Using Your Insurance Policy’s Appraisal Process? You May Still Have Tort Claims Left

I‘ve seen a few cases now come across with people trying to sue their insurance companies after using the appraisal process in their policies to resolve a dispute, so I thought I’d blog about one of them. This one is Clark v. Pekin Insurance Co., Case No. 3:15CV2272 (behind paywall), out of the Northern District of Ohio. 

The fact patterns for all these cases is basically the same: Plaintiff makes a claim under an insurance policy. The insurance policy pays less than the plaintiff desires. Plaintiff utilizes the appraisal process found in the insurance policy, in which each side chooses an appraiser and, if they can’t agree, an independent umpire then makes a finding. Plaintiff wins the appraisal process and the insurance company promptly pays plaintiff the extra money owed. 

However, plaintiff is not pleased–probably because of having had to go through a whole song-and-dance to get the money–and sues anyway. That’s what happened in this case. 

Breach of contract claims are tricky after the appraisal process has been invoked. Most insurance policies prohibit the insured from recovering damages beyond that awarded through the appraisal process, as the policy did here. Because Clark received what the umpire stated she was entitled to, exactly as required under the policy, the court found there was no breach of the contract.

However, the appraisal process doesn’t bar tort claims, and Clark was still alleging that the insurance company had acted in bad faith toward her insurance claim. However, the court found that the insurance company had behaved in a timely fashion and that disagreement over the amount to be paid didn’t constitute bad faith on its own, and there was no other evidence on the question, so Clark lost that claim as well. So the appraisal process might still leave you with tort claims, but they would be challenging to establish, I think.