Massey v. Farmers Ins. Group, 75279

CourtSupreme Court of Oklahoma
Citation837 P.2d 880
Docket NumberNo. 75279,75279
PartiesHarold MASSEY and Dorothy Massey, husband and wife, Appellees/Cross-Appellants, v. FARMERS INSURANCE GROUP, dba Truck Insurance Exchange/Truck Underwriters Association, Appellant/Cross-Appellee.
Decision Date02 June 1992

Galen L. Brittingham, Walter D. Haskins, Michael P. Atkinson, Thomas, Glass, Atkinson, Haskins, Nellis & Boudreaux, Tulsa, for appellees, cross-appellants.

Roger R. Williams, Joseph F. Clark, Jr., Williams, Clark, Baker, Howard, & Earl, P.A., Tulsa, John F. Percival, Culp, Heath, Sushnik, Percival & Percival, Oklahoma City, for appellant, cross-appellee.

SIMMS, Justice.

Certified Question of Law from the United States Court of Appeals for the Tenth Circuit.

Appellees, Harold and Dorothy Massey, purchased a fire insurance policy on their home from appellant, Farmers Insurance Group d/b/a Truck Insurance Exchange/Truck Underwriters Association (Farmers). The policy conformed to the statutory requirements of a standard fire insurance policy as mandated by 36 O.S. 1981, § 4803, and contained a clause permitting the amount of loss to be determined by an appraisal of the property by appointed experts. This clause reads as follows:

"Appraisal. In case the insured and this Company shall fail to agree as to the actual cash value or the amount of loss, then, on the written demand of either, each shall select a competent and disinterested appraiser and notify the other of the appraiser selected within twenty days of such demand. The appraisers shall first select a competent and disinterested umpire; and failing for fifteen days to agree upon such umpire, then, on request of the insured or this Company, such umpire shall be selected by a judge of a court of record in the state in which the property covered is located. The appraisers shall then appraise the loss, stating separately actual cash value and loss to each item, and, failing to agree, shall submit their differences, only, to the umpire. An award in writing, so itemized, of any two when filed with this Company shall determine the amount of actual cash value and loss. Each appraiser shall be paid by the party selecting him and the expenses of appraisal and umpire shall be paid by the parties equally." 36 O.S.1981, § 4803(G).

After a fire damaged their home, the Masseys made claim upon Farmers under the policy. The parties could not reach an agreement upon the amount of the loss, and the Masseys filed an action against Farmers in Atoka County District Court. Farmers then invoked the appraisal provision, and both parties appointed appraisers who figured the estimate for repair.

Farmers moved the court to appoint an umpire pursuant to the appraisal clause, and the court appointed a local builder suggested by Farmers' appraiser and attorneys. The umpire surveyed the property and reviewed the recommendations of the appraisers determining the damage to be repairable for $49,146.00.

A supplemental record and a filed affidavit indicate that the umpire attempted to contact each of the appraisers to obtain further detailed information, and though he received such information from Farmers' On appeal to the United States Court of Appeals for the Tenth Circuit, Farmers asserted the umpire's damage appraisal was preclusive as to damages. In reviewing this assertion, the Tenth Circuit Court determined that it contained an issue not addressed by the courts of Oklahoma and certified the following question of law pursuant to the Uniform Certification of Questions of Law Act, 20 O.S. 1981, § 1601, et seq.:

appraiser, he could not reach the Massey's appraiser. A letter from the appraiser appointed by Farmers shows that they agreed with the umpire's determination. It is unclear whether the award was filed with Farmers per the requirement of the provision, however, it was apparently sent to the district court. The Masseys did not file a formal objection to the award. Rather, they discharged their attorney and filed a pro se Motion to Reconsider the appointment of the umpire. They then retained new counsel, dismissed the Atoka County action without prejudice, and filed a new action on the policy as well as a bad faith claim in the United States District Court for the Eastern District of Oklahoma. The federal suit went to trial over the objection of Farmers, and the jury returned a verdict for the Masseys exceeding $4,000,000.00 in actual, consequential and punitive damages.

"Under Oklahoma law, what is the preclusive effect of a court-appointed umpire's damage appraisal under a statutorily-mandated provision of a fire insurance policy, where the insured, as of right, dismisses without prejudice an initial lawsuit without challenging the umpire's appraisal and, thereafter, institutes a subsequent lawsuit on the same cause of action in another court?"

We hold that the umpire's damage appraisal award made pursuant to the policy provision mandated by 36 O.S.1981, § 4803 has no preclusive effect upon issues raised and litigated by the party who did not make demand to enter into the appraisal process.

The legislature enacted § 4803 in 1957, and this Court has had little opportunity to interpret the appraisal portion of it. However, such appraisal clauses have been a part of standard fire insurance policies for well over one hundred years. See Appalachian Ins. Co. v. Rivcom Corp., 130 Cal.App.3d 818, 182 Cal.Rptr. 11 (1982) (citing Old Saucelito Land & Dry-Dock Co. v. Commercial Union Assurance Co., 66 Cal. 253, 5 P. 232 (1884)). Furthermore, this Court has approved of such appraisal provisions in fire insurance contracts since 1912. See Home Ins. Co. of New York v. Ballard, 32 Okla. 723, 124 P. 316 (1912); Rochester German Ins. Co. of Rochester, N.Y. v. Rodenhouse, 36 Okla. 378, 128 P. 508 (1912).

We construed the appraisal provision of § 4803 in Fidelity-Phenix Fire Ins. Co. of New York v. Penick, 401 P.2d 514 (Okla.1965), and though we did not determine the preclusive effect of appraisal awards, we did discuss the effect of an insurer calling for appraisal without admitting liability. We held that the appraisal clause of § 4803 does not constitute a condition precedent for maintaining an action on a policy where the insurer, in making demand for an appraisal, reserves the right to litigate the question of liability. Moreover, denial of liability by an insurer waives the right of the insurer to invoke the appraisal provision. Concordia Fire Ins. Co. of Milwaukee v. Barkett, 110 Okla. 177, 236 P. 890 (1925).

This holding finds support in the majority view concerning appraisal provisions, including the generally recognized rule that appraisal provisions permit appraisers or umpires to determine one issue, to wit, the amount of damage to the property. 14 G. Couch, Insurance § 50:54, at 204 (2d ed. 1982); Hamilton v. Liverpool, London & Globe Ins. Co., 136 U.S. 242, 10 S.Ct. 945, 34 L.Ed. 419 (1890); Casualty Indem. Exch. v. Yother, 439 So.2d 77 (Ala.1983); Hanson v. Commercial Union Ins. Co., 150 Ariz. 283, 723 P.2d 101 (Ct.App.1986); Safeco Ins. Co. of Am. v. Sharma, 160 Cal.App.3d 1060, 207 Cal.Rptr. 104 (1984); St. Paul Fire & Marine Ins. Co. v. Wright, 97 Nev. 308, 629 P.2d 1202 (1981); Elberon Bathing Co. v. Ambassador Ins. Co., 77 The majority view also concludes that although appraisal awards generally cannot determine the cause of a loss and do not discharge a cause of action on the policy, they are conclusive as to the amount of damages, and a confirmed award has the same preclusive effect as a judgment in a civil action. 14 G. Couch, Insurance § 50:55, at 205 (2d ed. 1982); 44 Am.Jur.2d, Insurance § 74 (1982); 45 C.J.S., Insurance § 1126 (1946); Hanson, supra; Safeco Ins. Co. of America, supra; Brethren Mut. Ins. Co. v. Filsinger, 54 Md.App. 357, 458 A.2d 880 (1983); Patriotic Order Sons of Am. Hall Ass'n v. Hartford Fire Ins. Co., 305 Pa. 107, 157 A. 259 (1931); Bainter v. United Pac. Ins. Co., 50 Wash.App. 242, 748 P.2d 260 (1988). The award in the case at bar was not confirmed by the state district court.

N.J. 1, 389 A.2d 439 (1978); In re Delmar Box Co., 309 N.Y. 60, 127 N.E.2d 808 (1955).

In joining the majority of jurisdictions, this Court recognized that awards made under the appraisal clauses of insurance contracts are conclusive as to the amount of loss. Aetna Ins. Co. v. Jester, 37 Okla. 413, 132 P. 130 (1913). After an award was made, plaintiff objected to it on several grounds and brought an action on the policy. The jury found that the appraisal was invalidated by the misconduct of the appraisers. On review, we held as follows:

"Where an appraisal has been fairly conducted in accordance with the law and the terms of the policy, the finding of the appraisers is binding upon the parties, and the insured cannot disregard the appraisal and offer independent evidence of the amount of his loss. His rights, so far as the extent of the loss is concerned, are limited by the award of the appraisers. It would seem, therefore, that [insured] should have an opportunity to make the same proof before the appraisers that he would have if the matter were being litigated in a...

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