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Prosight-Syndicate 1110 at Lloyds v. RST Westwick, LLC

United States District Court, S.D. Mississippi, Northern Division

January 28, 2019




         RST Westwick, LLC (“Westwick”) has filed a motion for partial summary judgment seeking declaratory relief for the validity of an appraisal award.[1] It also seeks immediate payment of the award's full amount. Having reviewed the record and applicable law, the Court is ready to rule.

         I. Factual and Procedural History

         On February 23, 2016, Westwick suffered storm damage to its property. Westwick submitted a claim to its insurer, Prosight-Syndicate 1110 at Lloyds (“Prosight”). The parties agreed that coverage existed for hail damage. They disagreed, however, as to the amount of damage. Prosight's independent adjusting firm, Engle Martin & Associates, determined the repairs to be $16, 290.87, which did not exceed the $25, 000 hail and wind deductible. The parties then engaged in the appraisal process set forth in the insurance policy: each selected an appraiser and then the appraisers together selected an umpire. The appraisal panel consisted of Westwick's appraiser Bruce Fredrics, Prosight's appraiser Randy Warren, and the mutually-agreed-upon umpire David Hawkins.[2] During the appraisal process, Fredrics also retained a consultant, Dexter Brown, to assist in the appraisal process.

         On October 6, 2017, the umpire issued an appraisal award of a replacement cash value (RCV) amount of $1, 429, 554.26, with depreciation resulting in an actual cash value (ACV) amount of $1, 402, 642.75. The award also included a directive for the parties to split a $3, 000 “consultant's fee.” Two agreed. David Hawkins and Bruce Fredrics signed the award-Randy Warren did not. As Westwick notes, the record does not reflect that Warren ever submitted a written value of loss. Prosight subsequently filed this suit seeking to invalidate or, in the alternative, modify the appraisal award. Westwick now seeks partial summary judgment confirming the validity of the appraisal award. Westwick also requests that the Court direct Prosight to immediately issue payment of the full amount of the award.

         II. Legal Standard

         Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A dispute is genuine “if the evidence supporting its resolution in favor of the party opposing summary judgment, together with any inference in such party's favor that the evidence allows, would be sufficient to support a verdict in favor of that party.” St. Amant v. Benoit, 806 F.2d 1294, 1297 (5th Cir. 1987) (citation omitted). A fact is material if it “might affect the outcome of the suit under the governing law.” Id. (quotation marks and citation omitted). The moving party bears the initial burden of identifying the basis for its motion and the portions of the record that support it. See Nola Spice Designs, L.L.C. v. Haydel Enters., Inc., 783 F.3d 527, 536 (5th Cir. 1996).

         The Court views the evidence and draws reasonable inferences in the light most favorable to the nonmovant. See Maddox v. Townsend and Sons, Inc., 639 F.3d 214, 216 (5th Cir. 2011). But “[u]nsubstantiated assertions, improbable inferences, and unsupported speculation are not sufficient to defeat a motion for summary judgment.” Brown v. City of Hous., 337 F.3d 539, 541 (5th Cir. 2003) (citation omitted). In an insurance case, where the contract is clear and unambiguous, the Court may grant summary judgment based upon the plain language of the contract. See Shelton v. American Ins. Co., 507 So.2d 894, 896 (Miss. 1987) (citation omitted).

         III. Discussion

         Prosight argues that the appraisal award is invalid because Fredrics and Hawkins acted improperly by designating Brown as an “independent consultant” (who was in fact not independent), splitting Brown's fee among the parties, and colluding between themselves through ex parte communications during the appraisal process. Prosight then asserts that even if the appraisal award is valid, applicable policy provisions reduce the amount owed and the depreciation amount was incorrectly calculated. Summary judgment is thus improper, Prosight contends, because there are genuine issues concerning the conduct of the appraisal panel. Also, mistakes of fact in the calculation of the amount of the appraisal award preclude summary judgment.

         As this case is proceeding under the diversity jurisdiction of this Court, in determining the validity of the appraisal award the Court must look to the substantive law of Mississippi. See Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938). State law is determined by looking to the decisions of the state's highest court. St. Paul Fire & Marine Ins. Co. v. Convalescent Servs., Inc., 193 F.3d 340, 342 (5th Cir. 1999).

         It must first be noted that “[i]n Mississippi as in other states, it is difficult for a [party] to succeed in impeaching an award made by disinterested appraisers. Mississippi law favors amicable settlements of controversies without court involvement.” Mitchell v. Aetna Cas. & Sur. Co., 579 F.2d 342, 350 (5th Cir. 1978) (citations omitted). Consequently, as the Mississippi Supreme Court has explained, “an appraisal is presumptively correct but . . . the court may set aside an appraisal where the award is so grossly inadequate as to amount to fraud in effect, although fraud is not charged, or where the appraisers were without authority, or where there is a mistake of fact or to prevent injustice.” McElroy v. Evanston Ins. Co., No. 3:14-CV-180-CWR-FKB, 2016 WL 2726859, at *3 (S.D.Miss. May 6, 2016) (citing Munn v. Nat'l Fire Ins. Co. of Hartford, 115 So.2d 54, 58 (Miss. 1959)).

         A. Validity of the Appraisal Award

          Prosight claims that Brown's involvement in the appraisal process, along with the umpire's directive to split his fee, raises serious questions about the fairness and impartiality of the appraisal proceedings. Prosight further argues that the ex parte communications between Fredrics and Hawkins were improper and led to an invalid appraisal award. The Court will consider each argument in turn.

         1. Dexter Brown's Involvement in the Appraisal Process

         At the request of Hawkins, Fredrics retained Dexter Brown to serve as a consultant in the appraisal process. Warren was aware of Brown's involvement long before expressing any opposition. Warren first became aware of Brown's involvement in an email on May 1, 2017. In the email, Fredrics informed Warren that Westwick approved an independent consultant to provide a second opinion in the appraisal. Fredrics further informed Warren that he would wait until after he received Brown's report to complete his own estimate for the umpire. Docket No. 48-2. In response to Warren's inquiry on the identity of the consultant, Fredrics stated that Brown was a former general contractor who specialized in roofing and remodeling. Warren expressed no opposition at this point, nor did he request to meet with Brown.

         A week later, Fredrics told Warren in an email that Brown had completed his inspection and given Fredrics his findings verbally. Fredrics also attached his own findings to the email and requested that Warren advise of any errors. Docket No. 48-3.[3] Ten days after that, Fredrics notified both Warren and Hawkins of his intention to submit a formal report from Brown. Docket No. 48-4. A June 7, 2017 email from Warren to a Prosight representative stated, in relevant part:

Even though [the umpire] was nominated by my opposition, I thoroughly vetted him and am still convinced that he is honest and ethical . . .. As you know, anything can happen during this procedure, but I am ...

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