The court denied State Farm's motion for summary judgment on the insured homeowners' bad faith claim for State Farm's failure to agree to an appraisal. Currie v. State Farm Fire and Cas. Co., 2014 WL 4081051 (E.D. Pa. Aug. 19, 2014).
Superstorm Sandy caused a tree to crash in the insureds' home. The loss was reported to State Farm. The State Farm adjuster verbally quoted the roof replacement at more than $100,000. State Farm eventually paid $60,000 for the roof replacement. The insureds' adjuster estimated the loss at $363,804.98.
The insureds demanded an appraisal. State Farm rejected the demand because the claim involved certain items for which State Farm did not admit liability, including damage to the interior hardwood floors. State Farm contended that since the dispute went beyond the amount of loss, an appraisal was not an appropriate method of resolution.
The insureds sued for breach of contract and bad faith. State Farm moved for summary judgment.
On the breach of contract claim, State Farm argued that the insureds failed to establish that the loss sustained was covered by the policy. State Farm contended that the insureds' adjuster did not provide an estimate for damage to the hardwood floors. State Farm's adjuster found the floors were not damaged by the storm. The request for an appraisal was denied, therefore, because the claims involved items for which State Farm had not admitted liability or coverage.
The insureds asserted that their flooring expert concluded that the floors were discolored due to storm damage and water intrusion. Therefore, there was genuine issue of material fact regarding whether the floors were damaged by the storm. The court agreed. State Farm was not entitled to summary judgment on this issue.
On the bad faith issue, the court noted that there must be an admission of liability and a dispute as to the dollar value of the loss before an appraisal can be invoked. A dispute regarding coverage was improper for appraisal and occurred when an insurance company claimed an exclusion of a loss under the policy. However, when the parties merely disagreed over the extent of damage or whether a covered peril was the cause of certain damage, that was a dispute regarding the amount of loss which was proper for appraisal.
Further, an appraisal of the amount of loss included assessments of causation and the scope of repairs and, thus, a disagreement about these issues did not transform the parties' dispute into a coverage dispute. Adjusters could disagree as to whether the covered occurrence actually caused a certain portion of the damage, as well as disagree about the scope and method of necessary repairs.
Here, the dispute was as to the amount of loss, not coverage. It was disingenuous of State Farm to characterize the disagreement as a coverage issue in order to avoid appraisal. State Farm's summary judgment motion on the bad faith refusal to go to appraisal was also denied.