Court Opinion

ID: 9543939
Source: CourtListenerOpinion
Date Created: 2023-08-07 16:50:44.823086+00
Date Added: 2024-06-11T15:11:31.535422
License: Public Domain

VOSS, Judge,
dissenting.
The majority opinion holds that Twin City waived its right to an appraisal through its conduct. To support its opinion, the majority raises two arguments. First, they contend that Twin City waived its right to demand an appraisal by filing an answer on the merits and a notice of removal to federal court. Second, the majority claims that Twin City waived its right to an appraisal because its demand was unduly delayed. I disagree with both contentions.

*584
A. Twin City Did Not Waive Its Right to an Appraisal by Its Actions.

Twin City filed its answer on the merits and a notice of removal to the federal court on April 19, 1991. The majority interprets that by these acts, Twin City exhibited an intent to litigate rather than to rely upon the appraisal provision.
The majority cites Bolo, 105 Ariz. 343, 464 P.2d 788, as support for its argument; however, this ease is easily distinguished from Bolo. In Bolo, the party demanding an appraisal was the party that filed the lawsuit, whereas here, the opposite is true. Twin City did not elect a remedy—it merely answered the complaint. See Hanby, 265 A.2d at 31 (election of insured to file suit could not deprive insurer of its right to appraisal); Keesling, 520 P.2d at 627. Bolo does not answer the question of whether an answering defendant waives the right to an appraisal by participating in litigation because that issue was not before the court. Although a party’s filing of a lawsuit rather than invoking arbitration or appraisal would generally indicate a waiver of the right to have an appraisal, the filing of an answer, especially one that expressly reserves the right to demand an appraisal, does not indicate such a waiver. ITT World Communications, Inc. v. Communications Workers of America, AFL CIO, 422 F.2d 77 (2nd Cir.1970) (union did not waive its right to arbitrate by filing answer or by four-month delay in seeking arbitration); Short v. National Sport Fashions, 264 A.D. 284, 35 N.Y.S.2d 169 (1942) (defendant’s failure to assert right to arbitration in stipulation to extend time to answer or in his first answer, did not constitute waiver of that right).
The majority also labels as a deficiency Twin City’s failure to request an appraisal simultaneously with the filing of its answer. Although within its answer Twin City referenced its belief that it was entitled to an appraisal pursuant to the policy provision, it was not until ten days later that it formally demanded an appraisal. Twin City made it clear as early as November 1990 that it would insist on an appraisal in the event an agreement could not be reached. This intention was repeated in its answer and in its subsequent pleadings seeking to stay litigation and to compel an appraisal. The ten-day gap before Twin City formally requested an appraisal is an inadequate indication of a waiver. See ITT World, 422 F.2d 77.

B. Twin City Did Not Waive Its Right to an Appraisal by Unduly Delaying Its Demand.

Although the appraisal provision does not state a time limit, the majority contends that the appraisal demand must be made within the one-year period during which a lawsuit must be filed against the insurer. The applicable provisions are as follows:
Appraisal. If you and we fail to agree on the amount of loss, either party may demand an appraisal of the lops. In this event, each party will choose a competent appraiser within twenty days after receiving a written' request from the other. Suit against us. No action can be brought unless the policy provisions have been complied with and the action is started within one year after the date of loss.
The one-year limitation as specified by the plain language of the policy only applies to claims asserted against the insurer. The word “us”, is a defined term in the policy. It refers to the company providing the insurance. Furthermore, the paragraph itself has no application to claims for an appraisal.
The majority cites School District, 404 P.2d 889, as support for their conclusion that the language of this policy requires an appraisal to be brought within one year of the date of loss. A comparison of the language of the policy in School District with the policy in this case illustrates its inapplicability. The provision in the policy at issue states that there cannot be a suit against the insurance company unless it commences within one year after the date of the loss. The language in School District states:
No suit or action on this policy for the recovery of any claim shall be sustainable in any court of law or equity unless all of the requirements of this policy shall have been complied with and unless commenced within twelve months after the inception of the loss.
*585404 P.2d at 891. The language in School District applies to both the insured and the insurance company/insurer. Conversely, the language in the policy before us precludes only claims against the insurance company. Furthermore, because the request for an appraisal was made within one year in School District, the conclusion that the demand needs to be within one year after the loss is dictum. Dictum is not binding on this court.
We should not presume that the one-year limitation on filing an action also limits the time in which a party may demand an appraisal. Public policy favors arbitration/appraisal, see A.R.S. section 12-1501; therefore, waiver of an appraisal clause, like waiver of an arbitration agreement, is generally not favored. The facts of each case must be considered in light of the strong policy approving appraisal. U.S. Insulation, 146 Ariz. at 258, 705 P.2d at 498; Rancho Pescado, 140 Ariz. at 181, 680 P.2d at 1242. Once a party invokes the appraisal procedure, the party seeking to prove waiver has a heavy burden of proof. See Rancho Pescado, 140 Ariz. at 181, 680 P.2d at 1242; Fisher, 791 F.2d at 694. There is no indication that the parties believed a one-year limit to demand an appraisal was part of their policy. Therefore, without a policy provision so providing, we should not interpret the limitations clause as applying to a demand for an appraisal.
The better practice is employed by other jurisdictions that have considered this question. They require the demand to be within a reasonable time. Kester, 726 F.Supp. 1015; Hanby, 265 A.2d at 30 (where policy did not state time within which demand was to be made, an appraisal must be requested within reasonable time); Monroe Guar. Ins. Co., 537 N.E.2d at 529 (demand for an appraisal must be made within reasonable time under circumstances of case or right to demand an appraisal is waived). In Kester the policy at issue made no provision for a time when an appraisal must be requested, but it contained an identical “suit against us” paragraph as exists in the case before this court. The Kester court found that there was no provision in the policy which indicated that an appraisal must be sought within a specific time, and therefore concluded that it must be requested within a reasonable time period. Kester, 726 F.Supp. at 1019.
In considering the time limits of a demand, the court should consider the circumstances that existed at the time the demand was made and specifically look to prejudice and a breakdown of good faith negotiations as determining factors. Id. at 1019. Here, Mei-nekes met with a home builder to discuss estimates for replacing their residence. Based on changing information from the Mei-nekes, four separate bids were prepared by the contractor in the approximate amounts of $342,922.00, $466,156.00, $459,965.00, and $368,994.00. Each of these estimates was far in excess of the face amount of the insurance policy which provided $132,000.00 in coverage for the structure.
Meinekes were dissatisfied with the estimates; therefore, they submitted different values to Twin City. The first claim was made for $687,085.30. A second claim was made for $824,340.00. The third claim was made for $983,880.00 and was submitted one day before Meinekes’ filed their complaint. The complaint was never served and, during the course of negotiations that followed, Twin City operated under the presumption that good faith negotiations were continuing.
During these negotiations, Twin City paid Meinekes in excess of $470,000.00 in advance payments on their loss. A review of the chronology of these negotiations demonstrates that Meinekes’ claims escalated drastically since the loss occurred in December 1989. Much of the delay was caused by changing information provided by Meinekes. Throughout the year following the fire, Twin City engaged in good faith negotiations; however, much of the time was spent waiting for Meinekes to submit their value for the structure. The majority disregarded these delays caused by the Meinekes and concentrated on a one-year time limit regardless of the Meinekes’ actions.
The majority also examined the lapse of time between the breakdown in negotiations and the demand for an appraisal. It determined that Twin City’s demand two months after negotiations ceased was adequate evidence that it waived its right to an appraisal.
*586There is no reason to conclude that Twin City intended to waive this right. A time limit for demanding an appraisal is not specified in the policy. Twin City was operating under the assumption that good faith negotiations were continuing up until service of the amended complaint on March 7,1991. Within a few weeks, Twin City filed its answer, referencing its belief that it was entitled to an appraisal pursuant to the policy provisions. Then, on April 29, 1991, Twin City formally demanded an appraisal. The brief break in good faith negotiations and the lack of prejudice compel the conclusion that Twin City should be entitled to invoke the appraisal provision of the policy in accord with Arizona’s strong public policy favoring appraisal.
For the foregoing reasons I would reverse the denial of Twin City’s motion to compel the appraisal and remand for compliance with the policy’s appraisal procedure and for further proceedings.