Opinion ID: 2167431
Heading Depth: 1
Heading Rank: 3

Heading: The Scope of Appraisal: Damages vs. Liability

Text: In Scottish Union, we referred to the scope of appraisal in the course of distinguishing it from arbitration: But here the [appraisal clause] does not divest the courts of jurisdiction, but only binds the parties to have the extent or amount of the loss determined in a particular way, leaving the question of liability for such loss to be determined, if necessary, by the courts. [16] In 1897, we repeated this distinction between damage questions for appraisers and liability questions for the courts: It seems to be generally held that a stipulation that the question of liability shall be determined by arbitration is contrary to public policy and void, but it is otherwise, as we have seen, as to the ascertainment of the amount of the loss. There is neither repugnancy nor inconsistency in leaving the former question to the courts when the liability is disputed, and at the same time in providing that the amount of the recovery shall be settled by arbitration. [17] While policies hostile to arbitration have largely been preempted, [18] limiting appraisal to damages and not liability is surely still correct. [19] Most appraisal clauses do not define the scope of appraisal in detail (as is the case here), but the ordinary meaning of the words serves that purpose. [20] The word appraisal itself generally means [t]he determination of what constitutes a fair price; valuation; estimation of worth. [21] The policy directs the appraisers to decide the amount of loss, not to construe the policy or decide whether the insurer should pay. [22] And the policy requires each party to select a competent, disinterested appraiser, not a lawyer or insurance expert. [23] The line between liability and damage questions may not always be clear, as discussed below. But while appraisal clauses might be drafted more precisely, the scarcity of suits on the subject suggests the 1888 test is still adequate: the scope of appraisal is damages, not liability.