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Will Pennsylvania’s Revised Uniform Arbitration Act Clarify or further Muddy the Appraisal Process

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On July 1, 2019, Pennsylvania’s overhaul of its sixty (60) year old Uniform Arbitration Act (“UAA”) will take effect. The changes to the new act, titled the Revised Uniform Arbitration Act (“RUAA”) are substantial. In the insurance context, the changes may be most significant to first-party property insurers and the appraisal process where the process may be transformed from a relatively simple and straightforward alternative dispute resolution process into mini trials involving discovery, motion practice, and oral arguments.

To recap, Appraisal is a process that Pennsylvania law mandates be included within first-party property insurance policies.[1] When properly executed, appraisal is intended to resolve disputes over the amount of loss only. Since the Pennsylvania Supreme Court’s 1974 decision in Ice City,[2] appraisal has been recognized as a favored means of resolving first-party property insurance disputes. Although similar, appraisal is not arbitration or mediation, yet Pennsylvania’s courts often looked to the UAA for guidance where issues arose.[3] Notwithstanding the courts increased focus on Appraisal after Judge Diamond’s decision in Correnti[4], insureds and insurers continued to find themselves at odds over the parameters of Appraisal. Some of these issues included, but are not limited to, appraiser impartiality, the extent to which coverage issues should be decided by appraisers, the damages appraisers may award or the issues that may be appealed.

The first item that many will note about the RUAA is the requirement that an arbitrator disclose any known facts that a reasonable person would consider likely to affect his or her impartiality.[5] At first blush, this will most likely impact public adjusters who will be obligated to disclose their fee arrangement with the insureds. However, this may also extend to an insurer’s appraiser and any proposed umpires who may be obligated to disclose similar information. If a party to the appraisal objects to a disclosed fact or is aware of an undisclosed conflict, the RUAA allows a court to vacate the award for “evident partiality.”[6] The RUAA is also distinguishable from its predecessor in that discovery may be permitted, this includes the taking of depositions of a party or a witness to be used at a hearing[7] as well as the equivalent of summary judgment motions.[8] This potentially opens the door to either party’s ability to depose one or more contractors or experts regarding the basis for their findings as part of the appraisal proceeding, or even the insured where questions exist as to whether a loss occurred in the first instance.

It is also worth noting that under the RUAA, questions regarding the scope of the proceeding are to be determined by a court unless the arbitration agreement says otherwise.

In conclusion, the Revisions to Pennsylvania’s Uniform Arbitration Act have the potential to dramatically transform Appraisals from a process involving two contractors or independent adjusters into a more expensive and time-consuming legal process. Time will tell.

[1] P.S. Section 636

[2] Ice City, Inc. V. Ins. Co. Of N. Am., 314 A.2d 236 (Pa. 1974).

[3] Riley v. Farmers Fire Ins. Co., 735 A.2d 124 (Pa. Super. 1999).

[4] Correnti v. Merchants Preferred Ins. Co., 2013 WL 373273 (E.D. Pa. Jan. 31, 2013).

[5] 42 Pa.C.S.A. § 7321.13(a).

[6] 42 Pa.C.S. §§ 7321.13(c), 7321.24 (a)(2)(i).

[7] 42 Pa.C.A. § 7321.18.

[8] 42 Pa.C.A. § 7321.16(b).