Troisi, Korman, Mascia and Bholan Secure Important Appellate Victory

Rivkin Radler secured a victory in the first appellate case to interpret Insurance Law § 3408(c) since a 2014 amendment.

Under § 3408(c), a property insurer or an insured can demand that appraisers selected by the parties decide disagreements over the amount of the loss. Typically, insurers argue that an appraisal is confined to an agreed scope of damage, and resist submission to appraisal in situations where the “scope of damage” or required repairs are disputed.

In response to intense lobbying efforts from the plaintiffs’ bar, the New York Legislature amended the statute in 2014 to permit appraisers to decide the “extent of the loss or damage.” The Legislature also acknowledged that an appraisal is only appropriate to determine issues relating to damages and that “an appraisal shall not determine whether the policy actually provides coverage for any portion of the claimed loss or damage.” After the amendments became effective, insureds aggressively pursued appraisal, even in cases where coverage was disputed by the insurer.

No appellate court had interpreted the amendments to the statute until the First Department issued its opinion in Louati v. State Farm Fire and Casualty Co. (2018 NY Slip Op 03908 [May 31, 2018]). In Louati, the Court affirmed the dismissal of the insured’s Petition to Compel Appraisal. While the insured argued that the only issue to be decided was the “scope of damages,” State Farm showed that an appraisal was not appropriate in this case since there were unresolved issues relating to the cause of the loss and whether or not the insured complied with certain provisions of the policy relating to exhibiting the damaged property.

In ruling in our client’s favor, the Court adhered to the longstanding principle that a court must first resolve policy coverage issues before the parties can seek an appraisal. The Court also reaffirmed well-settled New York law, as well as the plain language of the amendment, that coverage issues cannot be decided in an appraisal. The decision provides guidance and clarity for those seeking to rely on New York’s appraisal statute.

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