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Travelers loses dispute with policyholder over appraisal

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hailstorm

Appraisers can determine the cause of damages, said a federal appeals court Friday, in affirming a ruling against a Travelers Cos. Inc. unit.

In June 2012, hailstorm damaged three buildings owned by Englewood, Colorado-based BonBeck Parker LLC and BonBeck HL LLC, according to the 10th U.S. Circuit Court of Appeals in Denver in BonBeck Parker, LLC; Bonbeck HL, LLC v. The Travelers Indemnity Co. of America.

Travelers paid $34,200, the amount of damage it said was caused by the hailstorm.

A dispute ensued between BonBeck and Travelers unit Travelers Indemnity as to how much damage was caused by the storm, in particular damage to the roofs of three buildings, and how much from uncovered events like wear and tear, deterioration and improper installation.

BonBeck then invoked a policy provision that allows either party to conduct an appraisal, including the amount of loss, which is to be determined by a three-person appraisal panel.

Travelers said it would only agree to an appraisal upon certain conditions, including that the panel would not be allowed to decide what caused the roof damage.

BonBeck refused the insurer’s conditions and Travelers filed suit in U.S. District Court in Denver, seeking a declaration the policy precluded the appraisal panel from determining causation issues. BonBeck counterclaimed for breach of contract.

After the district court ruled the appraisal provision authorizes the panel to make cause-of-loss determinations, an appraisal estimated total repair cost for hail damage to be about $216,000. Travelers paid BonBeck this, less the $34,200 it had already paid.

The district court then granted summary judgment for BonBeck on its breach of contract counterclaim, ruling there was no genuine dispute that Travelers had breached the policy by not agreeing to an appraisal when BonBeck requested one.

The ruling was affirmed by a unanimous three-judge appeals court panel. “The policy’s plain language identifies disputes like this one, over ‘the amount of loss’ as one of the issues on which the parties may request an appraisal,” the ruling said.

“And because we conclude that the Colorado Supreme Court, if faced with the issue, would recognize that the ordinary meaning of the phrase ‘amount of loss’ encompasses causation issues, the district court properly interpreted the Policy to conclude that the Panel could determine the cause of BonBeck’s roof damage,” it said, in affirming the lower court ruling the insurer had breached the policy when it had refused to allow the appraisal to proceed.

Attorneys in the case did not respond to requests for comment.

 

 

 

 

 

 

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