Court Opinion

ID: 4705398
Source: CourtListenerOpinion
Date Created: 2021-07-21 20:02:44.309962+00
Date Added: 2024-06-11T08:06:21.318949
License: Public Domain

Filed 7/21/21 Rees v. American Security Insurance Co. CA2/6

   NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion
has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                         SECOND APPELLATE DISTRICT

                                         DIVISION SIX

 SHAWN REES,                                                    2d Civil No. B302938
                                                            (Super. Ct. No. 18CVP-0352)
      Plaintiff and Appellant,                                (San Luis Obispo County)

 v.

 AMERICAN SECURITY
 INSURANCE COMPANY, ET
 AL.,

      Defendants and Respondents.

      Shawn Rees appeals an order denying his petition to vacate
an appraisal award he believes undervalues the cost to repair
flood damage to his house. He contends the appraisers exceeded
the scope of their authority when preparing the award. (Code
Civ. Proc., § 1286.2, subd. (a)(4).)1 We conclude the appraisers
did not exceed their authority. The Award conforms in all
respects to the appraisal provision contained in Rees’ residential

         1   We cite the Code of Civil Procedure exclusively.
flood policy. The record does not show he and his flood insurer
agreed to modify or deviate from this provision.
       We affirm the trial court’s ruling and remand the case with
orders to confirm the award.
         FACTUAL AND PROCEDURAL BACKGROUND
       Rees’s Paso Robles duplex sustained major flood damage
during an unseasonably wet thunderstorm in July of 2015. He
reported the damage to his flood insurer, American Security
Insurance Company (ASIC), which immediately sent an adjuster
to inspect the damage. The adjuster initially set the actual cash
value (ACV) of Rees’s losses as $43,226.08 but later revised the
amount to $64,631.70 after Rees documented the need for
additional repairs.2 ASIC notified Rees by letter on June 30,
2017 that it had finished reviewing his claim. Enclosed was a
document titled “Building Estimate” that itemized the claim’s
total labor and materials costs.
       The figures in the Building Estimate fell far below what
Rees expected. He disputed the amounts allocated for repairing
and replacing most items, including wall plaster, HVAC ducting,
cabinets, countertops, flooring, paint, and exterior stucco. Rees
insisted his costs would exceed policy limits. He demanded ASIC
correct its estimates to align with FEMA standards for water
damage restoration and pay the higher rates charged by
contractors when handling materials contaminated by Category 3

      2 These figures represented losses to the main dwelling
under Coverage A of the ASIC policy. Rees received an
additional $17,594.00, or ten percent of his policy limits, for
losses to his garage conversion under Coverage B. The garage
conversion claim is not at issue in this case.

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flood water.3 He also noted the Building Estimate did not
allocate sufficient money to repair the subfloors and to excavate
the crawl space under the house.
      ASIC insisted it adjusted the claim properly. It eventually
invoked a policy provision requiring the insurer and the
policyholder to resolve valuation disputes through an appraisal
process.4 ASIC and Rees selected Kathleen Conway and
Woodman White, respectively, to serve as their appraisers.
Conway and White inspected the property and co-signed an
appraisal award on July 17, 2018 setting the ACV of Rees’s losses
at $94,758.97 (the “Award”). This exceeded ASIC’s total ACV by
more than $30,000.00.5

      3“Category 3” is the highest level of water contamination
according to industry standards established by the Institution of
Inspection, Cleaning and Restoration Certification (IICRC). This
includes surface and ground water intrusion as well as wind-
driven rain from storms and hurricanes.

      4 The ASIC policy describes the appraisal process in Section
O of its General Conditions. The provision states in relevant
part: “If we fail to agree with the first named insured on the
actual cash value or replacement cost of the damaged property to
settle upon the amount of loss, then either of us may demand an
appraisal of the loss. In this event, the first named insured and
we shall each choose a competent and impartial appraiser within
20 days after receiving a written request from the other. . . . The
appraisers will separately state the actual cash value, the
replacement cost, and the amount of loss to each item. If the
appraisers submit a written report of an agreement to us, the
amount agreed upon will be the amount of the loss.”

      5Rees told the trial court ASIC paid only a part of the
additional $30,000.00 awarded to him by the appraisers. The

                                3
       Rees believed the appraisers’ figures, while higher, still
undervalued his actual losses by deviating in key respects from
ASIC’s Building Estimate. He petitioned to vacate the Award on
the grounds the appraisers exceeded the scope of their authority.
(§§ 1286.2, subd. (a)(4), 1286.4.) The trial court denied the
petition after holding an evidentiary hearing. It then denied
Rees’s motion for reconsideration. This appeal followed.
                             DISCUSSION
                    1. Appraisal of Insured Losses
       Appraisal is a form of arbitration designed to resolve
disputes between insurers and policyholders over the value of
covered losses. Appraisal provisions are considered “agreements”
for the purposes of Code of Civil Procedure section 1280,
subdivision (a) and thus subject to the statutes governing
contractual arbitration. (Louise Gardens of Encino Homeowners’
Assn., Inc. v. Truck Ins. Exchange, Inc. (2000) 82 Cal.App.4th
648, 658.) Judicial review of appraisal awards is circumscribed
by those statutes to certain situations, such as when the
appraisers “exceed[] their powers.” (§ 1286.2, subd. (a)(4); Kacha
v. Allstate Ins. Co. (2006) 140 Cal.App.4th 1023, 1031 (Kacha).)
“It is not the court’s role to review the merits of the controversy
or to determine whether the evidence is sufficient to support the
appraisal award.” (Lee v. California Capital Ins. Co. (2015) 237
Cal.App.4th 1154, 1165.)
       “We review the trial court’s ruling on a challenge to an
appraisal award under a de novo standard, drawing every
reasonable inference to support the award.” (Kacha, supra, 140
Cal.App.4th at p. 1031.) We apply the substantial evidence

trial court refrained from considering this allegation because it
went beyond the scope of his petition. We refrain as well.

                                 4
standard to the extent the ruling rests on factual determinations.
(Ibid.)
            2. The Appraisers Did Not Exceed the Scope
                          of Their Authority
       Rees acknowledges the appraisers affixed higher ACV to
his losses than ASIC did.6 He asserts the Award nevertheless
undervalues his losses because the appraisers improperly
jettisoned undisputed parts of the Building Estimate. For
example, he contends the appraisers offset the higher cost of
Category 3 labor and demolition rates by reducing ASIC’s square
footage calculations using an alternate method of measuring his
house’s floors. Rees describes this and other deviations from the
Building Estimate as showing the appraisers exceeded the scope
of their authority. (§ 1286.2, subd. (a)(4).) He contends their task
was confined to re-assessing the Building Estimate’s costs line-
by-line because he and ASIC’s adjuster considered the document
the “[a]greed upon scope of repairs” for the damage observed in
the days after the flood.
       Rees’s substantive criticisms of the Award do not show the
appraisers exceeded their authority. The ASIC policy delineates
this authority succinctly: to “separately state the actual cash
value, the replacement cost, and the amount of loss to each item.”
Here, the Award states both actual cash value and replacement
cost values. The appraisers’ 25-page damages report lists the
repairs and materials needed in each area of the house’s two
separate living quarters. Comparing it with ASIC’s Building

      6 Rees accuses ASIC and the appraisers of modestly
increasing these figures in a scheme to decrease Rees’s chances of
succeeding in a bad faith lawsuit against them. We find no
evidence of corruption or fraudulent intent in the record.

                                 5
Estimate7 does not show the appraisers overlooked previously
identified losses, as Rees alleges, or otherwise “misconceived
[their] powers and duties or deliberately chose to ignore them.”
(San Luis Obispo Bay Properties, Inc. v. Pacific Gas & Elec. Co.
(1972) 28 Cal.App.3d 556, 565.) Nor does the record show they
omitted or reduced any damaged item’s value for improper
reasons. (See, e.g., Kacha, supra, 140 Cal.App.4th 1023
[appraisal panel exceeded its authority by deciding issues
relating to insurance coverage].)
       We decline to read the policy as requiring the appraisers to
overlay their revised estimates on top of ASIC’s line-by-line or
restricting them to the area calculations, mitigation techniques,
or adjusting methodologies described in the 2017 Building
Estimate or other documents submitted to them by Rees. (See
Lee v. California Capital Ins. Co., supra, 237 Cal.App.4th at
p. 1172 [appraisal panel need not “assign a loss value to every
item claimed by the insured, regardless of whether that item is
damaged”].) The record contains no evidence Rees and ASIC
agreed to modify the policy’s appraisal provision. We conclude
the trial court properly denied Rees’ petition to vacate and motion
for reconsideration.
      3. The Trial Court Shall Confirm the Award on Remand
       A court presented with a petition under the arbitration
statutes must confirm, correct, or vacate the award. (§ 1286.)
The trial court denied Rees’ petition to vacate and motion for
reconsideration but did not explicitly confirm the Award in its
written rulings. It shall do so on remand.

      7The record contains only the first seven pages of the
Building Estimate’s itemizations. This prevents us from
comparing many of ASIC’s figures to the appraisers’ figures.

                                6
                          CONCLUSION
      We affirm the trial court’s denial of the petition to vacate
the appraisal award. The case is remanded with instructions to
confirm the Award. ASIC shall recover its costs on appeal.
      NOT TO BE PUBLISHED

                                     PERREN, J.

We concur:

      GILBERT, P. J.

      YEGAN, J.

                                 7
                  Hon. Linda D. Hurst, Judge
           Superior Court County of San Luis Obispo
               ______________________________

     Shawn Rees, in pro. per., for Plaintiff and Appellant.
     Wargo & French, Jeffrey N. Williams, for Defendant and
Respondent, American Security Insurance Company.

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