The California Court of Appeals affirmed the trial court's denial of a motion to compel an appraisal in the midst of a suit filed after the insureds' property was destroyed by fire. Alexander v. Farmers Ins. Co., Inc., 219 Cal. App. 4th 1183 (Cal. Ct. App. Sept. 23, 2013).
The insureds held homeowners policies issued by Farmers. The insureds suffered losses to their homes and personal belongings from fire in 2009 and 2010. Claims were submitted to Farmers, identifying the damaged property and the estimated actual cash value of each item. The insurers disputed Farmers' adjustment of their claims, complaining that Farmers' method of calculating depreciation was illegal under the Insurance Code.
The insureds filed a class action suit on behalf of homeowners who received an offer of settlement from Farmers of a partial loss property claim for less than the applicable policy limits. The complaint alleged claims for declaratory relief, unfair competition, breach of contract and bad faith.
Farmers moved to strike the complaint because they had not violated the Insurance Code and because the insureds were obligated to first complete an appraisal. Farmers also moved to compel appraisal. The California Insurance Code provided that if the parties could not agree on the actual cash value or the amount of loss, an appraisal was required. The demurrer was overruled. The motion to compel appraisal was also denied. Farmers appealed the denial of its motion to compel appraisal.
The Court of Appeals decided that the trial court had discretion to stay the appraisal pending resolution of claims that could not be decided by an appraisal. Farmers argued that the insureds lacked standing without a showing of economic injury, which could only come about after an appraisal. The court rejected this argument because there was no need to demonstrate damages in order to qualify for declaratory relief.
