Opinion ID: 2543734
Heading Depth: 4
Heading Rank: 1

Heading: Miller I Order of Dismissal

Text: ¶ 45 Although the Miller II district court relied upon the dismissals of both Miller I and Miller II when it denied the motion for conference, we first concern ourselves with the dismissal of Miller I. The Miller II district court dismissed the Millers' extra-contractual claims on the basis that the doctrine of res judicata barred prosecution of those claims because they were the same claims that the Miller I district court had already dismissed. Accordingly, we first analyze whether the Miller I district court properly dismissed the extra-contractual claims in the August 21, 1997, order. ¶ 46 On March 21, 1997, USAA moved the district court in Miller I to dismiss the Millers' complaint in its entirety because, as it argued to the district court, [t]he dispute should be resolved via the appraisal process. In the August 21, 1997, order, the Miller I district court dismissed all of the Millers' claims, including the extra-contractual claims, because USAA invoked the appraisal clause of the insurance contract. The district court reasoned that the parties [were] bound by contract to settle the dispute in this case by appraisal. ¶ 47 Appraisal clauses, like other contractual clauses requiring alternative dispute resolution, are strictly enforceable. See Utah State Bar v. Summerhayes & Hayden, 905 P.2d 867, 868 (Utah 1995); see also Ice City, Inc. v. Ins. Co. of N. Am., 456 Pa. 210, 314 A.2d 236, 240 (1974) (stating that appraisal clauses are enforceable); Standard Fire Ins. Co. v. Fraiman, 514 S.W.2d 343, 345 (Tex.Civ.App.1974) (same). Therefore, a court must compel compliance with a valid appraisal clause if one party demands appraisal. Lundy v. Farmers Group, Inc., 322 Ill.App.3d 214, 255 Ill.Dec. 733, 750 N.E.2d 314, 318 (2001) (holding that court may compel compliance with appraisal clause); Aetna Cas. & Sur. Co. v. Ins. Comm'r, 293 Md. 409, 445 A.2d 14, 19 (1982) (same). ¶ 48 Nevertheless, a litigant's constitutional right to its day in court constrains a court to compel appraisal of a dispute only if the parties expressly and unequivocally agreed to resolve the particular disputed issue by appraisal, thereby waiving their constitutional right to judicial resolution of the dispute. See Jenkins, 962 P.2d at 799; see also Cade v. Zions First Nat'l Bank, 956 P.2d 1073, 1077 (Utah Ct.App.1998) (noting that party who has not agreed to arbitrate dispute has right to court's decision on merits). Generally, to decide whether a party clearly agreed to appraisal of a particular issue, a court must review the appraisal clause of the underlying insurance contract, see Summerhayes & Hayden, 905 P.2d at 868, determine the scope of that clause, and compel appraisal accordingly, Lundy, 255 Ill. Dec. 733, 750 N.E.2d at 318 (maintaining that court must determine whether appraisal clause exists and whether particular dispute is covered by clause); Riley v. Farmers Fire Ins. Co., 1999 Pa.Super. 179, 735 A.2d 124, 128 (1999) (stating that insurance policy's appraisal provision provides the scope of authority for the appraisers in fashioning the appraisal award.). We therefore turn to the appraisal clause of the insurance contract itself to decide whether the extra-contractual claims were amenable to appraisal. ¶ 49 An insurance policy is a contract between the insurer and the insured and, accordingly, is subject to the general rules of contract construction. S.W. Energy Corp. v. Cont'l Ins. Co., 1999 UT 23, ¶ 12, 974 P.2d 1239. Specifically, unless the language of an insurance contract is ambiguous or unclear, the court must construe it according to its plain and ordinary meaning. First Am. Title Ins. Co. v. J.B. Ranch, Inc., 966 P.2d 834, 836 (Utah 1998). Whether an insurance policy is ambiguous is a question of law. S.W. Energy, 1999 UT 23 at ¶ 14, 974 P.2d 1239. An insurance policy is ambiguous only if it is not `plain to a person of ordinary intelligence and understanding.' First Am. Title Ins. Co., 966 P.2d at 836 (quoting Nielsen v. O'Reilly, 848 P.2d 664, 666 (Utah 1992)). As we review the appraisal clause agreed to by the parties, moreover, we must interpret words ... according to their usually accepted meanings and in light of the insurance policy as a whole. Utah Farm Bureau Ins. Co. v. Crook, 1999 UT 47, ¶ 5, 980 P.2d 685. ¶ 50 In section one of the insurance contract, USAA agreed to insure the Millers' home against property damage. As a condition precedent to recovery for property damage, the insurance contract requires the parties to submit the amount of loss to appraisal if a dispute arises as to the amount of loss. The appraisal clause states: If [the Millers] and [USAA] do not agree on the amount of loss, either party can demand that the amount of the loss be determined by appraisal.... The appraisers will ... set the amount of loss. If they submit a written report of any agreement to us, the amount agreed upon will be the amount of loss. If they fail to agree within a reasonable time, they will submit their differences to the umpire. Written agreement signed by any two of these three will set the amount of the loss. (Emphasis added.) The appraisal clause in this contract, especially in light of the contract as a whole, is plain and unambiguous. ¶ 51 According to the plain language of the appraisal clause, the appraisers were only to set the amount of loss of the property damage to the home. Inasmuch as the appraisal clause is a condition only in section one of the insurance contract, the clause necessarily applies only to property damage claims. ¶ 52 Further, relying on the usually accepted meaning of the term, amount of loss as used in the appraisal clause refers to the value of the injury or damage for which the Millers may seek indemnity. Massey v. Farmers Ins. Group, 837 P.2d 880, 882 (Okla. 1992) ([A]ppraisal provisions permit appraisers or umpires to determine one issue, to wit, the amount of damage to the property.); 46A C.J.S. Insurance § 1355 (1993) ([S]ubmissions to ascertain the `amount of loss or damage' are to be construed to signify a proceeding to appraise and estimate the damage to the property described, but not to embrace the question of ownership or any other matter [that] goes to the root of the cause of action.). The word `loss' in a clause in an indemnity insurance policy ... means the injury or damage caused by the accident for which the insurer may, under the provisions of the policy, be liable .... 44 Am.Jur.2d Insurance § 1327 (1982). ¶ 53 The only claim the Millers alleged in Miller I regarding the amount of damage or loss caused by the water heater's bursting was the contractual claim for property damage. None of the extra-contractual claims pertain to the amount of loss under the insurance contract. Because the clause is limited to appraisal of the amount of loss, only the contractual claim was covered by the clause. See Rastelli Bros. v. Netherlands Ins. Co., 68 F.Supp.2d 440, 442-43 (D.N.J. 1999) (The appraisal clause ... deals exclusively with the method of handling a dispute about `the amount of loss.'); J. Wise Smith & Assocs. v. Nationwide Mut. Ins. Co., 925 F.Supp. 528, 529 (W.D.Tenn.1995) (concluding that appraisal of amount of loss was appropriate where parties agreed to resolve amount of loss by appraisal); Atencio v. U.S. Sec. Ins. Co., 676 So.2d 489, 490 (Fla.Dist.Ct. App.1996) (ruling that lower court erred in granting order to compel appraisal because dispute was not concerning amount of loss); Lundy, 255 Ill.Dec. 733, 750 N.E.2d at 319 (Here, the appraisal process provided for in the policy was designed solely to resolve disputes over the amount of loss.); Guider v. LCI Communications Holdings Co., 87 Ohio App.3d 412, 622 N.E.2d 415, 419 (1993) ([A]n appraisal determines only the amount of loss, without resolving issues such as whether the insurer is liable under the policy.); Riley, 735 A.2d at 127 (`[A]ppraisal is limited to determining the amount of loss with all other issues reserved for settlement by either negotiation or litigation.' (quoting Ice City, Inc. v. Ins. Co. of N. Am., 456 Pa. 210, 314 A.2d 236, 240 n. 12 (1974))). Therefore, the Miller I district court should have compelled only appraisal of the contractual claim and erred by dismissing the extra-contractual claims under the appraisal clause. [7] ¶ 54 Because the Miller I district court improperly dismissed the extra-contractual claims, the district court never resolved those claims on their merits. The due process clause and the open courts provision mandate that the Millers have an opportunity to litigate the merits of all controversies between them and the USAA defendants. The district court unconstitutionally denied the Millers any opportunity to have their day in court on the extra-contractual claims by improperly dismissing those claims and ordering their appraisal when the Millers had not agreed to their appraisal.