Colorado Court of Appeals Holds Policy Evaluation Clause Determines Causation

Colorado Court of Appeals Holds Policy Evaluation Clause Determines Causation

AT BonBeck Parker, LLC v. Travelers Indemnity Co. of America, 14 F.4th 1169 (10th District 2021) The court ruled that Travelers’ policy allows either party to request an estimate of the “amount of loss,” which is a phrase with a common meaning in an insurance context that unambiguously covers disputes of causation. The district court predicted that the Colorado Supreme Court would recognize that in the context of insurance, the phrase “amount of loss” would cover causation. In doing so, the 10th District rejected the Travellers’ argument that the valuation clause is limited to monetary definitions, thus precluding a determination of causation. Rather, the 10th Circuit concluded that nothing in the appraiser’s dictionary definition indicated that appraisers could not consider causation as part of the appraisal of value.

Jordan Plitt

BonBeck Parker, LLC and BonBeck HL, LC (collectively, “BonBeck”) filed a hail damage claim with their Travelers Indemnity Co. insurance company. Upon inspection, the travelers admitted that some of the property damage claimed was caused by insured hail. storm. However, Travelers also concluded that the review identified damage caused by unidentified events such as wear and tear on property. BonBeck requested an estimate. Travelers informed BonBeck that she would agree to the appraisal, provided that BonBeck also agreed that appraisers should not decide whether or not the hail caused the disputed damage assessed by the appraisal panel. BonBeck rejected this condition. The scope of the assessment issue was eventually submitted to the court.

The travel policy valuation clause provided that if the parties did not agree on the value of the property, the “amount of damages” could be settled by valuation. However, the policy did not define the phrase “amount of loss”. Because politics did not define the phrase, the Court turned to the Black Law Dictionary for help in interpreting the phrase by the Court. In particular, the Court turned to dictionary definitions of “loss”. According to the Blacks Law Dictionary, the term “loss” meant “the amount of financial damage caused by …”. . . property damage of the insured, for which the insured is liable. Webster’s Third New International Dictionary defines the term “loss” as “the amount of the insured person’s financial loss due to the occurrence of a specified contingent event”. . . so as to hold the insurer liable under the terms of the policy.” The Merriam Webster Collegiate Dictionary defines “loss” as “the amount of the insured’s financial loss as a result of . . . damage for which the insurer is liable. The Court found that in every dictionary iteration of the term “loss” there was a causal component, where the dictionaries clearly indicated that the term “loss” referred to damage resulting from the covered event. The Tenth Circuit Court of Appeals then referred to the decisions of various state courts outside of Colorado, which concluded that causation is integral to determining damages and that appraisers are empowered to determine the actual cause of property damage when determining the amount of damages from a hail storm.

The Court noted that the purpose of the appraisal provision in Traveler (and other similar) policies was to avoid litigation and to help resolve the dispute between the parties. If causation is excluded from the appraisal, this goal will be frustrated, as many detailed damage estimates will be retained for judicial review. The Court considered this unreasonable since the issue of causation involved separating the damages that were caused by the events covered from the pre-existing condition of the property, which could be subject to exclusions. This type of causation often arose in property claims, and the Court noted that if valuers are not allowed to allocate damage between covered and excluded hazards, then valuers will never be able to assess hail damage unless the roof is brand new. This would render the evaluation clause largely inoperative.

Many courts have not resolved this issue. The lack of authority in the case is likely due to the fact that insurers reserve, in the event of an assessment, coverage issues. Coverage questions often implicitly include questions of causation. By reserving coverage issues, appraisers can decide on the amount of damages that the appraisal board assesses, leaving the courts and possibly juries to deal with the more complex issues of causation. In the author’s experience, determining causation can be complex and time-consuming and often beyond the competence of the members of the evaluation committee. For example, in cases of hail, there are usually serious causal issues related to the distinction between old hail damage and new hail damage. This is often the subject of extensive engineering analysis. Such matters must be resolved through the DJA, where the parties can present their evidence. This kind of propaganda from party representatives is not usually encountered in the evaluation process. The Evaluation Board rarely allows the presentation of evidence and arguments of the parties. Thus, the purpose of the policy appraisal dispute resolution mechanism would be undermined if the appraisal process dragged on and made the appraisal process beyond what was intended much more costly.

About Jordan R. Plitt

Plitt is a senior shareholder in the Phoenix, Arizona law firm Cavanagh. His practice focuses on insurance coverage and bad faith litigation. He is an Associate Writer/Editor of Couch On Insurance, 3rd edition.

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