The insurer's challenge to an appraisal award was rejected by the federal district court. Bogaerts v. State Farm Fire and Cas. Co., 2025 U.S. Dist. LEXIS 102170 (E.D. Mich. May 29, 2025).
The plaintiffs' home was destroyed by fire. State Farm was notified of the loss and after an inspection, made a payment in excess of $650,000 to plaintiffs. Plaintiffs hired a public adjuster who estimated the claim for damages in excess of $1,100,000. The claim included covered line items for backfill/grading, a front paver walkway, and architectural fees. An appraisal was demanded by plaintiffs. State Farm agreed to appraise losses under the Dwelling, Other Structures, and Trees, Shrubs, and Landscaping provisions. Both sides selected appraisers.
The appraisers agreed on the scope and amount of the loss and issued a lumps award for the replacement cost value and the actual cash value of the appraised damages. After both appraisers signed the award, State Farm sent a letter notifying plaintiffs that it was refusing to pay the award in its entirety. State Farm claimed, first, that the award for damages for removal and replacement of backfill/grading was not covered under the Dwelling provision of the policy although State Farm agreed to pay to excavate the dirt/land and for backfill so that the new foundation could be installed. Second, State Farm claimed that plaintiffs must prove why architectural fees were necessary since blueprints for the home already existed.
Plaintiff sued to compel payment of the remaining amount owed under the appraisal award – $136,321.21.
The court agreed the appraisal award was valid and plaintiffs were entitled to payment,. State Farm admitted coverage both for the event generally and for the Dwelling, Other Structures, Debris Removal, Trees, Shrubs, and Landscaping. Once an insurer admitted that a loss was covered under its policy, the court was statutorily mandated under Michigan law to order the parties to participate in the appraisal process, as the parties did not dispute liability and only disagreed about the amount of the loss.
State Farm attempted to obfuscate the issue and avoid payment of the award by reframing the disagreement as a coverage dispute. But State Farm had already admitted that the damages at issue were generally covered by the policy, so this was not a coverage dispute. The parties only disagreed on the amount of loss. The appraisal award set the amount of loss. State Farm could not now challenge the loss amount by requiring plaintiffs to prove that the appraised value did not include non-covered damages. While State Farm argued plaintiffs must prove that the appraisers did not make a mistake in their computation of damages, State Farm had the burden of demonstrating a manifest mistake.
The appraisal award was affirmed and State Farm was ordered to pay the outstanding balance.
