2019 CO 65
Colo.2019Background
- Dakota Station II Condominium Association filed two weather-damage claims with Owners Insurance; the parties disputed value and invoked the policy appraisal clause.
- The policy required each party to "select a competent and impartial appraiser," who would submit values; disagreements go to an umpire and any two-agreeing decision is binding.
- Each side selected an appraiser; their estimates conflicted across six cost categories; the court appointed an umpire who adopted some estimates from each appraiser; Dakota’s appraiser signed the award and Dakota was paid.
- Months later Owners moved to vacate the appraisal award, alleging Dakota’s appraiser was partial and failed to disclose a contingent fee cap (5% of award) that created a financial incentive.
- Trial court denied vacatur; a division of the court of appeals affirmed; Colorado Supreme Court granted certiorari to resolve the scope of the policy’s "impartial" requirement and whether the fee cap created legal partiality.
Issues
| Issue | Plaintiff's Argument (Owners) | Defendant's Argument (Dakota) | Held |
|---|---|---|---|
| Whether "impartial" appraisers must be as impartial as arbitrators | Appraisers must meet arbitrator-level impartiality; Providence requires same duty | Appraisers are selected and paid by parties and need not meet arbitrator standard | Court: Providence limited to notice issue; policy language controls; "impartial" requires unbiased, disinterested, unswayed by personal interest (reversed on this point) |
| Whether an appraiser may act as an advocate for the selecting party | "Impartial" forbids advocacy for a party | Policy contemplates party-selected appraisers who advocate to the umpire | Court: Advocacy and partiality conflict with plain meaning of "impartial"; appraisers may not advocate (reversed on appeals court) |
| Whether a contingent-cap fee agreement (5% of award) renders appraiser partial as a matter of law | Fee cap creates a financial interest that makes appraiser legally partial | Cap was not in effect, parties did not treat it as applicable; award fell well below cap | Court: On these facts the fee cap did not render appraiser partial as a matter of law (affirmed on this point) |
| Appropriate remedy and remand instructions | Vacatur warranted if impartiality standard unmet | Remand to evaluate appraiser conduct under correct impartiality standard | Court remanded for further proceedings to determine whether Dakota’s appraiser met the impartiality standard established by the opinion |
Key Cases Cited
- Providence Wash. Ins. Co. v. Gulinson, 215 P. 154 (Colo. 1923) (discussed comparison between appraisers and arbitrators; Court treats relevant language as dicta and confines holding to notice defect)
- Union Ins. Co. v. Houtz, 883 P.2d 1057 (Colo. 1994) (cited for contra proferentem principle in policy interpretation)
- Cent. Life Ins. Co. v. Aetna Cas. & Sur. Co., 466 N.W.2d 257 (Iowa 1991) (court of appeals relied on this decision allowing appraisers to act fairly without being disqualified as advocates)
- Palizzi v. City of Brighton, 228 P.3d 957 (Colo. 2010) (cited for standard of reviewing legal questions de novo)