under the insurance policy control the scope of plaintiff's appraisal award. Consequently, plaintiff's failure to submit proof of actual loss in accordance with that provision entitles her to only the actual cash value of her damaged personal property. In lieu of granting defendant's application for leave to appeal, we reverse the judgment of the Court of Appeals and remand this case to the Wayne Circuit Court for entry of an order vacating its ruling in plaintiff's favor and granting summary disposition in favor of defendant.
YOUNG, C.J., and MARKMAN, MARY BETH KELLY, ZAHRA, McCORMACK, and VIVIANO, JJ.
MICHAEL F. CAVANAGH, J. I would deny the application for leave to appeal.
