Virginia Court of Appeals Finds Appraisal Award Not Reviewable under Arbitration Statute

    The Virginia Court of Appeals affirmed the trial court's conclusion that an appraisal award was not an arbitration award reviewable under the arbitration statute. Church Mutual Ins. Co., S.K. v. Ephesus Richmond Seventh-Day Adventist Church, 2025  Va. App. LEXIS 214 (Va. Ct. App. April 8, 2025).

    Ephesus held a property insurance policy with Church Mutual. In 2021, Ephesus filed a claim alleging that wind and hail had damaged the church building, Church Mutual's inspector concluded that damage to the flat portion of the roof and the church interior resulted from ordinary "weathering" and "footfalls" and that only the sloped portion of the roof and the gutters sustained storm damage. Church Mutual denied most of the claim and issued a check for $59,084.05.

    Ephesus challenged the amount paid and demanded an appraisal. The appraiser selected by Church Mutual estimated the net replacement cost value, less depreciation and other deductions, at $68,148.78. The appraiser selected by Ephesus provided a much greater estimated net replacement cost value, less depreciation, of $1,692,642.89. The umpire concurred with the higher valuation of almost $1.7 million. He and the appraiser for Ephesus endorsed an appraisal award reflecting that valuation.

    Church Mutual asked the trial court to "modify or correct the appraisal award." Ephesus filed a demurrer arguing that the appraisal award was not an arbitration award subject to review under the arbitration statute. It argued the trial court did not have subject matter jurisdiction under the statute, The trial court ruled that the policy, drafted by Church Mutual, provided for an appraisal, not arbitration. The statute permitted modification of arbitration awards exclusively, with no reference to appraisals. The court found that it lacked jurisdiction, denied Church Mutual's application to modify or correct the appraisal award, and dismissed the matter with prejudice. 

    On appeal, the court noted that the language of the contract generally determined whether a particular dispute is arbitrable, In the event of a dispute over the application of arbitration language in a contract, the court had to construe it to determine whether a particular question was one that the parties agreed to submit to arbitration. Without an agreement to arbitrate a particular point, a party could not be subject to the arbitration process.'The burden of proving an agreement to arbitrate rested on the party seeking to us e this method to resolve the dispute, here the insurer, Church Mutual.

    The policy failed to reflect an intention to classify the appraisal process followed in this case as a form of arbitration. The policy included express references to the arbitration of disputes between the insurer and the insured in a provision other than the one setting out the appraisal process. For example, the policy expressly provided for arbitration when the insurer and the insured could not reach agreement on payment of defense costs. The word "arbitration," by contrast, did not appear in the contract provision covering appraisal awards, the specific provision that formed the basis of this suit,

    Church Mutual, therefore, did not met its burden of proving that the appraisal award qualified as an arbitration award under the statute. The trial court correctly ruled it lacked jurisdiction to review the award under the statute pleaded.