Miller v. USAA Cas. Ins. Co.

• Decision Date: 11 January 2002
• Docket Number: No. 20000268.,20000268.
• Citation: 44 P.3d 663,2002 UT 6
• Parties: Paul MILLER and Kathy Miller, Plaintiffs and Appellants, v. USAA CASUALTY INSURANCE COMPANY and Kenneth Riddle, Defendants and Appellees.
• Court: Utah Supreme Court

44 P.3d 663

2002 UT 6

Paul MILLER and Kathy Miller, Plaintiffs and Appellants, v. USAA CASUALTY INSURANCE COMPANY and Kenneth Riddle, Defendants and Appellees.

No. 20000268.

Supreme Court of Utah.

January 11, 2002.

Rehearing Denied February 25, 2002.

Lynn B. Larsen, Salt Lake City, for plaintiffs.

Stuart H. Schultz, Peter R. Barlow, Salt Lake City, for defendants.

RUSSON, Associate Chief Justice.

¶ 1 Plaintiffs Paul and Kathy Miller (collectively, "the Millers") appeal the denial of their motion to either set their unresolved claims for trial or provide another forum for the resolution of those claims. Additionally, the Millers appeal the district court's refusal to confirm an appraisal award in their favor. We reverse and remand.

BACKGROUND

¶ 2 The Millers contracted with USAA Casualty Insurance Company ("USAA") to insure their family home located in Parowan, Utah. According to section one of the written insurance contract, USAA agreed to insure the Millers' home for physical damage. However, section one subjected property damage claims to several conditions. One such condition was an appraisal clause, that provided:

If [the Millers] and [USAA] do not agree on the amount of loss, either party can demand that the amount of the loss be determined by appraisal. If either makes a written demand for appraisal, each will select a competent, independent appraiser and notify the other of the appraiser's identity within 20 days of receipt of the written demand.

....

The appraisers will then set the amount of loss. If they submit a written report of any agreement to us, the amount agreed upon will be the amount of loss. If they fail to agree within a reasonable time, they will submit their differences to the umpire. Written agreement signed by any two of these three will set the amount of the loss.

¶ 3 On or about June 14, 1996, the water heater located in the basement of the Miller family home burst, resulting in water damage to the home. The Millers then made a claim under their insurance contract with USAA to cover the cost of repairs. USAA retained Kenneth Riddle ("Riddle"), an independent adjuster, to estimate the amount of damage to the Millers' basement. Riddle, after conducting two inspections of the Millers' home, concluded that there was only minor damage to the basement. The Millers disagreed with Riddle's assessment of the extent of damage.

¶ 4 To resolve the dispute, the Millers filed suit against USAA on February 10, 1997 ("Miller I"), seeking recovery for physical damage to their home under the terms of the insurance contract ("contractual claim"). In addition, the Millers sought recovery on various extra-contractual grounds. Specifically, the Millers sought recovery for (1) loss of use of the home, (2) mental and emotional distress, (3) physical illness¹ and distress, (4) frustration and embarrassment, (5) infliction of emotional distress, (6) bad faith, (7) punitive damages, and (8) other special, general, and consequential damages ("extra-contractual claims").

¶ 5 On March 24, 1997, USAA moved to dismiss the Miller I complaint, invoking the appraisal clause and contending that the "dispute should be resolved via the appraisal process." On August 21, 1997, the Miller I district court dismissed the complaint in its entirety, relying upon the appraisal clause and stating that "the parties are bound by contract to settle the dispute in this case by appraisal."

¶ 6 Nevertheless, the parties did not proceed to appraisal pursuant to the court's ruling because the parties could not agree about which of the Millers' claims were to be appraised. The Millers asserted that all the Miller I claims must be appraised. USAA, however, refused to agree to appraisal of any claim other than the Millers' contractual claim for physical damage to the Millers' home. USAA also refused to agree to allow the extra-contractual claims to be determined after the contractual claim was resolved by appraisal.

¶ 7 On December 2, 1997, the Millers moved for reinstatement so that the Miller I court could resolve the parties' dispute over the scope of appraisal. The Miller I court denied this motion on January 16, 1998. Then, on January 23, 1998, the Millers moved the Miller I court to reconsider the court's denial of the motion to reinstate. Again, the court denied the motion, stating: "The suit [that] plaintiffs seek to resurrect has no claim relating to the interpretation of the appraisal clause. If there is a viable claim of that type, it may be grounds for a separate suit...."

¶ 8 Because the Miller I court refused to address the scope of the appraisal clause and refused to specifically address the extra-contractual claims, the Millers filed a second action on February 27, 1998 ("Miller II").² In their complaint initiating Miller II, the Millers named both USAA and Riddle as defendants (collectively, "USAA defendants") and sought declaratory judgment regarding the scope of the appraisal clause. In addition, the Millers asserted the following claims: (1) bad faith by USAA; (2) breach of contract and fiduciary duty by USAA; (3) intentional infliction of emotional distress by both USAA defendants; and (4) breach of duty by both USAA defendants with respect to carrying out the water damage investigation.³

¶ 9 On July 15, 1998, the USAA defendants moved to dismiss these claims based on the doctrine of res judicata, arguing that those counts were "entirely based on the same causes of action as" the Miller I extra-contractual claims. On August 10, 1998, the Millers moved for partial summary judgment on their request for declaratory judgment with respect to the scope of appraisal.

¶ 10 On November 25, 1998, the district court granted the USAA defendants' motion to dismiss the extra-contractual claims, concluding that the August 21, 1997, order dismissing Miller I constituted a final judgment on the merits and, thus, those claims were precluded by res judicata and the appraisal agreement. The Miller II court also ruled in its November 25, 1998, order that the appraisal panel should exercise its discretion to determine the scope of appraisal. The court explained:

[T]he ... appraisal clause [should] be construed to allow the appraisers and the umpire to consider all losses claimed by the [Millers] resulting from the 1996 water heater burst which flooded [the Millers'] home. Furthermore, the court declares that assessment of such loss shall include all damages suffered by [the Millers] from the broken water heater in the most general sense, including but not limited to actual losses, expenses, decrease in value or resources or increase in liabilities, depletion or depreciation or destruction of value, deprivation, ruin, shrinkage in value of estate or property, or any other loss stemming from the water heater burst which the appraisers and umpire, in their discretion, decide to consider.

(Last emphasis added.) Finally, the district court ordered that after the appraisers and umpire (collectively, "appraisal panel") appraised the loss, either party could appeal the appraisal panel's determination to the Miller II district court within twenty days of the panel's decision.

¶ 11 Despite the court's ruling, the parties again disputed which claims the appraisal panel would consider. As a result, the Millers moved to alter or amend the November 25, 1998, order, allegedly seeking clarification regarding the scope of appraisal. The district court denied that motion on January 22, 1999, stating that "it [was] premature to involve the court before the appraisers and umpire have had the opportunity to perform their duties."

¶ 12 Accordingly, the matter proceeded to appraisal. The parties argued to the appraisal panel their respective contentions concerning the scope of appraisal. On December 17, 1999, the appraisal panel issued a limited appraisal award. In the award, the panel addressed only the contractual claim, determining the amount of property damage to the Millers' home to be $40,880. However, exercising the discretion the district court afforded it, the panel explicitly refused to address any of the extra-contractual claims. The appraisal panel explained:

The panel as a whole is neither prepared nor willing to address extra-contractual claims (e.g., bad faith, punitive damages, emotional distress, etc.) unless specifically directed by the Court to do so. The panel as a whole is generally hesitant to embark on the laborious task of analyzing the extra-contractual claims, and feels unqualified to do so.

However, the panel agrees that the [USAA defendants] cannot avoid having [the Millers'] claims heard by one body or another. It is the intent of this panel to follow any procedure that would allow the [Millers] to preserve any properly brought claims. The panel will take any action to preserve those causes of action by decision of another tribunal.

¶ 13 After the panel issued its award, the Millers demanded that USAA pay the award before December 25, 1999. USAA promptly paid it on December 22, 1999.⁴ On December 27, 1999, the Millers filed a motion with the Miller II court to "confer on the forum and schedule for resolving" the extra-contractual claims. Then, on January 18, 2000, the Millers also moved to confirm the appraisal panel's determination.

¶ 14 On March 10, 2000, the district court denied both motions. First, the district court held that the appraisal panel's determination was final, and thus precluded the extra-contractual claims. Accordingly, the court denied the motion to confer on the forum and schedule for resolution of those claims. The court held:

[The extra-contractual claims are] not properly before this court, as they have previously been dismissed both in Miller I and again in Miller II as final judgments on the merits. The [appraisal panel] having performed their duties and exercised their discretion, and made an award for damages found to be a loss covered under the policy, this matter is now

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