{"id":904294,"date":"2025-04-30T14:12:39","date_gmt":"2025-04-30T20:12:39","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=904294"},"modified":"2025-04-30T14:12:43","modified_gmt":"2025-04-30T20:12:43","slug":"appraisal-clause-over-delay-and-coverage-dispute","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/appraisal-clause-over-delay-and-coverage-dispute\/","title":{"rendered":"Itemized Appraisal Ordered Over Delay and Coverage Dispute Objections: A Shift in the Appraisal Enforcement Paradigm?"},"content":{"rendered":"\n

Jessica Port | Zelle<\/a><\/p>\n\n\n\n

In a recent decision,\u00a0Gray v. Philadelphia Contributionship, 748 F. Supp. 3d 367 (D. Md. 2024), U.S. District Judge James K. Bredar granted a policyholders\u2019 motion to compel appraisal and stayed litigation in a diversity action involving a disputed storm damage claim. The ruling offers lessons for insurers on appraisal clauses<\/a>, waiver, and litigation strategy under Maryland law.<\/p>\n\n\n\n

Factual Background<\/strong><\/p>\n\n\n\n

On March 27, 2024, Plaintiffs Gary and Lashonda Gray filed suit against their insurer, The Philadelphia Contributionship (TPC), alleging breach of contract and bad faith. The dispute arose from a $120,158.35 valuation disagreement over storm damage to their Maryland home that occurred on May 4, 2021. On April 29, 2024\u2014three years after the date of loss, and one month into litigation\u2014the Grays invoked the policy\u2019s appraisal clause, which provided:<\/p>\n\n\n\n

If you and we fail to agree on the amount of loss, either may demand an appraisal of the loss<\/a>. In this event, each party will choose a competent appraiser within 20 days after receiving a written request from the other. The two appraisers will choose an umpire…. The appraisers will separately set the amount of loss…. A decision agreed to by any two will set the amount of loss.<\/p>\n\n\n\n

TPC rejected the appraisal demand \u201cdue to the passage of time between the date of loss and the date of the request.\u201d The Grays subsequently filed a motion to compel appraisal and stay the litigation.<\/p>\n\n\n\n

Legal Framework and Analysis<\/strong><\/p>\n\n\n\n

Maryland treats appraisal clauses as analogous to arbitration agreements governed by the Maryland Uniform Arbitration Act (MUAA), Md. Code Ann., Cts. & Jud. Proc. \u00a7 3-201 et seq., which deems them valid and enforceable absent contract-revocation grounds (id. \u00a7 3-206(a)). See Brethren Mut. Ins. Co. v. Filsinger, 54 Md. App. 357 (1983). In practice, the appraisal provision governs the process of appraisal, while the MUAA generally governs enforcement of appraisal rights (e.g. legal action to compel appraisal, appoint an umpire, or enforce an award).[1]<\/a><\/p>\n\n\n\n

Judge Bredar addressed each of the three arguments TPC raised against appraisal:<\/p>\n\n\n\n

1. Condition Precedent<\/strong><\/p>\n\n\n\n

First, TPC argued that the policy\u2019s \u201cSuit Against Us\u201d clause\u2014requiring \u201cfull compliance with all terms\u201d before suit\u2014barred the action because appraisal was not completed pre-litigation. Citing Aetna Cas. & Sur. Co. v. Ins. Comm\u2019r, 293 Md. 409, 445 A.2d 14 (1982), TPC asserted appraisal was a condition precedent. Judge Bredar held that TPC waived this defense by explicitly refusing the Grays\u2019 appraisal demand, finding the refusal inconsistent with insisting on the condition: \u201cTPC cannot seriously expect this Court to go along with its attempt to refuse to participate in appraisal, only to then turn around and say this action is barred because there has been no appraisal. TPC cannot have it both ways.\u201d<\/p>\n\n\n\n

2. Waiver by Delay<\/strong><\/p>\n\n\n\n

TPC contended the Grays waived their appraisal right by waiting nearly three years post-loss and filing suit before invoking appraisal, claiming prejudice due to faded evidence from intervening weather events. Judge Bredar acknowledged the delay and noted that \u201cTPC\u2019s frustration with the delay is understandable.\u201d However, he concluded that (1) the \u201cpolicy contains no time limit on when to invoke the appraisal right\u201d; (2) the damage was not \u201cparticularly complex\u201d such that the court would \u201cdo a better job determining the loss than the appraisers would\u201d; (3) the suit was in its \u201cearly stages\u201d before discovery; and (4) absent \u201cactual prejudice\u201d beyond speculative assertions about evidence degradation, there was no basis to find that the Grays waived their right to compel appraisal.<\/p>\n\n\n\n

3. Scope of Appraisal<\/strong><\/p>\n\n\n\n

Finally, TPC objected that the Grays sought to recover the public adjuster\u2019s fee, which is not a category of loss covered under the policy, via appraisal. While Judge Bredar agreed that appraisal is limited to valuing covered losses, not determining coverage, he distinguished between cases where the \u201cdispute centers on whether the insured is entitled to coverage at all\u201d and those where \u201cthe parties disagree over one (fairly small) category of coverage.\u201d In the latter, appraisal should not be \u201cthrown out altogether.\u201d Instead, the court implemented a practical solution. Following the lead the court in Thompson v. Allstate Prop. & Cas. Ins. Co., 2024 WL 3161586 (D. Md. June 25, 2024), Judge Bredar compelled appraisal, but required itemized damage reports to \u201censure that the appraisal process may promptly begin while preserving TPC\u2019s right to contest, after appraisal, whether certain categories of loss were covered by the policy.\u201d<\/p>\n\n\n\n

Based on the above, the court granted the motion, ordered appraisal with itemized reporting, and stayed the case pending completion.<\/p>\n\n\n\n

Three Takeaways for Insurers<\/strong><\/p>\n\n\n\n

This ruling carries several precise implications for insurers operating in Maryland and similar jurisdictions:<\/p>\n\n\n\n

1. Coverage Disputes and Appraisal Scope: This ruling reflects a willingness to enforce appraisal with an itemized reporting requirement where tangential coverage disputes exist \u2013 not when coverage remains completely unresolved. Cf. Jones v. Nationwide Mut. Fire Ins. Co., No. CV DKC 23-2340, 2024 WL 4534510, at *3 (D. Md. Oct. 21, 2024) (\u201cIt is evident that the parties\u2019 dispute is about more than the value of covered loss; it is whether the remainder of Mr. Jones\u2019 claimed loss is covered at all. Until the issue of coverage is determined, an appraisal is premature and the motion to compel appraisal and stay litigation pending appraisal will be denied without prejudice.\u201d)<\/p>\n\n\n\n

2. Strategic Risks of Refusing Appraisal: In this case, the insurer\u2019s rejection of the insured\u2019s appraisal demand was construed as a waiver of the ability to enforce appraisal as a condition precedent. There may be instances where proceeding with appraisal subject to a reservation of rights may be warranted.<\/p>\n\n\n\n

3. Burden to Prove Prejudice: To the extent a court requires actual prejudice to establish that the policyholder waived its right to demand appraisal, concrete proof will be necessary; theoretical prejudice, however likely that prejudice might be, may not be enough.<\/p>\n\n\n\n

Conclusion<\/strong><\/p>\n\n\n\n

Gray v. Philadelphia Contributionship signals a willingness to enforce appraisal in cases where the dispute centers on the value of covered loss, even if tangential coverage disputes remain unresolved. It also reflects reluctance to find that a policyholder has waived the right to demand appraisal without concrete evidence that the insurer suffered prejudice.<\/p>\n\n\n\n

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[1]<\/a>\u00a0George E. Reede, Jr. & Jessica E. Pak, \u201cIs Appraisal an Arbitration? Yes and No. Maybe. Sort Of.\u201d, Zelle, LLP (n.d.).\u00a0https:\/\/www.zellelaw.com\/Is-an-Appraisal-an-Arbitration<\/a>.<\/p>\n\n\n\n