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Union Mutual Fire Insurance Co. v. Pate

Superior Court of Rhode Island

August 2, 2016


         Providence County Superior Court

          For Plaintiff: Fred L. Mason, Jr., Esq.

          For Defendant: Charles M. Nystedt, Jr., Esq.; David P. Whitman, Esq.


          LANPHEAR, J.

         This matter came on for hearing before Mr. Justice Lanphear on July 14, 2016 on Defendants' Motion for Confirmation of Appraisal Award, Plaintiff's Motion to Vacate and or to Modify the Appraisal Award, and Defendants' Motion for Entry of Final Judgment.


         Facts and Procedure

         On August 16, 2003, a hot water storage tank in the basement of Mr. and Mrs. Pates' home ruptured. Valuable baseball cards were stored in cardboard boxes directly on the floor and on wooden slabs in the basement. Mr. Pate waited a day to contact the insurance agent, and on the next day (August 18, 2003), left a voice message and indicated he was about to embark on a road trip.

         Union Mutual Fire Insurance Company (Union Mutual) contends they received notice for the first time on September 3, 2003. Union Mutual hired Pelletier & Rourke Inc. on September 4, 2003, who inspected the property on September 16, 2003. At the inspection, Mr. Gorman of Pelletier & Rourke Inc. observed visible water damage to the boxes containing the baseball cards. He also noted that a number of the cardboard boxes were still damp or wet. In December 2003, Mr. and Mrs. Pate claimed a loss and submitted an estimate for $1, 281, 552.25.

         On February 15, 2005, Union Mutual sent Mr. and Mrs. Pate a letter advising that it would arrange an appraisal of the items that sustained water damage and were the subject of the claim. The appraisal was conducted and on December 29, 2005, Union Mutual forwarded a copy of its expert's report to Mr. and Mrs. Pate and asked for a response.

         Union Mutual filed a complaint with the Rhode Island Superior Court on April 5, 2013[1]seeking a Declaratory Judgment outlining the respective rights and duties of each party with regard to the insurance policy at issue; a declaration that the appraisal requirement was barred by the statute of limitations; and a declaration that any recovery under the policy was barred by the statute of limitations as outlined in G.L. 1956 § 27-5-3. Mr. and Mrs. Pate counterclaimed with several counts, including a request for declaratory judgment that the insurer's defenses were waived.

         Meandering slowly at the prelitigation stages, the case kept a low throttle thereafter. Although each party requested a declaratory judgment, the case continued unresolved. In June of 2014, a motion to accelerate was granted, but discovery motions ensued. It was listed as ready trial in January 2015, but was delayed to allow further discovery. In an attempt to move the case along, the Court listed the case as ready trial after April 1, 2015 in an attempt to move it along and assigned it to a trial justice. In spite of the trial justice's valiant efforts, the case made no significant progress. The case was set for a trial date of June 1 and 2, 2015. After several conferences and hearings, the trial justice saw few, if any, remaining genuine issues of material fact in dispute and suggested new motions for summary judgment. Cross-motions for summary judgment were filed by the parties in October of 2015. In a bench decision, the trial justice ruled in favor of Mr. and Mrs. Pate finding that Union Mutual's remaining defenses concerned the amount of loss rather than bars to recovery. The Court ordered the parties into the appraisal process pursuant to the terms and provisions of the applicable policy stating:

"The question of damages shall be submitted to the appraisal process. During the appraisal process, any evidence concerning Pates' alleged failure to comply with the subsection 2(d)(1) will be limited to the efforts they reasonably could have and should have taken up to the time when UM reasonably could have commenced its investigation had its agent and adjuster acted diligently, that is no more than three or four days after the Pates discovered the initial flooding." Hr'g Tr. 31:24-32:7, Oct. 26, 2015.

         At the hearing, counsel for Mr. and Mrs. Pate asked the Court to specify that the appraiser separately calculates pre-award interest, and the Court did so. Tr. 35:14-20. The trial justice also agreed that although she had ordered final judgment to enter, she would delay entry until the appraisal was completed. Tr. 36:1-23.

         The policy required that the insurer and insured each select an appraiser and that they mutually select a neutral umpire. Defs.' Mot. For Entry of Final J., Ex. E at 11. Mr. and Mrs. Pate designated Robert Connolly of Binghamton, New York and Union Mutual designated Fred Winer of Baltimore, Maryland. Mr. Connolly and Mr. Winer agreed upon Roger Durkin of Durkin Valuation Consultants of Boston, Massachusetts to be the neutral Umpire. Mr. Durkin sent a proposed engagement letter to the parties dated October 8, 2015 concerning the exact nature of his services and a proposed appraisal process. In this letter, Mr. Durkin explained that there would be no personal inspection of the property, unless required. Union Mutual requested that Mr. Durkin meet their appraiser, Fred Winer, and expert, Mr. Kathenes, onsite to do an inspection. Mr. Durkin declined to meet with the appraiser or allow for an inspection and suggested the parties go back to Court to seek an order on the appraisal process.[2]

         Mr. and Mrs. Pate requested the court's intervention in a letter dated January 16, 2016 (Pl.'s Mem. Ex. M, May 13, 2016). Union Mutual formally requested instruction on the appraisal process in its motion of February 6, 2016, and suggested that Mr. Durkin be replaced.

         The trial justice, by an Order dated March 22, 2016, denied the request to disqualify Mr. Durkin as the Umpire. With the case still drifting, and counsel feuding over each procedural step, the Court provided specific instructions on the appraisal process: 1) Union Mutual will submit the complete reports of Mr. Winer and Mr. Kathenes to the appraisers and the Umpire; 2) the appraisers will separately set the amount of the loss; 3) if the appraisers agree, then that will be the loss awarded to the Pates; 4) if the appraisers disagree on the amount, they must submit their differences to the Umpire who will decide the amount of the loss; 5) the appraisal process will be conducted according to the Uniform Standards of Professional Appraisal Practice (USPAP); 6) the parties are prohibited from providing submissions or argument to the Umpire and appraisers unless specifically requested and agreed upon by a majority vote; and 7) the parties are prohibited from further inspection of the Pates' property unless requested and agreed upon by a majority vote. (Order 1-2, Mar. 22, 2016.)

         In accordance with the Order, Mr. and Mrs. Pate sent an appraisal to Mr. Durkin. Union Mutual sent the appraisal report of Mr. Kathenes to Mr. Durkin in early March 2016. Mr. Durkin and Union Mutual engaged in various communications seeking Mr. Kathenes' work product and Mr. Winer's appraisal report; however, Mr. Winer never submitted a report. On April 1, 2016, Mr. Durkin emailed the parties with an "Umpire Status Report."

         On April 5, 2015, Mr. Durkin emailed his "Neutral Umpire Report." He determined that the loss was $400, 000 and pre-award interest amounted to $588, 000 (147%). Mr. and Mrs. Pate moved to confirm this award. Union Mutual seeks to vacate the award.


         Standard ...

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