### IN THE COURT OF APPEALS OF TENNESSEE AT NASHVILLE November

10, 1999 Se ssion
MERRIMACK MUTUAL FIRE INSURANCE COMPANY v.

GLORIA C. BATT S
Appeal from the Chancery Court for Davidson County No. 98-3345-II Carol L. McCoy, Chancellor

No. M1999-00078-COA-R3-CV - Filed May 15, 2001

This appeal involves a dispute between a homeowner a nd her insurance company rega rdin g the damages to her house caused by the tornado that struck Nashville o n April 16, 1998. When they could not agree on the amount

of the loss, both parties invoked the insurance policy’s provision for the appointment of appraisers. After the part ies’ two a ppraise rs could not agree on the amount of the loss, the two appraisers selected a third appraiser who eventually agreed with the homeowner’s appraiser regarding the amount of the loss. The insurance company filed suit in the Chance ry Court for Davidson County, seeking a declaratory judgment that it was required to pay the homeowne

r less than one-half of the amount of the loss calculated by the two appraisers. Both parties filed motions for partial summary judgment. The trial court granted the insurance company’s motion, concluding that the insurance policy’s appraisal clause was not a n agreement

for binding arbitration and that the appraisers had not been empowered t o determ in e whether parts of the claimed damage ha d been caused by a peril covered by the policy. The homeowner takes issue with both of the trial court’s legal conclusions on this appeal. We have determined that the trial court interpre ted the insurance policy correctly and, therefor e, that the trial c ourt prop erly concluded that the insurance company was entitled to a judgment as a matter of law. Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed

W ILLI AM C. K OCH , J R ., J., delivered the opinion of the court, in which B EN H. C ANTRELL , P.J., M.S., and P ATRIC IA J. C OTTRELL , J., joined. Raymond G. Prince, N ashville, Tenness ee, for the appe llant, Glo ria C. Batt s.
Parks T. Chastain, Nashville, Tennessee, for the appellee, Me rrimack Mutual Fire I nsurance Company.
OPINION

Gloria Batts owns a two-story house in East Nashville. On April 16, 1998, her house was substantia

lly damaged when a severe windstorm and ac companying tornado tore its way through N ashville. Ms. Batts notified Merrimack Mutual Fire Insurance Company (“Merrimac k”), he r-2-

homeowners casualty insurance company, that the tornado had dama ged five bedrooms, the living room, a bathroom, a hallway, two porches, some fencing, a nd at least one outbuilding. Although Merrima

ck’s poli c y contemplated fairly prompt settlemen t of claims, Ms. Batts and Merrimack

could not agree on the a m ount of her loss. The policy anticipated and provided a procedurefor resolving just this kind of stalemate. Under a paragraph hea ded “Appraisal,” the policy stated:

If

you and we fail t

o agree on the amount of loss, either may demand
an appraisal of the loss. In this event, ea ch part y will choose a competent

appraiser within 20 days after receiving a writ

ten requ est from the other . The two a

ppraise rs will choose an umpire. If they cannot agree upon an umpire within 15 days, you or we may request that the choice be ma de by a jud ge of a c ourt of r

ecord in the state where the “r esidenc e premise s” is loca ted. The apprais ers will separately set theamount of loss. If the appraisers submit a written rep ort of an agreement to us, the amount agreed upon wi ll be th e amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to byany two wi ll set the amount of loss.

In late June 1998, Ms. Batts retained George Keys of Howarth, Keys, Manley& Associates as her apprais er. Mer

rimack r etained David Hor

ton of Hor

ton & Assoc iates. Mr. Keys placed

the dama ge to Ms. Ba

tts’s prop erty at $ 121,116.7 5. He cha racter ized his appraisal as a “building estimate” that covered repair wor k, including

replac ing the ha

rdwood f loors, replacing windows, re-doing walls and ceilings, reset ting bathroom f

ixtures, leveling the front porch, and replacing the chimneys, a sidewa lk, and a p aved dri veway. M r. Keys’ s estimate

of the los s differed markedly f

rom Mr. Ho

rton’s e stimate. A

fter de ducting f

or depreciation o f certa

in items, Mr. Horton determined that Ms. Batts’ s net loss w as $11,45 7.28. Thisten-fold difference between the two appraisers’ opinions can be traced to the appraisers’ differing view s regarding the repairs that were traceable to the windstorm and tornado.

Because Mr. Keys and Mr . Ho rton wer e at an imp asse, the

y appointed a third a

ppraise r to act as the “umpir

e” envis ioned by th

e appra isal clau se in

Ms. Batts’s homeowners policy. At Mr. Horton’s suggestio n, they ag reed on A lden War d of Maste

rCraft M asterCle an. Mr. W ard met w ith Messrs. Keys and Hort

on at Ms. Ba

tts’s house

in late Jul

y 1998 to finalize th

e amount o f Ms. Batts loss. The appraisers quickly fell to cross purposes. A ccord ing to Mr. Horton, Messrs. Keys and Ward were a ttempting t

o decide whether the polic y covered certa

in it em s of damage and whether Ms. Batts’s c laims might exceed the limits of her policy. Mr. Horton objected because he be lieved that their sole

responsi bility was to place

a dollar amount on t

he prope rty dama ge and tha

t it wa s Merrimack’s prerogative to determine which items of damage wer e covered by Ms. Batts’s policy. Mr. K eys argued that the appraisers could not intelligently determine the amount of the damage withoutalso determining whether the damage had been caused bythe torna

do. Mr. Wa

rd sided with Mr. Keys

.-3-

Mr. Ward eventually submitted a property damage estimate to Merr imack stating that the “amount of loss due” under

Ms. Batts’s policy was $45,622.95. Mr. Keys agreed with Mr. Ward’s estimate, but Mr. Horton did not. On No vember 9 , 1998, Me rrimack forwar ded Ms. Ba

tts checks totaling $21,070.85 to settle her claim. In anaccompanying cover letter, Merrimack explained that it was not paying the full amount of Mr. Ward’s appraisal bec ause Mr. Ward’s responsibility was limited to determining the amount of the loss and did no t extend to deciding covera ge questi ons. The letter also stated t hat Merrimack had reduced Mr. Wa rd’s appraisal because (1) it included several items thathad not, in Merrima ck’s opin ion, been damaged by the tor nado, (2 ) it

included the replacement

cost, rather than the actual cash value, of several items that had not been repaired, a nd (3) it had allocated $12,666.98 for items that had already bee n repaired for $7,045.90. Ms. Batts declined to accept Merrimack’s settlement chec ks because she believed she was entitled to the full amount of Mr. Ward’s appraisal. On November 10, 1998, M errimac

k filed suit in the Chancery Court for Davidson County seeking a declaratory judgment that its liabilit

y to Ms. Batts was limited to $21,070.85. Both parties filed mo tions for partial summary judgment on the coverage issues. On March 3, 1999, the trial court entered an order granting Merr imack’s motion for partial s ummary jud

gment. The court rejected Ms. Batts’s argument that Merrimack was bound by Mr. Ward’s appraisal and h eld that Me rrimack reserved the right under the policy to dec ide
c overage questions after receiving the appraisal of the loss. The c ourt also concluded t ha t Merrimack

was not obligated to pay the r eplace ment cost of items that had not been repaired or replaced and that Merrimack was also entitled to rejec t the portions of Mr. Ward’s appraisal that exceeded the amount actually spent to repair or replace the damage. Finally, the trial court certified its order as final under Tenn. R. Civ. P. 54.02 because it had not yet addr essed the parties’ dispute concerning whether the tornado had caused several of the claimed items of damage. Ms. Batts has appealed from this order.

I. T HE S TANDARD OF R EVIEW Summary judgmen ts are pr oper in vi rtually any civilcase that can be

resolve d on the ba sis of legal issues alone. Fruge v. Doe , 952 S.W.2d 408, 410 (Tenn. 1997); Byrd v. Hall , 847 S.W.2d 208, 210 (Tenn. 1993); Church v. Perales , 39 S.W.3d 149, 156 (Ten n. Ct. App. 2000). Th

ey are not, however, appropr

iatewhen genuine disputes regar ding material facts exist. Tenn. R. Civ. P. 56.04. Thus, a summary judgment should be granted o nly when the undisputed facts, and the inferences
reasona bly drawn f rom the un disputed f

acts, sup port one con clusion – that the party see king the summary judgmen t is entitle d to a judgment as a matter of law. Goodloe v. State , 36 S.W.3d 62, 65 (Tenn. 2001); Staples v. CBL& Assocs., Inc. , 15 S.W.3d 83 , 88 (Ten n. 2000); White v. Lawrence , 975 S.W.2d 525, 529-30 (Tenn. 1998).

Summary judgments enjoy no pr

esumption of

correctness on appeal. Penley v. Honda Motor Co. , 31 S.W.3d 181, 183 (Tenn. 20 00); Burress v . Sanders , 31 S.W.3d 259, 262 (Tenn. Ct. App. 2000). Accordingly , appella te courts must make a fresh determination that the requirements of Tenn. R. Civ. P. 56 have been satisfied. Hunter v . Brown , 955 S.W.2d 49, 50-51 (Tenn. 1 997); Mason v. Seaton , 942 S.W.2d 470, 472 (Tenn. 1997). We must consider the evi denc e in the lig ht most-4-

favora ble to the non- moving pa rty , and we m

ust resolv e all infer ences i n the n on-mo ving p arty's favor. Memphis Hous. Auth. v. Thompson , 38 S.W.3d 50 4, 507 (Te

nn. 2001) ; Terry

v. Niblack , 979 S.W.2d 583, 585 ( Tenn. 1998); Tamco Sup ply v. Po llard , 37 S.W.3d 905, 908 (Tenn. Ct. App. 2000). Questions relating to the interpretation of written contracts involve legal rather than factual issues. Brandt v. Bib Enters., Ltd. , 986 S.W.2 d 586, 592 ( Tenn. Ct. App. 1998 ); Rapp Constr. Co.
v. Jay Realty Co. , 809 S.W.2d 490, 491 (Tenn. Ct. App. 1991). Insurance policies are contrac ts, and thus scope of coverage issues present questions of law. Pile v. Carpenter , 118 Tenn. 288, 296, 99 S.W. 360, 362 ( 1907); Pennsylvania Lumbermens Mut. F i re Ins. Co . v. Holt , 32 Tenn. App. 559, 566, 223 S.W.2d 203, 206 (1949). A declaratory judgment proceeding is an appropriate vehicle for deciding c o verage questions, Standard Fire Ins. Co. v. Chester-O’Donley & Assocs., Inc. , 972 S.W.2d 1, 5 (Tenn. Ct. App. 1998), and, when the relevant facts are not in dispute, the legal issues regarding a policy’s coverage may be resolved by summary judgm ent. St. Paul Fir

e & Marine

Ins. Co. v. Torpoco , 879 S.W.2 d 831, 834 (Tenn. 199 4); Rainey v. Stanse ll , 836 S.W.2d 117, 118 (Tenn. Ct. App. 1992).

II. C ONSTRUCTION OF I NSURANC E P OLICIES
The respective rights of an insured and an ins urance

company a

re gover ned by the

ir contract of insurance. Thus, determining whether Merrimack is entitled to a summary judgment entails construing the insur

ance po licy that M errimac k issued to

Ms. Batts. Insurance contracts are subject to the same rules of construction that are used to interpret other types of contracts. McKimm v . Bell , 790 S.W.2d

526, 527 ( Tenn. 199 0); Hurley v. Tennessee Farmers Mut. Ins. Co. , 922 S.W.2d 887, 892 (Tenn. Ct. App. 1995).

As withany other

contract, the courts must give effect to the parties’ intentions as re flected in their written contra ct of insurance. Black v. Aetna Ins. Co. , 909 S.W.2d 1, 3 (Tenn. Ct. App. 1995); Blaylock & Brown Constr. Co. v. AIU Ins. Co. , 796 S.W.2d 146, 149 (Tenn. Ct. App. 1990). The insur ance po licy shoul d be cons trued asa whole in a reasonable and logical manner. English
v. Virginia Sur. Co. , 196 Tenn . 426, 430, 268 S.W.2d 338, 340 ( 1954); Standard Fi re Ins. Co. v. Chester-O’Donley& Assocs., Inc. , 972 S.W.2d at 7. The courts should interpret an insurance policy
as written andshould give the polic y’s termstheir

natural and ordinary meaning. Tata v. Nichols , 848 S.W.2d 649 , 650 (Te

nn. 1993) ; Moss v. Golden Ru le Life Ins

. Co. , 724 S.W.2d 367, 368 (Tenn. Ct. App. 1986).

The insuring agreement defines the outer limits of an insurance compa ny’s contractual liability. Standard Fire Ins. Co. v. Chester-O’Donley & Assocs., Ltd. , 972 S.W.2d at 7. The cour ts are not at libe

rty to rewrite an insurance policy solely because they do not favor its terms, Black v. Aetna Ins. Co. , 909 S.W. 2d at 3, and must avoid forced constructions that render a provision ineffective or extend a provision beyo nd its inten ded scope. Demontbr eun v. CNA Ins. Cos. , 822 S.W.2d 619, 621 (Tenn. Ct. App. 1991). In the absence of fraud, over reaching, or unconscionability,1 1 Ga briel M W ilner, Domke on CommercialArbit rati on § 3:01 (rev. ed

. 2000) (“Dom ke on Com mercial

Arbitration”); Michael A. S cod ro, Arbit rating Nove l Legal Q uestions: A Reco mm enda tion for Refo rm , 105 Y ale L.J. 1927, 19 29 (199 6).

2 Act of M ay 1 1, 19 83, c h. 46 2, 19 83 T enn . Pub . Acts 9 46, codi fi ed at Tenn. Cod e Ann. §§ 29-5- 301, -320 (2000).
-5- the courts must give effect to a provision in an insurance policy when its terms are clear and its intent certain. Quintana v. Tennessee Farmers Mut. Ins. Co. , 774 S.W.2d 630, 632 (Tenn. Ct. App. 1989).

III. T HE P OLICY ’ S P ROVIS ION FOR A PPRAISING THE A MOUN T OF THE L OSS
Ms. Batts firs t assertsthat the tr ial cour t erred by refus ing to inter

pret t he appra isal clau se in her homeowners policy as an binding arbitration agreem ent requ iring Mer rimack to pay the f ull amount of Mr. Ward’s calculation of the amount of her loss. We have determined that this argument is not well-taken fo r two r easons. First, the appraisal clause is not an agreement to arbitra te. Second, even if t

he appra isal clau se could b e constr ued as an agreem ent to ar bitrate, it i s no t enforc eable

because it was not executed in accordance with the requirements of Tenn. Code Ann. § 29-5-302(a) (2000).
A.

Tennessee’s judicial system has not always looked upon private arbitration with favor even though arbitration has existed in various forms since the Roman era. As late as twenty-five years ago, the Tennessee Supreme Court, held that “ordinarily provisions in privat e contracts for the arbitration of future disputes are not enforceable .” Cavalier Ins. Corp. v. Osment , 538 S.W.2d 399, 403 (Tenn. 1 976). How ever, du ring the p ast tw o de cades, the attitude of Tennessee’s courts, like the federa

l courts a nd many oth

er state courts, 1 has changed. Today Tennessee’s cour ts construe arbitration agreements broadly in favor of arbitra tion and r outinely uphold and enforce arbitration agreem ents. Buraczynski v. Eyring , 919 S.W.2d 314, 321 (Tenn. 1996) (enforcing a phy sician’s arbitration agreement requiring patients to accept binding arbitration of medic al malpra

ctice c laims in lieu of a judicial remedy); Wachtel v. Shoney’s, Inc. , 830 S.W.2d 905, 908 (Tenn. Ct. App. 1991) (enforcing a provision requiring arbitration of disputes betwe en a c orporat ion and its minority stockholders).

Until relatively recent times, the ground rules for arbitra tion of future disputes were largely found in the common law. Jackson v. Chambe rs , 510 S.W.2 d 74, 76 (T enn. 1974 ); Meirowsky v. Phipps , 222 Tenn. 112, 117, 432 S.W.2d 885, 88 7 (19 68); Halliburto n v. Flowe rs , 59 Tenn. (12 Heisk.) 25, 26-28 (1873). In 1983, the General Assembl y enacted a version of the Uniform Arbitration Act that had been approved in 1955 by the National Confer ence of Commissioners on Uniform State Law s. 2 The purpose of this Act wa s “to valid ate arbitration agreements, make the arbitration process effective, provide nece ssary safeguards, and provide an efficient procedure when jud icial assistance is necessary.” Uniform Arbitration Act, Pre fatory Note, 7 U.L.A. 2 (199 7)

.-6-

Accordingl y, the outco me of disputes reg arding ge neral a rbitrati on agree

ments are largely controlle d by statute.

B.

Ms. Batts’s argument that the ap pra isal clause in her insurance policy is an arbitration agreement

overlooks the fact that arbitration proceedings and appraisal procee dings are not the sa me thing. Arbitration is a consensual proceeding in which th e partie s select d

ecision- makers o f their
own choice a

nd then vo luntarily

submit thei

r disagr eement to those decision-makers for

resolution in lieu of adjudicating the dispute in court . Robert E. Keeton & Alan I. Widis, Insurance Law § 9.6(b)(1), at 1059 (1 988); Domke on Commerci al Arbitration § 1.01. Appraisal is something narrower. Appraisal

is the act of estimating or evaluating something; it usually means the placing of a value on property by some authorized person. Unetco Indus. Exch. v. Homestead Ins. Co. , 67 Cal. Rptr.2d 78 4, 789 (Ct. Ap p. 1997); Littlehead v. Shepp ard , 251 P. 60, 62 (Okla. 1926). Specifically, the object of appraisal in cases of casualt y insurance is to quantify the monetary value of a property loss. Palati ne Ins. Co. v. Morton-Scott-Robertson Co. , 106 Tenn. 558, 578, 61 S.W.787, 791 (1901), not to decide questions of liability. Meirowsky v. Phipps , 222 Tenn. at 119-20, 432 S.W.2d at 888. Many courts a

nd commen

tators ha ve discus se d the di fferences between ar bitration proceedings and appraisal proceedings. The United States Court of Appeals for the Fifth Circuit has succinc tly expla

ined the d iffere nces as f ollows:

Insuranceappra isals are generally distinguished from arbitra tions. While both procedures aim to submit a dispute to a third partyfor speed y and efficient resolution without recourse to the courts, there are significant difference s between them. For example,
an arbitration agreement may encompass the entire c o nt roversy bet ween parti es or it may be tailored to particular legal or factua l disputes

. In co ntrast, an appraisal determines only the amount of loss, without re solving issu es su ch as w hether t he insure r is liable under the policy. Additiona ll y, an arbitration is a quasi-judicial proceeding, complete with formal hearings, notice to pa rties, and testimony of witnesses

. Appraisals are informal. Appraisers typically conduct independ

ent inves tigations a

nd base their decisions
on their own knowledge, without holding formal hearings. (Citations and footnotes omitted). Hartford Lloyd’s I ns. Co. v. Te achworth , 898 F.2d 1058, 1061-62 (5th Cir. 1990). See also C asualty Indem. Exch. v. Yother , 439 So. 2d 77, 79-80 (Ala. 1983); Kawa v. Natio nwide Mut. Fire Ins. Co. , 664 N.Y.S.2d 430, 431-32 (Sup. Ct. 1997).

While we rec ognize th at some jur isdictions , perhaps out of their enthusiasm for alternative dispute resolution procedures, have blurred the distinct ion between arbitration proceedings and3 See Closs er v. Penn Mut. Fi re I ns. Co. , 457 A.2d 1081, 1087 (De l. 198 3); Intraco astal Ven tures v. Safeco Ins. Co. , 540 So.2 d 16 2, 16 4 (Fla . Dist. C t. Ap p. 19 89) ; Beard v. Mount Carrol l Mut. Fire Ins. Co. , 561 N.E. 2d 116, 118 (Ill. Ap p. Ct. 1 990 ); Friday v. Tr ini ty Uni vers al , 939 P.2d 86 9, 871 (Ka n. 1997).
-7- appraisal procee dings, 3 we find it unnecessary and even inappropria te to abandon the w or kable distinction betwee

n the two in

this case . When Me

rrim ac k drafte d its insura nce policy, it did so relying on the genera

lly preva iling unde rstandin g that an a

ppraisa l was just th at – an ap

praisal, not binding arbitra

tion. We d

ecline, on these f

acts, to upset this settled expectation. Accordingly, we
concur with the trial court’s conclusion that the appraisal clause in Ms. Batts’s insurance policy was not an agreement for binding arbitration.
C.

T here is a seco nd, equa

lly compelling rea son for declining to interpre t and enf orce th e apprais al claus e in Ms. Batts’s homeowners policy as an agreement for binding arbitration. Even if the clause could be construed to be an agreement for arbitration, it does not meet the statutory requirements to make it binding and irrevocable.

Tennessee ’s version of the Uniform Arbitration Act co ntains two non-conforming provisions , one of whi ch figur es prominently in this case. The section of the uniform act dealing with the enforc eability o f an agr

eement to arbitra te provid es:
A written agreement to submit any existing controversy to arbitration
or a provision in a wri tten co ntract to submit to arbitration any controver sy therea

fter ar ising betw een the p arties isvalid , enforceabl e and irrevocable, save upon such grounds as exist at law or in equity for the revo cation of

any contr act. This act a

lso applies to arbitration agreem ents betwee

n employe

rs and em

ployees o

r betwee n their respective repres entati ves [unless otherwise provided in the agreement].
Uniform Arbitration Act § 1, 7 U.L.A. 6-7. How ever, th e Gener al Assemb ly changed this section when it en acted the statute , and thus Tenn. Code Ann. § 29- 5-302(a

) reads :
A written agreement to submit any existing controversy to arbitration
or a provision in a written contract to submit to arbitration an y controve rsy thereafter arising between the par ties is val id, enfor ceable and irrevocable save upon such grounds as exist at law or in equ ity for the revocation of

any contr act; pro vided, tha

t for con tracts relating to far m pro perty, structures or goods, or to property and structures utilized as a

residence of a party, the

clause providing for arbitration shall be a dditionall y signed or

initialed by the par

ties.

Our task in construing Tennessee’s version of the Uniform Arbitration Act is to ascertain and to give e ffect to the General Assembly’s purpose as re flected in the statute’s language. Lavin v
.4 It is not customary fo r hom eown ers to sign the copy of their insurance policy provided by their insurer.

Accordingl y, the format of Merri mack’s policy does not even provide spaces for an ins ured to separ atel y sign or i niti al the apprai sal cla use. The absence of a s eparate s ignature l ine provides str ong evidence that Merrimack never intended the app raisal cla use to be an agre em ent fo r bind ing a rbitratio n. If M errim ack intended to i nclude an agree ment for bindi ng arbit ration in its agreement , i t would ha ve requi red Ms. Ba tt s t o separ atel y si gn or i nit ial such an a greement (con tinue d...)
-8- Jordon , 16 S.W.3d 3 62, 365 (T enn. 2000 ); Myint v. Allstate Ins. Co. , 970 S.W.2d 920, 926 (Tenn. 1998). We must ini

tially look

to the lan guage of

the arbi tration st atutes, Riggs v. Burson , 941 S.W.2d 44, 54 (Te

nn. 1997) ; Realty Shop, Inc. v. RR Westminster Holding,Inc. , 7 S.W.3d 581, 602 (Tenn. Ct. App. 1999), and we must avoid constru ing these statutes in a way that outstrips the General Assembly’s expressed purpose. SunTrust Bank v. Johnson , 46 S.W.3d 216, 223 (Tenn. Ct. App. 2000).

A judicial construction of a statute will more likely conform to the General Assembly’s purpose if the court approaches the statutory text assuming th at the Ge neral As sembly ch ose its words deliberately. Tidwell v. S ervomat ion-Will oug hby Co. , 483 S.W.2d 98, 100 (Tenn. 1972); Clark v. Crow , 37 S.W.3d 919, 922 (Tenn. Ct. App. 2000). The courts should, therefore, construe statutory provisions in the context of the entire statute and in light of the statute’s general purpose, BellSouth Telecomms., Inc. v. Greer , 972 S.W.2 d 663, 673 (Tenn. Ct. A pp. 1997) , and should likewise give the words used

in the statute their natural and ordinarymeaning. State ex rel. Metro. Gov’t v. Spicewoo d Creek W atershed Dist. , 848 S.W.2d 60, 62 (Tenn. 1993).

An arbitra

tion agreement must

be in writing in order to be binding and enforceable. If the agreement

relates to “prope

rty and structures used as a residence of a party,” Tenn. Code Ann. § 29- 5-302(a) also requires that the agreement be “additionally signed or initialed by the parties.” The location of a signature on an agreement does not normally control the part ies’ righ ts unless the law specifies that a signature must appear in a particular location. Restatment (Second) of Contr

acts § 134 cmt. b (19 81). Bec ause of t he signif icant ef fect tha t agree ing to bindi ng arbitr

atio n h as on a homeowner’s rights, the General Assembly determ ined that t hese clauses must be brought to a homeowner’s attention and that a person doing business with a homeowner w ill not be able to enforcea binding arbitration clause unless the homeowner has explicitly assented to it by placing a signature or initial adjacent to the clause.

There is no disput

e that Ms. Batts did no t separa tely sign th

e appra isal clau se eithe

r in Merrimack’s policy or on any application for insurance she might ha ve completed. Accordingly, by operation of Tenn. Code Ann. § 29-5-302(a), neither she nor Merrimack can

require the other to submit to binding arbitration, if, indeed, that is wha t the appr aisal cla use in Ms. Batts’s homeowners policy required. Ms. Batts does not disagree with the plain meaning of Tenn. Code Ann. § 29-5- 302(a) but attempts to circumvent it by arguing t hat it would be “ grossly inequitabl e” not to enforce the clause against Merrimack because Me rrimack never told her that the clause would h ave to be separa tely signed or

initialed to be enf orceab le. This argument misses the point. Merrimack never intended the appraisal clause in its homeowners policy to be an agreement for binding ar bitration. Accordingly, Merrimack

was unde r no obliga

tion to spe cifically call

this provision to Ms. Batts’s attention or to offer her an opportunity to sign or initial it separately. 44 (.. .continued)

wh en sh e app lied fo r insu ranc e cov erag e. M s. Batts’s h om eow ners in suran ce ap plicatio n is no t in the re cord

. -9- D.

Based on the plain language and common understanding of apprais al claus es, we affirm the trial court’s conclusi ons that the appra isal cla use i n Ms. Batts’s homeowners policy is not an agreement

for binding arbitration and, even if it were, that it would be unenforceable because it was notseparately signed and initialed as required by Tenn. Code Ann. § 29-5-302(a). Ac cordingly, we af firm th e trial court’s conclusion that Merrimack was not bound by Mr. War d’s appraisal of the amount of

Ms. Batts’ s loss.

IV. A N I NSURER ’ S P REROGATI VE TO D ETERMINE C OVERAGE
Ms. Batts also argues that the trial court erred by concluding that insurance appraisers do not have the authority to determine questions of coverage and liability under an insuranc e policy. This argumen tis another attack, albeit from a different direction, on the clear distinction bet ween a n appraiser and arbitrator. We ha ve concluded that

it must fail, first because it not supported by the plain language of Ms. Batts’s insurance policy and second because it flies in the face of the settled law on this issue.

An appraiser’s authority is limited to the authority granted in the insurance policy or granted by some other express agre ement of the parties. The appraisal clause in Ms. Batts’s homeowner s policy i s limited to determining the “amount of the loss” – the monetary value of the propert y damage. It does not vest the appraisers with the authority to decide questions of c overage and liability, and there is no evidence that Merrimack and Ms. Batts agree d independ ently togive this authorit y to Messr s. Keys, Horton, and Ward. Without evidence of the some a greement by the parties, there is no legal or factual basis for concluding that the appraisers were empowered to decide
covera ge questi ons.
More than four

decade s ago, in a

casualt y insurance case

similar to this one, the Mississippi Supreme Court held that appraisers did not have the authority to decide liability and cov erage questions because

“nowher e inthe stand ard [pol

icy] for submission t

o appraisal is any power vested in or conferred

upon the appraisers to determine the cause of the loss . . ..” Munn v. Na tional Fire Ins. Co. , 115 So. 2d 54, 56 (Miss. 1959). Othe r courts co nstruing standard appraisal provisions similarto the one involved in this case have consistently a gr eed that apprais ers have

no power

to decide covera

ge or lia bili ty issues. E.g ., Jeffe rson Ins. C o. v. Supe rior Court , 475 P.2d 880, 883 (Cal. 1970); Commonwealth Ins. Co. v. Soloman , 119 A. 850, 853 (Del. 1923); Opar v. Allstate I ns. Co. , 751 So. 2d 758, 761 (Fla. Dist. Ct. App. 20 00); St. Paul Fire & Marine Ins. Co. v. Wright , 629 P.2d 1202, 1203 (Nev. 1981); Elberon Bathing Co. v. Ambassador Ins. Co. , 389 A.2d 439, 446 (

N.J. 1978); Minot Town & C

ou ntry v. Fireman’s Fund Ins. Co. , 587 N.W.2d 189, 190 (N.D. 1998); Kentner v. Gulf Ins. Co. , 673 P.2d 1354, 135 6 (Or. Ct. App. 1983 ); Wells v. American States Preferred Ins. Co. , 919 S.W.2 d 679, 683 (Tex. App . 1996); Do mke on Comm ercial Arbitration §-10-

1:02, at 6-7. One cour

t has sugge sted that d

isputed c overage

and liabi lity issuesare bes tsubmitted to the cour

ts befor e any disp

ute rega rding the amount o f the loss i s submitted to the app

raisers

. Auto-Owners Ins. Co. v. Kwaiser , 476 N.W.2d 467, 469 (Mich. Ct. App. 1991).

The plain language of Ms. Batts’s homeowners policy confines the role of the appraisers to determining the “amount of the loss.” Inlight of other courts’ interpretation of similar language, we have concluded that the trial court correctly held that Messrs. Ke ys, Horton, and Ward

did not have the prerogative to deter

m ine whether any particular loss claimed by Ms. Batts was caused by the tornado or whether Merr imack was ultimately liable under its policy for the loss. The final responsi bility for res o lving disputes over those issues, assuming the parties cannot reach an agreem ent on the ir own, re sts with the

courts.
V.

We affirm the March 3, 1999 order granting Merrimack a partial summary judgment on the issues of coverage

and liability under Ms. Batts’s homeowners policy and remand the case to the trial court for fur ther pro ceeding s consiste nt with this opinion. We tax the costs of this ap peal to Gl oria C. Batts and her surety for which execution, if necessar y, may issue.

_____________________________ WILLIAM C. KOCH, JR., JUDGE