Appraisal Law: Milligan v. CCC Information Services Inc. et al.

The US Court of Appeals for the Second Circuit recently found appraisal inappropriate to resolve policy interpretation in an insurance dispute in New York. Importantly, the court found that the insurance appraisal process in the Policy falls within the meaning of arbitration. “The appraisal process here constitutes arbitration for purposes of the FAA. The appraisal provision identifies a category of disputes (disagreements between the parties over “the amount of loss”), provides for submission of those disputes to specified third parties (namely, two appraisers and the jointly-selected umpire), and makes the resolution by those third parties of the dispute binding (by stating that “[a]n award in writing of any two will determine the amount of the loss”).”

Also, the court “explained that an appraiser may not resolve coverage disputes raising legal questions about the interpretation of an insurance policy…The court deemed this a dispute over the proper interpretation of the policy’s coverage, which could be resolved only by the court’s legal analysis…An appraisal is appropriate not to resolve legal questions, but rather to address “factual disputes over the amount of loss for which an insurer is liable.””