The California federal district court granted the insured’s motion to compel appraisal despite the existence of outstanding coverage issues. K4 Dev. LLC v. ACE Am. Ins. Co., et al., 2025 U.S. Dist. LEXIS 211337 (C.D. Cal. Oct. 6. 2025).

The insured owned hotel property. It was insured by ACE while the hotel was under construction. During construction, the hotel suffered rainwater damage due to incomplete roofing systems. The water damaged the interior finishes and furnishings from the 6th floor down to the basement, including 32 guestrooms.

The insured’s experts determined that the covered water losses delayed the hotel’s opening by 144 days. The insured submitted a claim for the water damage, covered claim expenses, and delay in opening losses. ACE denied the claim for delay in opening losses, stating that its expert determined the Water Events did not delay the hotel’s opening. ACE, however, did pay for the repair damage caused by the Water Events.

The insured sued ACE and moved to compel an appraisal of the following: (1) disputed repair costs amount; (2) number of days opening was delayed by the Water Events; and (3) the claims expenses amount.

The policy’s Insuring Agreement provided, “[T]he Company will pay the actual Loss. . . of Business Income . . . sustained during the period of indemnity as a result of a delay in completion of the insured project . . .” Further, “The Company shall not be liable for any increase in delay caused by or resulting from . . . any deviation from the original schedule date of completion or revisions thereto, and which is independent of any insured loss which gives rise to a delay, whether occurring prior to or after an occurrence.”

The insured argued that the delay provisions in the insuring agreement provided coverage. ACE responded that the Water Events did not delay the hotel’s opening, but rather obtaining the temporary certificate of occupancy caused the delay. ACE contended that the insured could not timely obtain the certificate, which was necessary to open the hotel, because of other contract work. ACE’s expert concluded that incomplete contract work, not the loss due to the Water Events, caused delays. Therefore, an appraisal was premature.

The court found that the policy’s appraisal provision compelled appraisal of claims concerning repair costs, delay in opening losses, and claim expenses. Although the parties disputed whether the delay in opening provision covered the Water Events, the coverage dispute did not bar appraisal. The appraisal process was limited in scope to the amount of damage resulting to various items submitted for consideration and could not resolve questions of coverage and interpret provisions of the policy. Nevertheless, the disputed items had to be submitted to an appraiser for valuation under the terms of the policy and coverage could be litigated afterwards if necessary. Consequently, the court did not need to reach the coverage issues at this stage of the proceedings, and the disputes concerning repair costs, delay in opening losses, and claim expenses were subject to appraisal of their value.

The court granted the motion to compel appraisal