Insurance – Homeowners – Electrical Wiring Damage – ‘Amount Of Loss’

Plaintiff homeowners say it will cost $439,000 to repair covered electrical wiring damage from a power surge in their home, but their homeowners’ carrier says they can do the repairs for $60,000; construing the phrase “amount of loss” as a matter of first impression, a Fairfax Circuit Court says the carrier must participate in an appraisal process under the policy.

The homeowners, the Coates, claim that repairing the damage to the wiring necessitates removal and replacement of the undamaged walls and trim surrounding the wiring, at an approximate cost of $439,000. The carrier, Erie, claims the repairs can be made without removing the undamaged walls and trim by feeding new wiring behind the existing structure. Erie estimates this will cost about $60,000.

The insurance policy includes an appraisal clause permitting a dispute as to “amount of loss” to be submitted to an appraisal process upon demand of either party. But the carrier says this is a dispute over causation not subject to appraisal. The mandatory language of the appraisal clause is recited in Va. Code § 38.2-2105.

The phrase “amount of loss” is not defined in the policy. It is not defined in the Virginia Code, nor has its meaning been construed by a Virginia court. The phrase “amount of loss,” however, has been construed by foreign jurisdictions which have adopted appraisal statues with language nearly identical to Code § 38.2-2105. While this court is not bound by precedent on this question, it will look to these decisions for guidance in reaching its conclusion.

This court finds the reasoning of State Farm Lloyds v. Johnson, 290 S.W. 3d 886 (Tex, 2009), and Fla. Farm Bureau Cas. Ins. Co. v. Sheaffer, 687 So.2d 1331 (Ct. App. Fla. 1997), persuasive. I find the question of what must be replaced in order to adequately repair the damage caused by the admittedly covered event in this case is not a question of coverage. Rather, it is a question of the extent of the “amount of loss,” and is therefore appropriate for appraisal.

Plaintiffs’ motion for summary judgment is granted and defendants’ summary judgment motion is denied.

Coates v. Erie Insurance Exchange (McWeeny, J.) No. CL 2009-1456, Nov. 4, 2009; Fairfax Cir.Ct.; C. Thomas Brown, Stephen A. Horvath for the parties. VLW 009-8-251, 5 pp.