Plaintiffs German Automotive of Tinton Falls, Inc. and its owners Nicholas and Robyn Rossi suffered damage to their building when a vehicle driven by Rafael Vera-Hernandez drove into it. At the time, their building was insured under a Deluxe Garage Owners Policy with Harleysville Insurance Co. A dispute ensued with Harleysville as to the extent of the damage to their building. In German Automotive of Tinton Falls, Inc. v. Harleysville, dkt. No. A-2571-13T3 (July 29, 2014 App. Div.), the plaintiffs contended that Harleysville breached its policy due to its failure to arbitrate this claim.
Harleysville claimed the building could be repaired but the insureds claimed that structural damage to the building required major reconstruction and relocation costs. Plaintiffs made a demand for appraisal of the loss to resolve this dispute but Harleysville refused, claiming that it objected to the plaintiffs’ proposed appraiser and it had not received copies of the estimates that had been prepared.
The plaintiffs filed suit, seeking to compel an appraisal of the loss and arbitration. They contended that the Harleysville policy required “appraisal arbitration” in cases where there was a dispute as to the amount of damages. The plaintiffs filed a motion to compel an arbitration but the trial court denied the motion.
The Appellate Division upheld the trial court’s ruling. It found that the appraisal-dispute provision in the Harleysville policy is not an arbitration agreement. An appraisal provision is not the equivalent to an arbitration agreement. Further, it found that the policy requiring appraisal only pertained to the amount of the loss. The appraisal process was not intended to resolve disputes as to the extent of damage, the scope of work required, or the cause of the damage.
Moreover, in this case because the plaintiffs proceeded to litigate the case after their initial request for arbitration was denied, even if they had a right under the policy to arbitrate the dispute as to its claim, they waived the right.
