United States District Court, S.D. Indiana, Indianapolis Division
PHILADELPHIA INDEMNITY INSURANCE COMPANY, Plaintiff/Counterclaim Defendant,
WE PEBBLE POINT, Defendant/Counterclaimant.
REPORT AND RECOMMENDATION ON DEFENDANT'S MOTION
TO SET ASIDE APPRAISAL AWARD
McVicker Lynch United States Magistrate Judge.
the court for a report and recommendation on its appropriate
disposition is a motion filed by defendant/counterclaimant WE
Pebble Point (“Pebble Point”), the insured, to
set aside an appraisal award. (Dkt. 39). Pebble Point
contends the appraisal process leading to the award was
tainted and the award should not stand or bind it. The
plaintiff, Philadelphia Indemnity Insurance Company
(“Philadelphia Insurance”), opposes the motion.
As addressed below, the Magistrate Judge recommends that the
District Judge GRANT the motion, set aside the appraisal
award, and order that the parties' insurance dispute may
now be adjudicated in this court.
court first will summarize events that led to the initiation
of this litigation and to the District Judge's order
requiring the parties to proceed with an appraisal procedure
described in the subject insurance policy. Next, the court
will recite the appraisal language of the policy and describe
the process by which the court selected an umpire to act in
the appraisal procedure. The court will then describe the
events occurring within the appraisal process leading to an
appraisal award, at least as those events are illuminated by
documents and affidavits filed with the court. Finally, the
court will analyze the issues raised by Pebble Point's
motion to set aside in light of the governing law and the
facts and inferences gleaned from the evidence submitted by
court held a hearing on October 1, 2015, on Pebble
Point's motion to set aside the appraisal award. The
parties stated they had no materials or evidence to offer
other than the documents they had submitted to the court at
various times. The court will consider these documents, the
authenticity of which was not disputed by the parties. They
• The appraisal award in the amount of $29, 743.27,
dated June 8, 2015, by umpire David J. Balistreri, and dated
June 9, 2015, by appraiser Steve Zwolfer (the appraiser
selected by Philadelphia Insurance). Dkt. 40-10.
• Affidavit of Don Lamont, the appraiser selected by
Pebble Point. Dkt. 39-1.
• Affidavit (with attached emails) of appraiser Steve
Zwolfer. Dkt. 41-5.
• Additional emails between or among Mr. Lamont (Pebble
Point's appraiser), Mr. Zwolfer (Philadelphia
Insurance's appraiser), and Mr. Balistreri (the umpire).
Dkts. 41-3 and 41-4.
• Mr. Zwolfer's December 2014 damages estimate at
replacement cost value in the amount of $6, 114.75.
• Mr. Lamont's December 2014 damages estimates at
actual cost value (without recoverable depreciation) in the
amount of $562, 040.00 and at replacement cost value (with
recovery for depreciation) in the amount of $641, 005.26.
case is an insurance coverage dispute. Pebble Point owns an
apartment complex in Indianapolis, Indiana. Philadelphia
Insurance issued two materially identical policies to Pebble
Point that cover certain losses at the apartment complex for
the periods November 22, 2011, to November 22, 2012, and
November 22, 2012, to November 22, 2013 (together, the
“Policy”). In December 2012, Pebble Point made a
claim against the Policy for damages to apartment buildings
within the complex-primarily to the roofs of the 22 buildings
making up the complex- allegedly caused by an October 2012
storm. Pebble Point also made a second claim against the
Policy because of a different, later storm. For ease of
reference, the court groups the policies, claims, and storms,
and will refer to only one Policy, one claim, and one storm.
The issues currently before the court do not require
distinction between different storms and claims or the two
separate policies, and it is simpler to refer to them
Insurance investigated the claim and determined that the
majority of losses claimed by Pebble Point were not caused by
the storm (the Policy covers loss caused by “windstorm
or hail” and “water damage”) but by
non-covered causes such as improper installation or
maintenance of roofing shingles, other roofing construction
defects, or wear and tear. Philadelphia Insurance paid Pebble
Point an amount equal to the damages it found were caused by
a covered event minus Pebble Point's $10, 000 deductible,
or a total of $6, 288.56. When Pebble Point challenged
Philadelphia Insurance's evaluation of the claim,
Philadelphia Insurance took another look but reached
essentially the same conclusion, i.e., that few of
the problems with Pebble Point's roofs were the result of
the storm and thus covered losses.
Point disagreed that the damages were the result of
non-covered causes. It maintained its losses ranged in the
hundreds of thousands of dollars, and demanded Philadelphia
Insurance to participate in an appraisal proceeding as
outlined in the Policy. Philadelphia Insurance declined to do
so on the ground it believed the parties' dispute
concerned the extent of covered losses rather than
the “amount of loss.” Philadelphia then brought
this suit seeking a declaratory judgment that it had fully
satisfied its obligations under the Policy for the claim made
by Pebble Point.
Point moved to dismiss Philadelphia Insurance's complaint
on the ground Pebble Point was entitled to enforce the
appraisal provision of the Policy. This court agreed with
Pebble Point. The court ruled:
[Philadelphia Insurance's] [P]olicy makes clear that the
results of an appraisal do not necessarily constitute the
last word; appraisers' competence is limited to assessing
the amount of loss, and not to interpreting other provisions
of the [P]olicy. Where, as here, the parties dispute the
amount of loss and one has demanded appraisal, however, we
conclude that it is premature to consider
[Philadelphia's] suit for a declaratory judgment
enshrining its own estimates of the amount of covered damage.
We accordingly GRANT Defendant's motion to dismiss
Plaintiff's complaint for declaratory judgment, which we
dismiss WITHOUT PREJUDICE, and we order the parties to
proceed to the appraisal process as provided in the [P]olicy.
(Dkt. 29 at p. 14).
The Appraisal Provision and Selection of an
Point's claim sought coverage under the Commercial
Property section of the Policy, which contains this Appraisal
Provision at Section E.2:
If we and you disagree on the value of the property or the
amount of “loss”,  either may make written demand
for an appraisal of the “loss”. In this event,
each party will select a competent and impartial appraiser.
The two appraisers will select an umpire. If they cannot
agree, either may request that selection be made by a judge
of a court having jurisdiction. The appraisers will state
separately the value of the property and amount of
“loss”. If they fail to agree, they will submit
their differences to the umpire. A decision agreed to by any
two will be binding. Each party will:
a. Pay its chosen appraiser; and
b. Bear the other expenses of the appraisal and umpire
If there is an appraisal, we will still retain our right to
deny the claim.
(Policy, Dkt. 40-2, at p. 37).
Point and Philadelphia Insurance each selected its own
appraiser- men each had hired many months before to provide
an opinion about the extent of Pebble Point's loss. Each
party filed a motion asking the court to appoint an umpire,
and each provided the court with curriculum vitae of various
persons they represented to be neutral and competent.
See Pebble Point's motion, Dkt. 30, at p. 2;
Philadelphia's motion, Dkt. 31, at p. 2. The court
selected Mr. David J. Balistreri, who had been proposed by
Philadelphia Insurance, to act as the umpire, after finding
that its review of the candidates' curriculum vitae
indicated all appeared to be competent to work as an umpire,
and that an umpire located geographically close to Indiana
might save time and money. (Dkt. 33).
The Appraisal Process and the Award
Initial Communications and Scheduling a ...