Kellogg v. Middlesex Mutual Assurance Co.
165 A.3d 1228
| Conn. | 2017Background
- Sally Kellogg owned a historic Norwalk home insured by Middlesex Mutual under a “restorationist” policy that covers full restoration/replacement cost without permanent deduction for depreciation but pays in two steps: actual cash value (ACV) first, then supplemental replacement cost after repairs are completed.
- A tree fell on Kellogg’s home; the parties’ appraisers disagreed on repair costs (plaintiff’s appraiser ~$1.6M; defendant’s appraiser ~$476k), so the policy’s appraisal (unrestricted arbitration) was invoked.
- Each party appointed an appraiser and they selected an umpire; the umpire inspected the property, considered extensive submissions and hearings, and set an award between the two estimates. The defendant’s appraiser accepted the umpire’s award.
- The panel awarded replacement/restoration cost of $578,587.64 for the building, depreciated to ACV of $460,170.16 with depreciation withheld until repairs; personal property award was later added.
- Kellogg filed to vacate under Conn. Gen. Stat. §52-418. The trial court held an 8-day trial, denied the defendant’s motion to dismiss, vacated the appraisal award under §52-418(a)(3) (prejudice/refusal to hear evidence) and (a)(4) (manifest disregard of law for applying depreciation), and remanded for new arbitration.
- The Supreme Court reversed, holding the trial court improperly substituted its judgment for the unrestricted appraisal panel and misapplied the statutory vacatur standards.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §52-418(a)(3) was satisfied because the panel prejudiced plaintiff’s rights by under-awarding | Kellogg said the panel refused to award monies for multiple claimed items, prejudicing her substantial monetary rights | Middlesex said there was no procedural misconduct; panel heard evidence and reached a substantive valuation | Reversed: mere disagreement with award does not satisfy (a)(3); no evidence panel refused to hear evidence or committed procedural error |
| Whether panel manifestly disregarded law (§52-418(a)(4)) by applying depreciation under a no-depreciation policy | Kellogg argued Northrop and policy language prohibit withholding depreciation when replacement estimates exceed ACV | Middlesex argued the policy expressly allows withholding depreciation until actual repairs are completed; Northrop applies only after insured incurs a valid debt for repairs | Reversed: no manifest disregard—policy language permitted withholding depreciation until repair and Northrop was misread; deference to panel required |
| Proper scope of judicial review for unrestricted appraisal awards | Kellogg relied on trial-court factfinding to show errors in valuation and law | Middlesex contended courts cannot reweigh evidence or correct legal errors in unrestricted submissions; vacatur limited to narrow statutory grounds | Court held that unrestricted arbitration awards are final absent narrow defects; trial court improperly engaged in de novo review |
| Applicability of Northrop v. Allstate to estimates vs. incurred-repair debt | Kellogg treated an estimate as sufficient to trigger replacement-cost payment without withholding depreciation | Middlesex maintained Northrop limits withholding only after insured incurs actual repair-related debt; estimates alone do not prevent withholding | Held: Northrop does not apply to mere estimates; withholding until insured incurs valid repair debt was permissible |
Key Cases Cited
- Industrial Risk Insurers v. Hartford Steam Boiler Inspection & Ins. Co., 273 Conn. 86 (describing unrestricted arbitration)
- Comprehensive Orthopaedics & Musculoskeletal Care, LLC v. Axtmayer, 293 Conn. 748 (unrestricted arbitration awards not subject to de novo review)
- Bridgeport v. Kasper Group, Inc., 278 Conn. 466 (scope of vacatur review)
- Northrop v. Allstate Ins. Co., 247 Conn. 242 (insurer cannot withhold depreciation after insured incurs valid repair debt)
- Norwalk Police Union, Local 1727, Council 15, AFSCME, AFL-CIO v. Norwalk, 324 Conn. 618 (elements for manifest disregard of law)
- Harty v. Cantor Fitzgerald & Co., 275 Conn. 72 (courts should not review evidence or correct legal errors in unrestricted submissions)