In the recent case of Bell v. Liberty Mutual Fire Insurance Company., S.E.2d, 2012, 12 FCDR 4011 (Ga.App. Nov. 30, 2012) the insureds (the Bells) challenged
In the recent case of Bell v. Liberty Mutual Fire Insurance Company., S.E.2d, 2012, 12 FCDR 4011 (Ga.App. Nov. 30, 2012) the insureds (the Bells) challenged an appraisal award that favored Liberty Mutual.
The Bells’ home was damaged by fire on April 26, 2008. They submitted a claim to Liberty Mutual for the policy limits of their dwelling and personal property. Pursuant to the its policy, Liberty Mutual invoked the appraisal clause. While the appraisal process was going forward, the Bells filed a complaint for damages in Superior Court, seeking the policy limits for the dwelling and contents.
The Superior Court stayed the lawsuit and allowed the appraisal process to continue. The umpire awarded less than policy limits for both the dwelling and the contents. Liberty Mutual filed a motion for entry and approval of the award in the Superior Court over the objection of the Bells. The Superior Court entered the award and ended the litigation. The Bells filed an appeal which led to this decision.
On appeal, one of the challenges the Bells made against the award was that the umpire did not separately itemize the personal property values in his award. The Bells acknowledged that the appraisal clause found in the Liberty Mutual policy did not require such an itemization. Rather, they argued that Liberty Mutual’s policy was improper in that it did not conform to the Standard Fire Policy language found in the Georgia Code . They explained that the Standard Fire Policy states:
The appraisers shall then appraise the loss, stating separately actual cash value and loss to each item; and, failing to agree, shall submit their differences, only, to the umpire. An award in writing, so itemized, shall determine the amount of actual cash value and loss.
The Bells argued that the Liberty Mutual policy is not allowed to contain provisions that are less favorable to the insured than the Standard Fire Policy. The Bells argued that the Liberty Mutual Policy, by not requiring an itemization of the contents awarded in its appraisal clause, was less favorable to the insured than the Standard Fire Policy. As such, the appraisal clause (and thus, the appraisal) was fatally defective.
In response to this argument, the Court of Appeals determined that the word “item,” as used in the Standard Fire Policy, actually applied to the kinds of coverage, rather than individual items of personal property. Thus, in this case, the umpire actually did issue an “itemized” award when he awarded values for each individual type of coverage (additional living expenses, personal property, and dwelling coverage).
Next the Bells raised a potentially more interesting issue relating to the Value Policy Law. The Valued Policy Law, found at O.C.G.A. § 33-32-5, states:
(a) Whenever any policy of insurance is issued to a natural person or persons insuring a specifically described one or two family residential building or structure, located in this state against loss by fire and the building or structure is wholly destroyed by fire without fraudulent or criminal fault on the part of the insured or one acting on his behalf, the amount of insurance set forth in the policy relative to the building or structure shall be taken conclusively to be the value of the property . . . (b) Subsection (a) of this Code section shall not apply where: (1) The building or structure is not wholly destroyed by fire.
The Bells asserted that “unquestionably, [their] house has now been wholly destroyed as a result of the fire, as a result of Liberty Mutual’s refusal and failure to timely pay their claims and the Bells’ inability to rebuild or protect the property from ruin.” The court noted, however, that the umpire determined that the house was not wholly destroyed during the fire. Unfortunately for the Bells, the court further noted that the trial court did not rule on this issue, and therefore there was nothing presented for the appellate court to review.
This was a potentially interesting issue if it had been reached. One of the grey areas of the appraisal process is determining what matters are proper for appraisal. Specifically, at what point does the appraisal shift from determining the amount of loss to determining issues of coverage. The specific question here of determining whether a house is “wholly destroyed by fire” is one of those hybridfactual/legal questions that could at least arguably be outside the scope of appraisal. As the issue was not preserved, however, this court did not reach it.
Finally, the Bells raised a rather novel bad faith claim. Their position was that Liberty Mutual acted in bad faith by failing to have a “statutorily and contractually required provision in its homeowners insurance policy, to the detriment and unfair prejudice of the holders of its policy.” The court assumed that the Bells were referring to the allegedly deficient appraisal provision in the Liberty Mutual policy. Since the court had already ruled against them on that issue, the Court held that the denial of bad faith was proper.