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Kellogg v. Middlesex Mutual Assurance Co.

Supreme Court of Connecticut

August 22, 2017

SALLY KELLOGG
v.
MIDDLESEX MUTUALASSURANCE COMPANY

          Argued May 4, 2017

         Procedural History

         Application to vacate an arbitration award, brought to the Superior Court in the judicial district of Stamford-Norwalk, where the court, Hon. Kevin Tierney, judge trial referee, denied the defendant's motion to dismiss; thereafter, the case was tried to the court, Hon. Kevin Tierney, judge trial referee, who, exercising the powers of the Superior Court, rendered judgment granting the application to vacate, from which the defendant appealed. Reversed; judgment directed.

          Stuart Glenn Blackburn, for the appellant (defendant).

          Frank W. Murphy, for the appellee (plaintiff).

          Wystan M. Ackerman filed a brief for the Property Casualty Insurers Association of America as amicus curiae.

          Palmer, Eveleigh, McDonald, Espinosa, Robinson, D'Auria and Vertefeuille, Js. [*]

         Syllabus

         Pursuant to statute (§ 52-418 [a] [3] and [4]), a trial court shall make an order vacating an arbitration award if it finds either that the arbitrators have been guilty of misconduct in refusing to hear evidence pertinent and material to the controversy or of any other action by which the rights of any party have been prejudiced, or if the arbitrators have exceeded their powers by manifestly disregarding the law.

         The plaintiff sought to vacate an arbitration award setting the amount of the insured loss to her property resulting from a tree falling on the roof and chimney of her home during a storm. The plaintiff had filed a claim pursuant to a restorationist insurance policy issued by the defendant insurance company, under which payment of the full restoration cost of the insured property would be made in a two step process, with the defendant first making payment of the actual cash value of the loss, and, once the restoration or replacement was complete, paying the amount actually spent to repair, restore or replace the damaged building. When the plaintiff's appraiser and the defendant's appraiser were unable to agree on the amount of the loss, the plaintiff invoked the policy's appraisal provision, requiring the loss amount to be determined through an unrestricted arbitration proceeding. Under the terms of the policy, the plaintiff and the defendant each appointed one appraiser to serve as an arbitrator, and the two appraisers chose a neutral third party arbitrator to act as the umpire, all three of whom comprised the appraisal panel. After each appraiser independently estimated the loss, the umpire evaluated the differences between the two appraisers' estimates and set the loss, which was an amount between the two estimates. The defendant's appraiser accepted the umpire's valuation, which became the panel's decision on the amount of the loss. After the plaintiff filed its application to vacate, the defendant moved to dismiss as untimely the plaintiff's challenge to that portion of the arbitration award specific to the building. Although the trial court initially stated that it first would rule on the motion to dismiss, it held eight days of trial, covering all aspects of the motion to dismiss as well as the merits of the application to vacate. The trial court denied the motion to dismiss and granted the application to vacate the arbitration award because it violated § 52-418 (a) (3) and (4). The court determined that the panel prejudiced the plaintiff's substantial monetary rights by disregarding specific terms of the policy when it refused to award money for losses claimed by the plaintiff, and by manifestly disregarding the law by calculating depreciation when the policy provided for no depreciation. On appeal from the judgment granting the application to vacate, held:

         1. The trial court improperly vacated the arbitration award and substituted its judgment for that of the panel when it determined that the award violated § 52-418 (3): that court's disagreement with the panel's ultimate conclusions and the amount of the award, in the absence of any determination that the panel engaged in misconduct impacting the fairness of the arbitration procedures, did not establish a violation of § 52-418 (3) and was not a proper ground for vacating the award; moreover, there was no claim that the arbitrators refused to postpone a hearing or to hear any of the plaintiff's evidence, or otherwise committed a procedural error, and there was testimony by the plaintiff's appraiser that the defendant's appraiser and the umpire considered all of the evidence that the plaintiff's appraiser wanted to present to them.

         2. The trial court incorrectly concluded that the panel's decision to calculate depreciation when the restorationist insurance policy did not provide for depreciation evidenced a manifest disregard of the law that justified vacating the arbitration award pursuant to § 52-418 (a) (4): the court improperly engaged in a de novo review when it determined that the panel's decision to withhold depreciation was an error obvious and capable of being readily and instantly perceived by the average person qualified to serve as an arbitrator, as the meaning of the policy language was a matter for the panel to decide, and the plain language of the policy permitted the withholding of depreciation until repairs were made or the damaged property was restored or replaced; furthermore, that court misinterpreted the holding in Northrop v. Allstate Ins. Co. (247 Conn. 242), which held only that an insurer could not withhold depreciation from a replacement cost award after a homeowner had incurred a valid debt for repairs, and was not applicable to estimates, such as the estimate obtained by the plaintiff, which generally impose no obligation or debt on homeowners and do not address concerns that the insured will forgo repairs and receive a windfall, and, thus, the panel did not ignore a clearly governing legal principle when it permitted the defendant to withhold depreciation costs until the plaintiff had incurred a valid debt for the repair or replacement of the property.

          OPINION

          D'AURIA, J.

         In this appeal, we consider whether the trial court properly vacated an arbitration award setting the amount of an insured loss caused by a tree falling on the insured's home. We conclude that the trial court improperly substituted its judgment for that of ...


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