Certiorari to the Colorado Court of Appeals Court of Appeals
Case No. 16CA733.
Attorneys for Petitioner: Wheeler Trigg O'Donnell LLP
Terence M. Ridley Evan Bennett Stephenson Kayla L.
Scroggins-Uptigrove Denver, Colorado, Wheeler Waters, P.C.
Karen H. Wheeler Jami A. Maul Greenwood Village, Colorado
Attorneys for Respondent: Orten Cavanagh & Holmes, LLC
Jonah G. Hunt Denver, Colorado
Attorneys for Amicus Curiae American Insurance Association:
Foran Glennon Palandech Ponzi & Rudloff PC Amy M. Samberg
Matthew S. Ponzi Thomas Orlando Denver, Colorado
Attorneys for Amicus Curiae Colorado Defense Lawyers
Association: American Family Insurance Legal Group Dylan
Lewis Englewood, Colorado Ruebel & Quillen, LLC Jeffrey
Clay Ruebel Westminster, Colorado
Attorneys for Amicus Curiae Colorado Trial Lawyers
Association: The Frankl Law Firm, P.C. Keith E. Frankl
Greenwood Village, Colorado Speights & Worrich Colorado
LLC David Roth Denver, Colorado
Attorneys for Amici Curiae National Association of Public
Insurance Adjusters and Rocky Mountain Association of Public
Insurance Adjusters: Sherman & Howard, LLC Christopher R.
Mosley Denver, Colorado
Attorneys for Amici Curiae Property Casualty Insurers
Association of America and Colorado Civil Justice League:
Sweetbaum Sands Anderson PC Jon F. Sands Marilyn S. Chappell
Denver, Colorado
Attorneys for Amicus Curiae United Policyholders: Reed Smith,
LLP Jim Davis Chicago, Illinois
OPINION
Hood,
Justice.
¶1
A condominium association, Dakota, filed two claims with its
insurer, Owners, for weather damage. The parties couldn't
agree on the money owed, so Dakota invoked the appraisal
provision of its insurance policy.
¶2
The appraisal provision requires each party to "select a
competent and impartial appraiser." An umpire would be
selected by the parties or appointed by the court. The
appraisers would assess the value of the property and amount
of loss. Any disagreement would be submitted to the umpire.
Any agreement as to the values reached by at least two of the
three would bind them all.
¶3
The parties each selected an appraiser, putting the rest of
the provision's terms into motion. Ultimately, the
appraisers submitted conflicting value estimates to the
umpire, and the umpire issued a final award, accepting some
estimates from each appraiser. Dakota's appraiser signed
onto the award, and Owners paid Dakota.
¶4
Later, Owners called foul. It moved to vacate the award,
arguing that Dakota's appraiser was not
"impartial" as required by the insurance
policy's appraisal provision and that she failed to
disclose material facts. The trial court disagreed and
"dismissed" the motion to vacate. A division of the
court of appeals affirmed.
¶5
Having agreed to review the case, we must interpret the
policy's impartiality requirement and determine whether a
contingent-cap fee agreement between Dakota and its appraiser
rendered the appraiser partial as a matter of law. We
conclude that the plain language of the policy requires
appraisers to be unbiased, disinterested, and unswayed by
personal interest. They must not favor one side more than
another, so they may not advocate for either party. We also
hold that the contingent-cap fee agreement didn't render
Dakota's appraiser partial as a matter of law.
¶6
Accordingly, we affirm the judgment of the court of appeals
with respect to the contingent-cap fee agreement, reverse
with respect to the impartiality requirement, and remand for
further proceedings consistent with this opinion.
I.
Facts and Procedural History
¶7
Dakota Station II Condominium Association Inc., the owner of
a condominium development in Littleton, filed two claims with
its insurer, Owners Insurance Company, for weather damage to
the development.
¶8
Dakota disagreed with Owners about the value of the claims,
so it invoked the following appraisal provision of its
insurance policy:
If [Owners] and [Dakota] disagree on the value of the
property or the amount of loss, either may make a written
demand for an appraisal of loss. In this event, each
party will select a competent and impartial appraiser.
The two appraisers will select an umpire. If they cannot
agree, either may request that selection be made by a judge
of a court having jurisdiction. The appraisers will state
separately the value of the property and amount of loss. If
they fail to agree, they will submit their differences to the
umpire. A decision agreed to by any two will be binding.
(Emphasis added.)
¶9
In accordance with this provision, each party selected an
appraiser. The two appraisers couldn't agree on an
umpire, so the court appointed one. The appraisers evaluated
the property and submitted their conflicting estimates to the
umpire. Each estimate included six cost categories.
¶10
After reviewing the appraisers' estimates and supporting
documentation, the umpire adopted Owners' appraiser's
estimates in four of the six cost categories and Dakota's
appraiser's estimates in the other two. In total, the
umpire found that the replacement cost reached almost $3
million.[1]
¶11
Even though the umpire adopted four of Owners'
appraiser's six cost estimates, Owners' appraiser
didn't agree with the roof-cost estimate, the big-ticket
category ($2, 553, 434.50), and wouldn't sign the final
determination of costs.[2] However, Dakota's appraiser and the
umpire both signed the award. Owners then paid Dakota.
¶12
Months later, Owners filed a petition to vacate the award
pursuant to section 13-22-223, C.R.S. (2018), of the Colorado
Uniform Arbitration Act, arguing that Dakota's appraiser
was impermissibly partial and failed to disclose material
facts. Owners asserted that appraisers must be competent and
impartial "like arbitrators." Owners later filed a
clarification of the relief requested, explaining that the
appraiser's "duties of impartiality stem from the
Policy."
¶13
As relevant here, Owners alleged that Dakota's appraiser
acted improperly by entering into a contract with the public
adjuster that capped her fees at five percent of the
insurance award (allegedly giving her a financial interest in
the outcome).
¶14
Later, at an evidentiary hearing, Owners' counsel asked
Dakota's appraiser whether she felt that "it's
appropriate to be an advocate for an insured when you're
acting as an appraiser." The appraiser replied: "I
think it's natural. I think you're an advocate for .
. . Owners." In closing arguments, Owners' counsel
argued that this testimony further demonstrated the
appraiser's partiality.
¶15
The trial court "dismissed" the petition.
Ultimately, the court concluded that Dakota's appraiser
didn't act improperly or unlawfully. The trial court
rejected Owners' contention that appraisers must act as
impartially as an umpire or arbitrator in every instance. It
reasoned that the law requires appraisers to be impartial in
the sense that they must render their decisions based upon
experience and not allow their findings to be influenced by
the side that hired them or the side for whom they work.
¶16
The trial court also rejected Owners' contention that a
contingent-cap fee provision of Dakota's appraiser's
contract gave her an impermissible financial interest in the
outcome of the appraisal. The appraiser's contract
included a provision capping the appraiser's fees at five
percent of the overall award but indicated that the provision
would not apply unless it was initialed by the parties. The
parties didn't initial it. However, the trial court
concluded that the provision likely would have been
enforceable against the appraiser if her fees had indeed
exceeded five percent of the final award. The court reasoned
that including the provision created an ambiguity that would
be resolved against the appraiser, as the drafter.
¶17
Still, the trial court determined that the provision
didn't render the appraiser impermissibly biased. It
found the evidence "clear" that neither party
thought that the cap applied. It also found the cap
didn't come into play because, regardless of whose
estimates the umpire adopted, the fee would have been well
under the cap. It rejected the contention that the provision
rendered the appraiser biased as a matter of law. (The trial
court didn't explicitly ...