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In this case, a property damage dispute was handled through an appraisal process where each side selected an appraiser, and the two appraisers selected an umpire. The two appraisers disagreed over the scope of necessary replacement vs. repairs, and thus the damage valuation. The umpire ultimately agreed with the insurer’s appraiser on value, and adopted that appraiser’s report and valuation.

The insured brought suit for breach of contract and bad faith, in addition to filing a petition to set aside the appraisal. The insured alleged bad faith on the basis that the insurer “purposefully underestimated and misrepresented the scope of the damage and conspired with [its appraiser] and [the umpire] during the appraisal process.”

The Court of Common Pleas denied the petition to set aside the appraisal, and granted the petition to enforce the appraisal award. In the separate bad faith litigation, the trial court granted summary judgment on the breach of contract and bad faith claims. On appeal, the Superior Court affirmed the trial court’s decision on both the appraisal and the litigation.

The insured’s principle bad faith argument focused on the umpire adopting the insurance company appraiser’s report, claiming this amounted to some sort of fraud or collusion. The Superior Court rejected this bad faith claim, describing it as an improper attempt to challenge the appraisal award. If fraud or collusion existed, then these matters had to be raised in the petition process challenging the appraisal award, not via separate litigation. Thus, the Superior Court stated that “a bad faith claim premised on the actions of appraisers cannot supplant the settled standard of review for setting aside an appraisal award, which provides relief for fraud and misconduct.”

In dicta, the Superior Court further stated the insured “failed to set forth how [the umpire’s] alleged violations of his proposal [for fulfilling his duties as umpire] meets the high threshold required of evidence to prove that [the insurer] acted in bad faith in resolving the insurance claim.” Rather, the evidence showed the umpire reviewed both sides’ valuations, limited his methodology by agreement of both appraisers, and did not find it necessary to write a separate report (for which did not charge the parties).

Date of Decision: April 16, 2019

Mews at Byers Station Condominium Association v. Greater New York Mutual Insurance Co., Superior Court of Pennsylvania No. 1047 EDA 2018, 2019 Pa. Super. Unpub. LEXIS 1434 (Pa. Super. Ct. April 16, 2019) (Bowes, McLaughlin, Stabile, JJ.)