HARRY RONALD FRANS V HARLEYSVILLE LAKE STATES INS CO
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STATE OF MICHIGAN
COURT OF APPEALS
HARRY RONALD FRANS, d/b/a RAINBOW’S
END,
UNPUBLISHED
January 12, 2006
Plaintiff-Appellee,
v
HARLEYSVILLE LAKE STATES INSURANCE
COMPANY,
No. 255091
Schoolcraft Circuit Court
LC No. 03-003376-GK
Defendant-Appellant.
Before: Murphy, P.J., and Sawyer and Meter, JJ.
MURPHY, J. (dissenting).
Because MCL 500.2833(1)(m) mandates inclusion of the appraisal provision contained in
the fire insurance policy at issue, and because the statutory language of § 2833(1)(m) specifically
directs that “either party may make a written demand that the amount of the loss or the actual
cash value be set by appraisal[,]” the common-law principle of unilateral revocation must
succumb to the overriding legislative authority, as found in § 2833(1)(m), where the commonlaw principle is in conflict with the statute, which dictates that the appraisal process shall proceed
on the demand of one party. I would reverse the trial court’s ruling. Accordingly, I respectfully
dissent.
Questions of law are reviewed de novo on appeal. Westchester Fire Ins Co v Safeco Ins
Co, 203 Mich App 663, 667; 513 NW2d 212 (1994). The Insurance Code of 1956, and
specifically MCL 500.2833(1)(m), provides that Michigan fire insurance policies must contain
the following provision:
That if the insured and insurer fail to agree on the actual cash value or
amount of the loss, either party may make a written demand that the amount of
the loss or the actual cash value be set by appraisal. If either makes a written
demand for appraisal, each party shall select a competent, independent appraiser
and notify the other of the appraiser’s identity within 20 days after receipt of the
written demand. The 2 appraisers shall then select a competent, impartial umpire.
If the 2 appraisers are unable to agree upon an umpire within 15 days, the insured
or insurer may ask a judge of the circuit court for the county in which the loss
occurred or in which the property is located to select an umpire. The appraisers
shall then set the amount of the loss and actual cash value as to each item. If the
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appraisers submit a written report of an agreement to the insurer, the amount
agreed upon shall be the amount of the loss. If the appraisers fail to agree within a
reasonable time, they shall submit their differences to the umpire. Written
agreement signed by any 2 of these 3 shall set the amount of the loss. Each
appraiser shall be paid by the party selecting that appraiser. Other expenses of the
appraisal and the compensation of the umpire shall be paid equally by the insured
and the insurer.
As required by the statute, the fire insurance policy in this case contained the language
regarding the appraisal process. It reads:
D. PROPERTY LOSS CONDITIONS
2. Appraisal
If we and you disagree on the amount of loss, either may make written demand
for an appraisal of the loss. In this event, each party will select a competent and
impartial appraiser. The two appraisers will select an umpire. If they cannot
agree, either may request that the selection be made by a judge of a court having
jurisdiction. The appraisers will state separately the amount of loss. If they fail to
agree, they will submit their differences to the umpire. A decision agreed to by
any two will be binding. Each party will:
a. Pay its chosen appraiser; and
b. Bear the other expenses of the appraisal and umpire equally. If there is an
appraisal, we still retain the right to deny the claim.1
Michigan case law indicates, for the most part, that appraisal clauses such as the one
before us today constitute common-law arbitration agreements. Manausa v St Paul Fire &
Marine Ins Co, 356 Mich 629, 633; 97 NW2d 708 (1959); Emmons v Lake States Ins Co, 193
Mich App 460, 466; 484 NW2d 712 (1992); Auto-Owners Ins Co v Kwaiser, 190 Mich App
482, 486; 476 NW2d 467 (1991); Davis v Nat’l American Ins Co, 78 Mich App 225, 232; 259
NW2d 433 (1977); but see Jacobs v Schmidt, 231 Mich 200, 203-204; 203 NW 845 (1925)
(distinguishing common-law arbitration from appraisal agreements). I note that Emmons,
Kwaiser, and Davis, supra, all discussed appraisals and common-law arbitration mainly in the
1
To the extent that this last sentence can be read as providing defendant insurer the right to
unilaterally reject the appraisal process or reject the amount determined via an appraisal, such an
interpretation cannot withstand scrutiny as it is contrary to MCL 500.2833(1)(m). I view this
language as merely indicating that defendant insurer need not pay a claim in the amount
determined in the appraisal process on grounds other than simply a disagreement with the dollar
figure arrived at in the appraisal, e.g., discovery that a homeowner committed arson. Bad faith,
fraud, misconduct, or manifest mistake can also provide grounds to reject the appraisal and deny
the claim. Emmons v Lake States Ins Co, 193 Mich App 460, 466; 484 NW2d 712 (1992).
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context of analysis relative to the appropriate standard of review applicable to common-law
arbitration as opposed to statutory arbitration. The discussion of common-law arbitration in
Manausa was cursory, with the Court simply noting that the arbitration statutes were not relevant
when addressing an appraisal provision because the provision involved common-law arbitration.
Thus, these cases narrowly addressed application of common-law arbitration principles to
disputes over appraisal provisions, and, importantly, they did not involve issues regarding
whether such principles control where there is statutory language to the contrary.
Pursuant to common-law arbitration principles, either party may unilaterally revoke the
agreement at any time before the announcement of the award, regardless of which party initiated
the arbitration. Hetrick v David A Friedman, DPM, PC, 237 Mich App 264, 268-269; 602
NW2d 603 (1999); Tony Andreski, Inc v Ski Brule, Inc, 190 Mich App 343, 347-348; 475 NW2d
469 (1991). However, neither Hetrick nor Andreski involved appraisal clauses or arbitration
agreements that were mandated by statute, no less a clause or agreement that required the
appraisal process to be carried out on the demand of one party contrary to the statute.2
“[W]hen common-law principles and clear statutory language conflict, the statute
controls.” People v Hock Shop, Inc, 261 Mich App 521, 532; 681 NW2d 669 (2004). Here,
allowing one party to unilaterally revoke the appraisal clause and terminate the appraisal process
would run contrary to the parties’ specific agreement as reflected in the insurance policy3 and it
would directly conflict with MCL 500.2833(1)(m), which requires the policy to include an
appraisal clause that provides for an appraisal process to be conducted on the demand of one
party only. If one party is permitted to reject and forgo the appraisal process despite a demand
to invoke the process by the other party, the language of § 2833(1)(m) would be rendered
nugatory and mere surplusage; this is not permissible. Bageris v Brandon Twp, 264 Mich App
156, 162; 691 NW2d 459 (2004).4
I would reverse the trial court’s ruling and order the parties to proceed with the appraisal
process. Accordingly, I respectfully dissent.
/s/ William B. Murphy
2
I agree with the Hetrick panel’s assessment, stated in dicta, that common-law arbitration
agreements should be enforced on the same terms as any other contract, thereby consigning “the
unilateral revocation rule to legal history’s dustbin.” Hetrick, supra at 277.
3
Our Supreme Court recently reiterated that “[a] fundamental tenet of our jurisprudence is that
unambiguous contracts are not open to judicial construction and must be enforced as written.”
Rory v Continental Ins Co, 473 Mich 457, 468; 703 NW2d 23 (2005)(emphasis in original).
4
My opinion can be viewed as either a conclusion that the appraisal clause is not a common-law
arbitration agreement because unilateral revocation is not permissible in light of § 2833(1)(m), or
a conclusion that the appraisal clause constitutes a common-law arbitration agreement, but one
which is not subject to the sole principle allowing for unilateral revocation. In the context of this
dissent, I find it unnecessary to choose one over the other as the result is the same.
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