COURT DENIES MOTION TO REOPEN APPRAISAL PROCESS

June 5, 2012

Recently, a federal District Court judge in the Galveston Division of the Southern District of Texas denied an insured’s motion to abate an adverse appraisal award and to reopen the appraisal process to conduct discovery.  In KLM Resources, LLC v. Ohio Casualty Insurance Co., 2012 WL 1911801 (S.D. Tex. May 25, 2012), the insurer invoked the appraisal process to resolve a dispute over the amount owed on a business interruption claim following Hurricane Ike.  The insurer’s appraiser and the umpire set the amount of loss at $5,000, substantially less than the $92,000 estimated by the insured’s appraiser and less than the $10,000 already advanced by the insurer.  Facing a summary judgment on all of its claims, the insured sought an abatement of the award to conduct discovery on the issue of whether the award resulted from mistake.

Judge Froeschner observed that the insured did not challenge the umpire’s credentials, nor offered any evidence of collusion or dishonesty.   The sole basis for the insured’s motion was based upon a belief that the methodology used by the umpire and insurer’s appraiser in reaching the amount owed was flawed. The court noted that the insured’s appraiser’s affidavit “simply expresses his disagreement” with the assessment methods used.  Accordingly, the court denied the insured’s motion to reopen the appraisal process.