West Hudson Sub Acute Care Center, LLC v. Chubb Group of Insurance Companies and Federal Insurance Company, No. HUD-L-2042-17 (N.J. Super. Ct., Law Div., Oct. 17, 2019)
In this case, the court granted summary judgment in favor of Federal Insurance Company, finding no basis to set aside an appraisal award.
The insureds owned and operated a sub-acute rehabilitation facility. Following a fire, they were required to temporarily close a portion of their facility to repair the damage. While the parties were able to resolve the insureds’ claim for property damage, they were unable to agree upon the amount of business interruption loss sustained by the insureds as a result of the temporary closure. The insureds invoked the policy’s appraisal provision, which provided for the appointment of appraisers by each party and the selection of an umpire by the appraisers to set the amount of the loss. The policy further provided that “each appraiser will separately state the value of the property and the amount of the loss or damage” and that “if the appraisers do not agree, they will submit their statements to the umpire,” with agreement by the umpire and either of the appraisers creating a binding award. After the insureds demanded appraisal, an award was entered setting the amount of the business interruption loss consistent with the insurer’s pre-appraisal valuation.
In upholding the appraisal award, the trial court rejected the insureds’ arguments that the appraisal was procedurally and substantively flawed. Initially, the insureds argued that the appraisal award should be set aside because the umpire refused to allow the parties to participate in the fact-finding process. In rejecting this argument, the trial court found that the insureds’ own appraiser conceded that there was no reason to allow the parties to participate in the appraisal process since all relevant information regarding the amount of the loss was submitted to the umpire. Next, the insureds argued that the umpire made a mistake of law in measuring the period of restoration. The trial court, however, found that measuring the period of restoration was a factual determination not subject to judicial review absent fraud, corruption, or other wrongdoing. As there was no evidence of misconduct, the trial court held the determination of the umpire was final.