Covenant Ins. Co. v. Banks

• Decision Date: 10 April 1979
• Citation: 177 Conn. 273,413 A.2d 862
• Parties: COVENANT INSURANCE COMPANY v. Thomas BANKS.
• Court: Connecticut Supreme Court

Page 862

413 A.2d 862

177 Conn. 273

COVENANT INSURANCE COMPANY v. Thomas BANKS.

Supreme Court of Connecticut.

Argued Jan. 9, 1979.

Decided April 10, 1979.

Peter C. Dorsey, Hamden, for appellant (defendant).

John Keogh, Jr., Norwalk, with whom, on the brief, was Robert L. Genuario, for appellee (plaintiff).

Before COTTER, C. J., and LOISELLE, BOGDANSKI, PETERS and PARSKEY, JJ.

PETERS, Associate Justice.

This is an appeal by the defendant from a judgment of the Superior Court that granted the plaintiff's motion for summary judgment, invalidated a purported appraisal award as well as the appointment of the umpire who rendered it, and enjoined the defendant from proceeding to enforce the award.

The facts of the case are not in dispute. The plaintiff issued to the defendant a policy of insurance covering fire losses on certain property located in New Haven. On November 7, 1976, a fire occurred on the premises for which a timely claim was made. The plaintiff promptly assigned an adjustor to investigate the loss. On December 21, 1976, the defendant requested a damage appraisal, as provided by the policy. The plaintiff refused to participate in the appraisal process, citing as its reason the contention that the request for appraisal was premature because the company had not completed its investigation or rejected the defendant's proofs of loss, and therefore no disagreement yet existed. Despite the plaintiff's refusal to participate, the defendant did appoint an appraiser and thereafter applied to the Court of Common Pleas for the ex parte appointment of an umpire. The court appointed an umpire who, working with the appraiser appointed by the defendant, rendered an appraisal award on February 21, 1977.

The plaintiff instituted the present action to invalidate the appraisal award and the appointment of the umpire, and to enjoin the defendant from proceeding to enforce the award. The plaintiff argued that the appointment of the umpire and the rendering of the award without its participation were invalid because the applicable policy provision called for an appraisal by both parties, and because the judicial appointment of an umpire did not comply with General Statutes §§ 52-410 and 52-411. ¹ The plaintiff claimed that the appraisal procedure required initial agreement as to liability so that the only disputed issue upon appraisal would be the amount of the loss. The plaintiff did not and still does not concede liability, citing some evidence of arson as the cause of the fire. After considering the plaintiff's and the defendant's cross-motions for summary judgment, the court granted the plaintiff's motion and denied the defendant's. The defendant appeals from the consequent entry of judgment for the plaintiff.

This appeal by the defendant concerns the interplay between §§ 52-410 and 52-411, on the one hand, and § 38-98 on the other. Section 38-98 ² requires fire insurance policies to contain an appraisal clause. The defendant contends that the decision of the trial court undermines the public policy represented by the enactment of § 38-98 because it permits an insurer unilaterally to frustrate appraisal simply by refusing to participate. This argument misconceives the position of the plaintiff that was accepted by the trial court. The plaintiff insurer concedes that the appraisal provisions are binding on both insurer and insured and may not be unilaterally abrogated by either. Rather, the plaintiff maintains that the appraisal procedure depends upon preconditions whose existence is in dispute. The plaintiff asserts that the appraisal procedure is inapplicable in the absence of agreement as to initial liability unless resort is had to the judicial remedy of §§ 52-410 and 52-411.

The appeal therefore raises two questions about the interrelationship between §§ 52-410 and 52-411 and § 38-98. Did the trial court err in its interpretation of § 38-98 that the appraisal clause did not permit recourse to appraisal by the insured without the appointment of an appraiser by the insurer? Did the trial court err in suggesting recourse to §§ 52-410 and 52-411 as a remedy for an insured aggrieved by inability to obtain appraisal? We conclude that the trial court was correct in both of these matters.

The appraisal clause mandated by § 38-98 of the General Statutes that appears in the contract of insurance between the parties provides that if the parties fail to agree "as to the actual cash value or the amount of loss," either party may demand in writing that each appoint an appraiser within twenty days of the demand. The appraisers should then select an umpire, but if they fail to agree on an umpire, "such umpire shall be selected by a judge of a court of record." See Sullivan v. Liberty Mutual Fire Ins. Co., 174 Conn. 229, 233, 384 A.2d 384 (1978).

The defendant, the insured, contends that this provision authorized him to petition the court for the appointment of an umpire, since there had been a failure by the parties to agree upon an umpire. This contention misconstrues the language of § 38-98. The phrase, "and failing for fifteen days to agree upon such umpire," refers not to the failure of the parties to agree but rather to the failure of the appraisers to agree. Thus, the provision presupposes that each party has already appointed an appraiser in accordance with the procedure specified, and that the appraisers cannot agree on the selection of an umpire. Only in that event may one of the parties request "a judge of a court of record" to select an umpire. If one of the parties has refused initially to select an appraiser, the provision in § 38-98 for judicial selection of an umpire never comes into play.

By contrast, §§ 52-410 and 52-411 of the General Statutes do provide an appropriate procedure for an insured who needs judicial assistance when an insurer unreasonably refuses to proceed with the appraisal procedure specified in the insurance contract. These sections, despite their generality, are not superseded by the more specific provisions of § 38-98, relating to fire insurance policies. The defendant's argument for mutual exclusivity cannot survive the recognition that § 38-98 empowers the judicial appointment of an umpire only when appraisers appointed by the parties cannot agree on the selection. The procedure authorized by §§ 52-410 and 52-411, specifying an adversary process by writ of summons and complaint, is appropriate in the event the initial requirement for appointment of appraisers has not been fulfilled. There is no need for such an adversary procedure under § 38-98, since both sides have selected appraisers and are thus aware of and involved in the proceedings.

One final question concerning the applicability of §§ 52-410 and 52-411 to the present case is whether the appraisal clause in the fire insurance policy constitutes "a written agreement to arbitrate" within the meaning of § 52-411. An agreement to arbitrate is defined in General Statutes § 52-408 as "(a) n agreement in any written contract . . . to settle by arbitration any controversy thereafter arising out of such contract, or out of the failure or refusal to perform the whole or any part thereof . . .." (Emphasis added.) In the past, courts have sometimes found a distinction between arbitration and appraisal, holding that the latter "is not an arbitration in the accepted legal sense of the word, because an arbitration is a method adopted to settle already-existing controversies," while an appraisal settles "questions of amount, quality, value or price which might come up during or after the performance of the contract." First Ecclesiastical Society v. Besse, 98 Conn. 616, 620, 119 A. 903, 905 (1923). It is noteworthy that this distinction was made prior to the adoption of Connecticut's arbitration statutes in 1929.

Whatever validity the distinction may once have had, this court has more recently rejected on interpretation of the word "controversy" in § 52-408 that would render it "narrower . . . than its normal connotation." Ginsberg v. Coating Products, Inc., 152 Conn. 592, 595, 210 A.2d 667 (1965). See note, "Judicial Interpretations and Applications of the Connecticut Arbitration Statutes," 7 Conn.L.Rev. 147, 150-51 (1974). The normal connotation of "controversy" is more than sufficient to encompass the dispute over the amount of a fire loss that triggers the appraisal procedure in the insurance contract in question. In addition, our definition of arbitration as "the voluntary submission . . . of an existing or future dispute to a disinterested person or persons for final determination", (emphasis added.)...