Opinion ID: 1701455
Heading Depth: 2
Heading Rank: 1

Heading: Waiver of the Right to Invoke the Appraisal Clause

Text: The Rogerses argue that State Farm waived its right to invoke the appraisal process by waiting until over 14 months after litigation had commenced, and almost 2 years after the tornado occurred, to demand invocation of the appraisal clause. Although this Court has never ruled on what standard should be applied to determine whether there has been a waiver of the right to invoke an appraisal clause in an insurance policy, the former Court of Appeals previously indicated that the same standard applies to both appraisal and arbitration clauses. See Chambers v. Home Ins. Co. of New York, 29 Ala.App. 34, 37, 191 So. 642, 644 (1939) ([A] denial of liability by an insurer on a policy of insurance, issued by the insurer, amounts to a waiver of an arbitration, or appraisal, clause incorporated in said policy.). Courts in other jurisdictions, both state and federal, have applied the same standard for determining whether there has been a waiver of the right to invoke an appraisal clause as they have applied to determining whether there has been a waiver of the right to invoke an arbitration clause. See, e.g., J. Wise Smith & Assocs. v. Nationwide Mut. Ins. Co., 925 F.Supp. 528, 532 (W.D.Tenn.1995) (finding that the defendant waived its right to invoke the appraisal clause because it was aware of the appraisal clause and could have sought to invoke it well before it did, avoiding unnecessary delay and expense for both parties); Lundy v. Farmers Group, Inc., 322 Ill.App.3d 214, 219-20, 750 N.E.2d 314, 319, 255 Ill.Dec. 733, 738 (2001) (Our research has not revealed any Illinois case that addresses waiver of an appraisal clause. Courts from other jurisdictions, however, have held that, like an arbitration clause, an appraisal clause may be waived. . . . [W]e conclude that these principles apply to appraisal clauses as well as arbitration clauses.); Meineke v. Twin City Fire Ins. Co., 181 Ariz. 576, 580, 892 P.2d 1365, 1369 (Ariz.Ct.App.1994) (holding that because appraisal is analogous to arbitration the court would apply principles of arbitration law to this dispute regarding an insurance policy appraisal clause) (citing Aetna Cas. & Sur. Co. v. Insurance Comm'r, 293 Md. 409, 445 A.2d 14, 20 (1982); Hanson v. Commercial Union Ins. Co., 150 Ariz. 283, 285, 723 P.2d 101, 103 (Ariz.Ct.App.1986); Hirt v. Hervey, 118 Ariz. 543, 545, 578 P.2d 624, 626 (Ariz.Ct.App.1978)). See also 15 Lee R. Russ and Thomas F. Segalla, Couch on Insurance § 210.42 (3d ed.1999) (treating identically the standard for waiver of an arbitration provision and an appraisal provision). We find this authority persuasive in our consideration of the standard for determining whether there has been a waiver of an appraisal clause, and we apply the standard for determining whether there has been a waiver of an arbitration clause to the facts before us. In Companion Life Insurance Co. v. Whitesell Manufacturing, Inc., 670 So.2d 897, 899 (Ala.1995), this Court stated with regard to the waiver of the right to invoke an arbitration clause: It is well settled under Alabama law that a party may waive its right to arbitrate a dispute if it substantially invokes the litigation process and thereby substantially prejudices the party opposing arbitration. Whether a party's participation in an action amounts to an enforceable waiver of its right to arbitrate depends on whether the participation bespeaks an intention to abandon the right in favor of the judicial process and, if so, whether the opposing party would be prejudiced by a subsequent order requiring it to submit to arbitration. No rigid rule exists for determining what constitutes a waiver of the right to arbitrate; the determination as to whether there has been a waiver must, instead, be based on the particular facts of each case. See Huntsville Golf Development, Inc. v. Aetna Casualty & Surety Co., 632 So.2d 459 (Ala.1994); Ex parte McKinney, 515 So.2d 693 n. 2 (Ala. 1987); Ex parte Merrill Lynch, Pierce, Fenner & Smith, Inc., 494 So.2d 1 (Ala. 1986); Ex parte Costa & Head (Atrium), Ltd., 486 So.2d 1272 (Ala.1986), overruled on other grounds, Ex parte Jones, 628 So.2d 316 (Ala.1994). In accord, see S & H Contractors, Inc. v. A.J. Taft Coal Co., 906 F.2d 1507 (11th Cir. 1990), cert. denied, 498 U.S. 1026, 111 S.Ct. 677, 112 L.Ed.2d 669 (1991). (Emphasis added.) See also Ocwen Loan Servicing, LLC v. Washington, 939 So.2d 6, 14 (Ala.2006). For purposes of determining whether the Rogerses have been prejudiced, we assume, without deciding, that State Farm has substantially invoked the litigation process. Regarding the standard for determining prejudice, we have stated: `Prejudice to the party opposing arbitration, not prejudice to the party seeking arbitration, is determinative of whether a court should deny arbitration on the basis of waiver.' Price [v. Drexel Burnham Lambert, Inc.], 791 F.2d [1156,] 1162 [(5th Cir.1986)] (footnote omitted). `Both delay and the extent of the moving party's participation in judicial proceedings are material factors in assessing a plea of prejudice.' Frye [v. Paine, Webber, Jackson & Curtis, Inc.], 877 F.2d [396,] 399 [ (5th Cir.1989) ]. `Prejudice has been found in situations where the party seeking arbitration allows the opposing party to undergo the types of litigation expenses that arbitration was designed to alleviate.' Morewitz v. West of England Ship Owners Mut. Protection & Indem. Ass'n, 62 F.3d 1356, 1366 (11th Cir.1995). `Sufficient prejudice to infer waiver might be found, for example, if the party seeking the stay [for arbitration] took advantage of judicial discovery procedures not available in arbitration.' Carcich v. Rederi A/B Nordie, 389 F.2d 692, 696 n. 7 (2d Cir.1968). . . .