Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_15-cv-01442/USCOURTS-azd-2_15-cv-01442-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Breach of Contract

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WO NOT FOR PUBLICATION 

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA 

David Miller, 

Plaintiff, 

v. 

Pacific Speciality Insurance Company, 

Defendant.

No. CV-15-01442-PHX-JJT

ORDER 

 At issue is Plaintiff David Miller’s Motion to Stay Proceedings and Invoke 

Appraisal (Doc. 15, Mot.), to which Defendant Pacific Specialty Insurance Company 

filed a Response in opposition (Doc. 16, Resp.) and Plaintiff filed a Reply (Doc. 18, 

Reply).1

 For the reasons that follow, the Court grants Plaintiff’s Motion to Stay 

Proceedings and Invoke Appraisal. 

I. BACKGROUND 

Plaintiff initiated this lawsuit in state court on June 23, 2015, (Doc. 1, Ex. A, 

Compl.), and Defendant removed it to this Court on July 27, 2015, (Doc. 1). On June 23, 

2014, Plaintiff’s residence was severely damaged by fire, which was a covered loss 

pursuant to his insurance policy from Defendant. (Compl. ¶ 5.) After one year, Defendant 

had still not completed its investigation and adjustment of the loss. (Compl. ¶ 6.) 

 

1

 In the caption of his Complaint, Plaintiff improperly named Defendant as Pacific “Speciality” Insurance Company. For clarity, the Court corrects this to “Specialty” in this Order. 

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According to the policy, any litigation in the matter must be initiated within twelve 

months of the loss. (Compl. ¶ 7.) Accordingly, Plaintiff filed this lawsuit one year later, 

on June 23, 2015, raising claims against Defendant for breach of contract and bad faith. 

At this point, significant discrepancies still exist between Plaintiff’s and 

Defendant’s estimates of the loss. (Mot. at 1.) Due to the difference in valuations, 

Plaintiff now moves for a stay of proceedings and requests an appraisal of the damage in 

accordance with the policy terms. (Mot. at 1-2.) 

II. ANALYSIS 

 Plaintiff’s insurance policy contains an appraisal clause that states:

If you and we fail to agree as to the actual cash value or the amount of loss, 

then, on the written request of either, each shall select a competent and disinterested appraiser and notify the other of the appraiser selected within 

twenty days of the request. Where the request is accepted, the appraisers shall first select a competent and disinterested umpire . . . . Dated this 7th day of June, 2016. 

(Doc. 17-1.) Arizona law treats appraisal requests pursuant to a contractual provision the 

same as arbitration requests. Meineke v. Twin City Fire Ins. Co., 892 P.2d 1365, 1369 

(Ariz. Ct. App. 1994); Hanson v. Commercial Union Ins. Co., 723 P.2d 101, 103 (Ariz. 

Ct. App. 1986). Thus, as with arbitration clauses under the Federal Arbitration Act 

(FAA), appraisal clauses are “valid, irrevocable and enforceable, save upon such grounds 

as exist at law or in equity for the revocation of any contract.” Ori v. Am. Family Mut. 

Ins. Co., No. CV-2005-697-PHX-ROS, 2005 WL 3079044, at *2 (D. Ariz. Nov. 15, 

2005). For example, waiver of an appraisal clause is a possible defense. See Moses H. 

Cone Mem’l Hosp. v. Mercury Const. Corp., 460 U.S. 1, 25 (1983).

 Defendant offers three reasons for the Court to refuse to enforce the appraisal 

clause with respect to Plaintiff’s claim: (1) Appraisal requires acceptance by the other 

party, (2) the appraisal request is barred by waiver, and (3) the demand for appraisal was 

untimely. (Resp. at 1-2.) The Court examines these in turn. 

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A. No Acceptance Requirement to Initiate Appraisal 

 Defendant argues that without acceptance and agreement of both parties, appraisal 

is not available. (Resp. at 1.) “[A]ny doubts concerning the scope of [appraisable] issues 

should be resolved in favor of [appraisal], whether the problem at hand is the 

construction of the contract language itself or an allegation of waiver, delay, or a like 

defense to [appraisability].” Moses, 461 U.S. at 24-25. 

 Here, the insurance policy, as required under Arizona law, provides for appraisal 

“on the written request of either” where the parties disagree as to the amount of loss. See

A.R.S. § 20-1503. Defendant argues it must first accept and agree to any request for 

appraisal. The Court disagrees. The policy states that either party may select a competent 

and disinterested appraiser when there is a disagreement as to the value of the loss. 

Further, a requirement that an opposing party must accept any request for appraisal would 

obstruct the purpose and effectiveness of the appraisal clause. See Gates v. Ariz. Brewing 

Co., 95 P.2d 49, 50 (Ariz. 1939) (stating the primary purpose of [appraisal] is to obtain an 

inexpensive and speedy final disposition on the matter involved). While the Court does 

not agree with Defendant’s proffered interpretation of its policy, even if the Court were to 

find ambiguity in the policy, it would construe the language in favor of appraisal. See 

Moses, 461 U.S. at 24-25. 

 The Court finds Plaintiff requested an appraisal in accordance with the policy 

terms. Therefore, Defendant’s argument for mutual acceptance of appraisal fails. 

B. No Waiver of Appraisal Right 

 Defendant argues that Plaintiff waived his right to appraisal by filing this lawsuit. 

(Resp. at 2.) Arizona law has established that a party to a contract may waive its right to 

enforce an arbitration or appraisal agreement by its conduct. See Forrest City Dillon, Inc. 

v. Superior Court, 675 P.2d 297, 299 (Ariz. Ct. App. 1984). However, because public 

policy favors arbitration and appraisal, Arizona courts generally do not favor waivers of 

arbitration or appraisal agreements. See Meineke, 892 P.2d at 1370 (Ariz. Ct. App. 1994) 

(citing U.S. Insulation v. Hilro Constr. Co., 705 P.2d 490, 498 (Ariz. Ct. App. 1985)). A 

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party waives an appraisal clause with conduct that is “inconsistent with the use of the 

[appraisal] remedy; in other words, conduct that shows an intent not to [appraise].” Id.

(citing EFC Dev. Corp. v. F.F. Baugh Plumbing & Heating, Inc., 540 P.2d 185, 188 

(Ariz. Ct. App. 1975)). Inconsistency is usually found from “such conduct as preventing 

[appraisal], making [appraisal] impossible, proceeding at all times in disregard of the 

[appraisal] clause, expressly agreeing to waive [appraisal], or unreasonable delay.” EFC 

Dev. Corp., 540 P.2d at 188. 

 Here, Plaintiff’s conduct is not inconsistent with the use of the appraisal remedy. 

Plaintiff filed this lawsuit before requesting appraisal, but only to comply with the policy 

terms that require the initiation of litigation within twelve months of the date of loss. 

(Mot. at 2.) While Defendant claims, citing Meineke, that the filing of a lawsuit indicates 

a clear repudiation of the right to have an appraisal, (Resp. at 2), the facts alleged by 

Plaintiff support a different inference. Since Defendant had not yet completed the 

adjustment of the loss, the need for Plaintiff to request an appraisal was not apparent. 

(See Reply at 2.) The approach of the twelve-month time limit imposed by the policy, 

however, made Plaintiff’s initiation of this lawsuit reasonable. 

 The Court finds that Plaintiff did not waive his right to invoke the appraisal clause 

by filing this lawsuit. Thus, Defendant’s argument for waiver fails. 

C. Demand for Appraisal Was Not Unreasonably Delayed 

Defendant argues that Plaintiff’s demand for appraisal was untimely, since he 

waited for over a year to make the request. (Resp. at 2.) However, untimeliness by itself 

does not rise to repudiation by unreasonable delay. City of Cottonwood v. James L. Fann 

Contracting, 877 P.2d 284, 290 (Ariz. Ct. App. 1994). In order to show unreasonable 

delay, Defendant must show “clear evidence of 1) prejudice suffered by the other party 

and 2) a demand for [appraisal] so egregiously untimely and inconsistent with an intent to 

assert the right to [appraisal] that an intentional relinquishment can be inferred.” Meineke, 

892 P.2d at 1370. 

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Here, Plaintiff’s request for appraisal was not unreasonably delayed. Neither party 

will be substantially prejudiced by engaging in the appraisal process at this juncture. See 

Lake Commc’ns, Inc. v. ICC Corp., 738 F.2d 1473, 1477 (9th Cir. 1984) (noting no 

prejudice where the progress of the litigation was limited). Defendant will not be 

subjected to unexpected expenditures of time, duplication of effort, or advantage to the 

other party—nor has Defendant suggested any possibility of prejudice in its Response. 

Defendant’s only argument is that the request came too late. (Resp. at 2.) While 

Plaintiff’s request for appraisal may be viewed as somewhat tardy in the context of this 

litigation, it is not egregiously untimely. Defendant has yet to complete the adjustment of 

the loss, the home has yet to be repaired, and there has been no substantial discovery thus 

far. Requesting appraisal at this point is not unreasonable and will likely benefit both 

parties and the Court in resolving this matter more efficiently. Particularly in view of the 

policy favoring appraisal, the Court concludes that Plaintiff did not waive his right to 

invoke the appraisal clause under his policy. 

C. Stay of Proceedings 

 Plaintiff asks the Court to stay these proceedings pending appraisal. (Mot. at 1-2.) 

In evaluating such a request, the Court considers the management of its docket and 

judicial economy as well as the predominance of the appraisable claims and the merit of 

the non-appraisable claims. See Ori, 2005 WL 3079044, at *4 (citing F.D. Imp. & Exp. v. 

M/V Reefer Sun, 248 F. Supp. 2d 240, 251 (S.D.N.Y. 2002)). 

 Here, the appraisable claim, for compensation under the policy for damage 

resulting from a covered event, predominates this lawsuit and the bad faith and breach of 

contract claim depend on it. The Court thus finds that staying the non-appraisable claims 

is the most efficient way to manage this litigation. 

III. CONCLUSION 

 Each of Defendant’s arguments in its Opposition fails. The Court finds that 

Plaintiff requested appraisal according to the policy terms. Additionally, this request was 

not unreasonably delayed and does not prejudice Defendant. 

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 IT IS THEREFORE ORDERED granting Plaintiff’s Motion to Compel Appraisal 

and to Stay Proceedings (Doc. 15) as detailed in this Order. The parties shall proceed 

with appraisal under the terms of the policy. 

IT IS FURTHER ORDERED staying these proceedings pending the results of the 

appraisal. The parties shall advise the Court within 14 days of the completion of the 

appraisal process whether the parties have resolved this matter in full or whether the 

Court should lift the stay and this matter should proceed.

 Dated this 8th day of June, 2016. 

Honorable John J. Tuchi

United States District Judge 

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