Holaday v. Foremost

NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

SHARON HOLADAY, et al., Plaintiffs/Appellees,

v.

FOREMOST INSURANCE COMPANY GRAND RAPIDS, MICHIGAN,
Defendant/Appellant.

No. 1 CA-CV 23-0541
FILED 08-20-2024

Appeal from the Superior Court in Maricopa County
No. CV2023-000217
The Honorable John L. Blanchard, Judge

VACATED AND REMANDED

COUNSEL

Dieker Copple, PLLC, Scottsdale
By Douglas F. Dieker
Co-Counsel for Plaintiffs/Appellees

Ahwatukee Legal Office, PC, Phoenix
By David L. Abney
Co-Counsel for Plaintiffs/Appellees

Broening Oberg Woods & Wilson, PC, Phoenix
By Robert T. Sullivan, Kelley M. Jancaitis, Jessica J. Kokal, Tyler M.
Abrahams
Counsel for Defendant/Appellant
 HOLADAY, et al. v. FOREMOST
Decision of the Court

MEMORANDUM DECISION

Presiding Judge Angela K. Paton delivered the decision of the Court, in
which Judge Michael S. Catlett and Judge James B. Morse Jr. joined.

P A T O N, Judge:

¶1 Foremost Insurance Company Grand Rapids, Michigan
(“Foremost”) appeals from the superior court’s order confirming an
appraisal award, entering judgment, and awarding interest, attorneys’ fees,
and costs to Sharon Holaday and Bryan Turner (“Homeowners”). For the
following reasons, we vacate the court’s order and judgment and remand
for further proceedings.

FACTS AND PROCEDURAL HISTORY

¶2 On September 1, 2020, a storm damaged Homeowners’ home.
Homeowners filed a claim with their homeowner’s insurance provider,
Foremost, in November 2020. Foremost dispatched a field adjuster who
inspected the home, and later placed a tarp on the roof at Homeowners’
request. Foremost claimed it mailed Homeowners a check for $5,507.02 in
December 2020.

¶3 About six months later, Foremost contacted Homeowners
after it appeared the check had not been cashed. Homeowners claimed they
never received the check and noted they attempted to make repairs on their
own to prevent further damage to the home. Foremost reissued and mailed
the check.

¶4 In July 2021, Homeowners requested a new tarp for their roof
because the first tarp had deteriorated. Later that month, Homeowners
reported additional damage to their home. Foremost required
Homeowners to submit a new claim for the 2021 damage, which
Homeowners did. Foremost denied the new claim after concluding the
damage was caused by Homeowners’ failure to timely repair the home after
the first storm.

¶5 Homeowners and Foremost disputed the amount of loss, so
in February 2022, Homeowners invoked the appraisal clause in their
homeowner’s insurance policy, which provides:

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If you and we fail to agree on the amount of loss,
then both you and we have the right to select a
competent and disinterested appraiser within
20 days from the day of disagreement. The
appraisers will determine the amount of the loss. If
they do not agree, then the appraisers will
choose a competent and disinterested umpire.
Then each appraiser will submit his amount of
the loss to an umpire selected by them or by a
court having jurisdiction if the appraisers
cannot agree upon an umpire. The agreement
of any two will determine the amount of loss for
damage to your property. You pay your
appraiser and we pay our appraiser. You and
we share equally the expenses of the umpire
and all other expenses of the appraisals.

In no event will an appraisal be used for the purpose
of interpreting any policy provision, determining
causation or determining whether any item or loss is
insured by this policy. If there is an appraisal, we
still retain the right to deny the claim.

(Emphasis added.)

¶6 In March 2022, Foremost accepted Homeowners’ appraisal
demand. Each party retained their own appraisers and because they were
unable to agree on the amount of loss, selected an umpire. Homeowners’
appraiser agreed with the umpire’s position and the two of them, as the
appraisal panel, entered an award of $170,511.66 Replacement Cost Value
(“RCV”) and $142,816.52 Actual Cash Value (“ACV”) in July 2022.

¶7 The appraisal award noted the panel determined the “amount
of loss and value” based on the “information, facts and evidence” provided
“without regard to policy coverage or loss causation.” The award also
noted that “[n]o consideration has been made for any loss on any other date
with regard to this appraisal[,]” and noted the date of loss was September
1, 2021.1 The award included the following “SPECIAL PROVISIONS:

1. Subject to policy provisions and deductible

1 Homeowners note in their Motion to Confirm the Appraisal Award that

the award incorrectly lists the date of loss as September 1, 2021.

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2. Less any previous payments per this claim

3. Policy coverage to be addressed by others”

¶8 Foremost made an additional payment for the ACV less the
Homeowners’ deductible, totaling $34,684.18, and declined to issue
payment for any damages allegedly resulting from the denied claim. This
amount was in addition to a $12,529.74 payment Foremost had previously
made to Homeowners.

¶9 In January 2023, Homeowners filed a complaint in superior
court against Foremost, alleging breach of contract and bad faith.
Homeowners argued Foremost breached the contract by “refusing payment
of the full amount of an appraisal award.” Foremost denied the allegation
in its answer and requested a jury trial “on all triable issues.” The court
issued a scheduling order, which ordered private mediation to take place
by September 2023, and a trial-setting conference for April 2024.

¶10 Over three months later, in April 2023, while the complaint
remained pending, Homeowners moved to confirm the appraisal award.
Foremost asked the court to deny the motion, arguing among other things,
that it was not liable for Homeowners’ damages because Homeowners
failed to timely report the September 2020 storm and failed to protect their
property after that storm, in violation of the insurance policy.

¶11 The court heard argument from both parties in May 2023.
Homeowners argued “the sole issue” before the superior court was
whether the appraisal award resolved causation and coverage issues. They
claimed that Foremost admitted that damage caused by the September 2020
storm was covered under the policy, and “[t]he coverage available under
the policy for storm loss is undisputed.” Foremost responded that the
appraisal process could only be used to determine the amount of loss, and
because the appraisal award appeared to resolve causation and coverage
disputes that need to be litigated—including its claim that Homeowners
damages are not covered by the insurance policy because they failed to both
timely report and protect their property after the September 2020 storm—
the appraisal award could not be confirmed.

¶12 The court confirmed the appraisal award, finding that the
appraisal panel did not exceed its authority. It later entered judgment
against Foremost for the appraisal amount, less the deductible and what
Foremost had already paid. The court also awarded interest on the
appraisal amount and granted Homeowners’ request for attorneys’ fees.

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¶13 Foremost timely appealed the court’s judgment. We have
jurisdiction under Section 12-2101.01(A)(6).

DISCUSSION

¶14 Foremost contends the superior court erred as a matter of law
in confirming the appraisal award because the appraisal panel exceeded its
authority when it determined causation and coverage issues—specifically,
that the damage to Homeowners’ home was caused by the September 2020
windstorm and not the July 2021 storms. Homeowners respond that no
error occurred because the appraisal panel’s determination of the amount
of loss inherently involves causation and coverage.

¶15 “We review the superior court’s decision to confirm an
arbitration award in the light most favorable to upholding the decision and
will affirm unless the superior court abused its discretion.” RS Indus., Inc.
v. Candrian, 240 Ariz. 132, 135, ¶ 7 (App. 2016); Hanson v. Com. Union Ins.
Co., 150 Ariz. 283, 285 (App. 1986) (applying “the general standard of
review applicable to arbitration” to “appraisal enforcement proceedings”
(quoting Safeco Ins. Co. v. Sharma, 207 Cal. Rptr. 104, 106 (Cal. Ct. App.
1984))).

¶16 Appraisal decisions are generally “entitled to the same degree
of finality accorded decisions of arbitrators.” Hanson, 150 Ariz. at 285
(quoting Hirt v. Hervey, 118 Ariz. 543, 545 (App. 1978)). But “appraisers
have no authority to adjudicate issues beyond those submitted to them.”
Id. “The boundaries of the arbitrators’ powers are defined by the agreement
of the parties. Within those boundaries, the arbitrators’ decision is final
. . . .” Smitty’s Super-Valu, Inc. v. Pasqualetti, 22 Ariz. App. 178, 180 (1974)
(internal citations omitted).

¶17 We presume appraisers only decide “the matters submitted
for [appraisal] unless the party seeking review carries the burden of
showing otherwise.” Einhorn v. Valley Med. Specialists, P.C., 172 Ariz. 571,
573 (App. 1992) (citation omitted). And the superior court shall only decline
to confirm an award under certain circumstances—including when the
appraisers “exceeded their powers[.]” See A.R.S. § 12-1512(A)(3). An
appraisal panel exceeds its powers by going outside the scope of its
authority, which is determined in the parties’ agreement. See Hirt, 118 Ariz.
at 545-46.

¶18 The parties here did not submit a written submission
agreement to the appraisal panel, but they agreed to set the amount of loss

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pursuant to the appraisal clause in the insurance policy, which expressly
states that the appraisers will only determine “the amount of loss.”
(Emphasis added.) And it provides that “[i]n no event will an appraisal be
used for the purpose of interpreting any policy provision, determining
causation or determining whether any item or loss is insured by this policy.”
(Emphasis added.) And even if there is an appraisal award, the insured
“still retain[s] the right to deny the claim.” Simply put, the policy did not
permit the appraisal panel to resolve the underlying causation and
coverage issues.

¶19 And the appraisal panel did not determine causation and
coverage. The appraisal award itself expressly stated it determined the
“amount of loss and value” based on the “information, facts and evidence”
provided “without regard to policy coverage or loss causation.” (Emphasis
added.) The award was “[s]ubject to policy provisions . . .” and stated that
“[p]olicy coverage [was] to be addressed by others.” In accordance with
the insurance policy, the appraisal panel did not decide whether any losses
were covered by the policy or determine the cause of loss. But in confirming
the appraisal award, the superior court found, among other things, that
Foremost’s position that causation and coverage remained outstanding “is
not supported by any language in the appraisal.”

¶20 We conclude that the appraisal panel did not determine
causation and coverage and therefore did not exceed its authority under the
insurance policy, but the superior court erred in confirming the appraisal
award and entering judgment against Foremost for the appraisal amount
when those issues remained unresolved. See Anderson v. State Farm, 1 CA-
CV 23-0611, 2024 WL 3791884, at *3, ¶ 16 (App. Aug. 13, 2024) (mem.
decision).

¶21 The parties also dispute whether causation is inherently
resolved in the appraisal process, and cite federal and other state case law
to support their positions. But we need not reach the issue because the
policy here does not permit the appraisal panel to determine causation and
coverage and the appraisal panel did not resolve those issues. The parties’
insurance policy is a contract, and therefore, the terms of the policy must
govern when a dispute based upon it arises. See Dairyland Mut. Ins. Co. v.
Andersen, 102 Ariz. 515, 517 (1967). “A general principle of contract law is
that when parties bind themselves by a lawful contract, the terms of which
are clear and unambiguous, a court must give effect to the contract as
written.” Grosvenor Holdings, L.C. v. Figueroa, 222 Ariz. 588, 593, ¶ 9 (App.
2009) (internal quotation marks and citation omitted). And “[w]here the
intent of the parties is expressed in clear and unambiguous language, there

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is no need or room for construction or interpretation and a court may not
resort thereto.” Id. (internal quotation marks and citations omitted). As
previously discussed, here, the appraisal award was limited to the amount
of loss consistent with the insurance policy.

¶22 We therefore vacate the superior court’s order confirming the
appraisal award to the extent it determines causation and coverage and the
resulting entry of judgment. The finder of fact must first determine the
cause of the damage to Homeowners’ home, whether the policy covers it,
and then the court can enter judgment accordingly using the appraisal
award as the maximum amount of loss. A.R.S. § 12-1513(B). We express no
opinion on how the causation and coverage issues should be resolved.

¶23 Foremost asks for attorneys’ fees and costs on appeal
pursuant to Section 12-341.01(A) and Wagenseller v. Scottsdale Memorial
Hospital, 147 Ariz. 370 (1985). In our discretion, we decline to award
Foremost its attorneys’ fees but award Foremost its taxable costs upon
compliance with Arizona Rule of Civil Appellate Procedure 21.

CONCLUSION

¶24 We vacate the superior court’s order confirming the appraisal
award and the resulting judgment, and remand for further proceedings
consistent with this decision.

AMY M. WOOD • Clerk of the Court
FILED: AGFV

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