The United States District Court for the Southern District of Mississippi Issues Four Orders Relating to Appraisal Arising Out of Hurrican Katrina
October, 2009
In Mississippi, "appraisers have no power to determine the cause of the [claimed property] damage. Their power is limited to the function of determining the money value of the property which may be damaged by the storm." Munn v. National Fire Ins. Co. of Hartford, 237 Miss. 641, 115 So.2d 54, 55 (1959). Recently, the United States District Court for the Southern District of Mississippi in four separate cases issued orders regarding the propriety of appraisals in connection with first party disputes arising out of Hurricane Katrina. In each order, the Southern District of Mississippi cites to Munn; however, the results are not uniform.
1. Pearl River County School District v. RSUI Indemnity Co., 2009 WL 2553267 (S.D.Miss. Aug. 17, 2009): In Pearl River, the policyholder moved to compel appraisal. Id. at *1. The carrier, however, argued that "coverage issues make appraisal improper." Id. The Pearl River Court agreed, and cited to Munn in its analysis. "Upon review of the record, the Court is of the opinion that questions of coverage under the Policy exist here. ... Based upon the foregoing, an appraisal is inappropriate at this time ..." Id.
2. Kuehn v. State Farm Fire and Cas. Co., 2009 WL 2567485 (S.D.Miss. Aug. 17, 2009): In Kuehn, the Court was faced with the "merits of a Declaratory Judgment action to determine the validity of an appraisal award. The [policyholders] contend the appraisal is valid and enforceable. [The carrier] contends the appraisal is invalid and should be set aside." Id. at *1. In Kuehn, the carrier argued, among other things, that the "appraisal [was] invalid and unenforceable because the appraisal panel unanimously decided to exclude from consideration all damage below the second story water line. The appraisers testified they excluded this damage from consideration because damage caused by storm surge flooding is not a covered loss under the terms of the ... policy." Id. at *5.
The Kuehn Court - notwithstanding the appraisers' implicit coverage analysis conducted during the appraisal - held the appraisal was valid and binding:
[w]hile Munn holds appraisers may not exclude a disputed item of damage from consideration, requiring all such damages be taken into consideration by the appraisers and the disputed issue of causation be left to the court, Munn does not prohibit an appraisal in which both parties' appraisers agree on the items the appraisal should take into consideration and on the items that should be excluded from consideration. Munn does not require the appraisal take into consideration any damage that both parties' representatives agree should be excluded (in this case the damage from storm surge flooding, i.e. all damage below the water line on the second floor). Id. at *6.
3. Sunquest Properties, Inc. v. Nationwide Property and Cas. Co., 2009 WL 2567222 (S.D.Miss. Aug. 18, 2009): In Sunquest, the Court considered, among other things, the policyholders' motion for appraisal of the entire loss. Id. at *1. In granting the policyholders' motion, the Court commented on its previous order in Kuehn and the law described in Munn:
[t]his case is in a different posture than Kuehn ... because appraisal has yet to occur here ... and the parties in Kuehn allowed the appraisal to proceed outside the principles established in Munn. The appraisal in the instant case will be conducted under a different standard than was used in Kuehn. It should be understood that there will be no deviations. ... [C]ausation and/or coverage are not factors in the appraisal and shall not be considered in determining the total loss to the insured premises ... Id. at *2.
4. Landmark American Ins. Co. v. Bradfor-O'Keefe Funeral Home, 2009 U.S.Dist. LEXIS 83194 (S.D.Miss. Sept. 11, 2009): In Landmark, the Court denied the carrier's motion to enforce appraisal and to dismiss. Id. at *1. The carrier contended that the amount of loss previously agreed to by the appraisers did "not exceed the amount that ha[d] already been paid to [the policyholder] by its primary wind carrier, and its flood carrier [therefore] ... has no obligation to pay.'" Id. at *2. The policyholder, however, argued that no agreement had been reached by the appointed appraisers. Id. at *3. In reaching its order, the Court referred to Munn, and concluded:
[t]he record before the Court reflects that the parties have yet to fully engage in and complete the appraisal process. First, the appraisal ... did not culminate in a final appraisal award that was signed by these two appraisers. Second, the parties never selected an umpire to resolve differences ... Finally, whether both appraisers had access to full and complete records in order to make a full and complete damages assessment is questionable. Id. at *5.
We will continue to monitor any additional orders from Mississippi state courts and those federal courts sitting in Mississippi regarding the application and interpretation of Munn.
Back to CM Report on Property Insurance (2009v1) 2009 Volume 1 Table of Contents
