Evanston Insurance Company v. Cogswell Properties, LLC
2012 U.S. App. LEXIS 10991
6th Cir.2012Background
- Cogswell Properties suffered a fire loss at the Rock Tenn Paper Mill site; policy had $1,000,000 Building coverage with 80% coinsurance.
- The Loss involved about 4% of the Building; Evanston Insurance determined coinsurance liability based on the Building’s value and paid a small portion.
- Appraisal was initiated; two appraisers and an umpire issued a final award specifying Building ACV and Loss ACV.
- The district court vacated the appraisal award for manifest mistake and legal error, remanding for a new award and holding the two-valuations were inconsistent with a single valuation definition.
- A second appraisal award was issued; district court entered judgment for Evanston on the revised figures, and Cogswell appealed.
- Cogswell pressed that FAA review should apply and challenged the district court’s chosen standard of review under Michigan law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| FAA applicability to appraisal | Cogswell argues FAA governs the review of appraisal awards. | Evanston contends FAA does not apply due to Michigan appraisal framework. | FAA not controlling; appraisal not arbitration under FAA. |
| Forfeiture of FAA claim | Cogswell raised FAA in reconsideration, preserving the issue. | Evanston argues FAA raised too late and was forfeited. | FAA claim forfeited; not considered on the merits. |
| Standard of review for appraisal under Michigan law | There was misapplication of Michigan review standards or manifest error. | Appraisal complied with policy terms and standard of review. | Judicial review limited to bad faith, fraud, misconduct, or manifest mistake; the district court applied correct standard. |
| Definition of actual cash value for coinsurance | Appraisal used consistent definition for value of property and loss as required by policy. | Two different definitions used violated the policy's single definition of value. | Use of two methods constituted manifest mistake; warranting vacatur of original award. |
| Whether the district court properly vacated and remanded | Vacatur was appropriate due to manifest mistakes and misapplication of value concepts. | The original award should be affirmed under Michigan common-law arbitration principles. | Correctly vacated and remanded; ultimately affirmed revised judgment. |
Key Cases Cited
- Davis v. Nat'l Am. Ins. Co., 259 N.W.2d 433 (Mich. App. 1977) (appraisal as substitute for judicial determination; limited review for misfeasance)
- Kwaiser, Auto-Owners Ins. Co. v. Kwaiser, 476 N.W.2d 467 (Mich. App. 1991) (judicial review limited to bad faith, fraud, misconduct, manifest mistake)
- Frans v. Harleysville Lake States Ins. Co., 714 N.W.2d 671 (Mich. App. 2006) (appraisal as common-law arbitration; unilateral revocation not allowed when statute applies)
- Port Huron & N.R. Co. v. Callanan, 34 N.W. 678 (Mich. 1887) (early articulation of review grounds for arbitration awards)
- Salt Lake Tribune Publ. Co. v. Mgmt. Planning, Inc., 390 F.3d 684 (10th Cir. 2004) (federal law governs definition of arbitration under FAA in some circuits)
- Fit Tech, Inc. v. Bally Total Fitness Holding Corp., 374 F.3d 1 (1st Cir. 2004) (federal law defines arbitrability under FAA when applicable)
- Teachworth, 898 F.2d 1058 (5th Cir. 1990) (appraisal not arbitration under FAA in Texas law context)
- Drexel v. Gavin, 331 N.W.2d 418 (Mich. 1982) (Gavin discussed for statutory arbitration vs common-law contexts (cited in opinion))