District Court of Colorado Revisits Legal Process for Challenging Appraisal Awards

Recently, the district court of Colorado revisited the legal process for challenging an appraisal award. Specifically, the Anita Court clarified whether a causation determination in appraisal is permissive, citing the blockbuster Tenth Circuit opinion in BonBeck Parker, LLC v. Travelers Indemnity Co. of America, 14 F.4^th 1169 (10th Cir. 2021). In Bonbeck, the Tenth Circuit predicted that the Colorado Supreme Court would agree that the words “amount of loss” in an insurance appraisal would necessarily also require a factual determination by an appraisal panel of the cause of an insurance loss—a huge win for policyholders. Prior to Bonbeck, insurers argued ad nauseam that appraisal ultimately decided nothing other than monetary value and that causation was a coverage determination.

Now, in Anita, Travelers argued that the Bonbeck decision only made causation a permissive task of the appraisal panel and therefore was not always required. The Anita Court rejected this interpretation of Bonbeck and affirmed that causation is necessarily decided when quantifying an amount of loss in appraisal. This decision affirms that appraisal is a valuable tool for resolving factual disputes concerning the cause of a loss.

Moreover, the Anita Court evaluated appraisal as an arbitration process. The issue of whether appraisals in Colorado constitute arbitration remains unsettled. In Anita, the Court applied the minority rule that appraisal is an arbitration, subject to Colorado’s Uniform Arbitration Act (“CUAA”). Under the CUAA, the Court has the power to either modify, correct, vacate, or confirm an award. Colo. Rev. Stat. § 13-22-220 (2022). Moreover, the CUAA mandates that the court confirm an arbitration award upon request, so long as the award has not been modified or vacated pursuant to a challenge. Id. at §§ 13-22-222 – 224.

Applying CUAA, the Court admonished Travelers for its failure to pay an appraisal award, noting that the underlying policy required payment after 60 days after receipt of a proof of loss and the issuance of an appraisal award. The Court explained that to avoid liability for breaching its insurance policy, Travelers should have filed a motion to vacate, correct, or modify the appraisal award. Since Travelers failed to take any legal action prior to summary judgment, the Court confirmed the award. For the next case where payment has not been made on an appraisal award, the logical application of Anita should be that if an award is confirmed by the court, the court should also find an insurer liable for breach of contract as a matter of law.

Read the full Anita Bertisen, et. al. v. the Travelers Home and Marine Insurance Company, Memorandum Opinion and Order here.