Product Liability

Product Liability: An Update from the PLC

And They’re Off! Snap Removal: “A Race to the Courthouse”

By Christopher L. Jackson, Kyle R. Bunnell, and Madison C. Stewart 

Introduction: At the Starting Gate.  

The excitement of a horse race builds as fans watch horses and their jockeys enter the gate, eagerly awaiting the famed call – “And they’re off!”  Just like a jockey poised at the starting gate of a horse race, a good defense attorney knows that as soon as a plaintiff files a complaint, the race is on to best position the case before the first turn.  One of the greatest practical challenges corporate defendants face in early litigation is the prospect of a hostile forum.  Many plaintiffs’ attorneys recognize the value of bringing their lawsuit in state court, a forum often acknowledged as more hostile to large corporations and manufacturers.  As a result, defense attorneys must assess the prospect of removal to federal court very early in the life of the case.  

Removal is proper pursuant to 28 U.S.C. § 1441 under a limited number of circumstances.  A defendant may remove to federal court if: (1) the claim against it is a matter of federal question under 28 U.S.C. § 1331; or (2) under 28 U.S.C. § 1332, if the amount in controversy is greater than $75,000 and there is complete diversity between the plaintiff and defendants.  As many attorneys recall from 1L Civil Procedure nightmares, 28 U.S.C. § 1441 also limits a defendant’s ability to remove an action from state court to federal court even when the requirements of diversity jurisdiction are met.    
What if a plaintiff names another defendant that resides in the forum state?  28 U.S.C. §1446(b)(2), known as the forum defendant rule, limits removal as follows:  

[a] civil action otherwise removable solely on the basis of the jurisdiction under section 1332(a) of this title may not be removed if any of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought.  

So, if a named defendant resides in the forum, the case is not removable, right?  Based on 28 U.S.C. § 1332(d)(4)(A)(i)(II), which contains the caveat that a federal district court may not exercise jurisdiction where at least one defendant is a citizen of the state in which the action was filed, that would appear to be the case.  But, not so fast….    
Focusing on key language included in 28 U.S.C. § 1441(b)(2) – “properly joined and served” – defendants can remove a diversity case to federal court, despite the presence of a forum defendant, under certain circumstances.   Using a technique affectionately coined “snap removal,” defendants can still remove a case to federal court with a forum defendant based on diversity grounds – but only if they act quickly. 

However, defense attorneys must be mindful of the applicable case law for the federal circuit to which they seek to remove the case.  28 U.S.C. §1446(b)(2)(A) has been subject to wide interpretation across different jurisdictions.  While some circuits permit snap removal under the plain reading of 28 U.S.C. § 1441(b)(2)’s “properly joined and served” language, others disapprove of snap removal as gamesmanship.   

Off to the Races: When Should You Consider Removing to Federal Court?  

A defense attorney must quickly evaluate whether snap removal is possible, and, if so, advantageous. But, first things first – is it even possible to remove?  This consideration requires determining which defendants are forum defendants and whether those defendants have been “properly joined and served.”  If a forum defendant has been served, the evaluation halts, unless that defendant was improperly joined.    

Further, a defense attorney must remember that snap removal does not defeat the core diversity requirements of 28 U.S.C. § 1332.  In other words, snap removal does not get one around the complete diversity requirement, only the forum defendant rule.  If there is a lack of complete diversity, an attempted snap removal will be remanded, as was the case in Woods v. Ross Dress of Less, Inc., 833 F. App’x 754 (10th Cir. 2021).  The growing canon of snap removal case law shows that its application is limited to 28 U.S.C. § 1441’s forum defendant rule and cannot circumvent the requirements of diversity jurisdiction.  As a result, it appears that snap removal will only be effective if the plaintiff is not a resident of the forum in which she filed an action – if she is, there is a lack of complete diversity between the plaintiff and the forum defendant and snap removal does not help.  

Of course, if a forum defendant has not yet been served, a defense attorney should evaluate whether removal would be advantageous to her client.  Many state courts are viewed as plaintiff-friendly forums, which can be hostile toward outside defendants.  Federal court affords other advantages to the defendant, such as lifetime-appointed judges, more rigorous enforcement of scheduling deadlines, more robust limitations on fact discovery, an improved summary judgment standard, stronger application of Daubert, and the unanimous jury verdict requirement.  However, there are instances where a defendant might choose to remain in state court, such as if the federal district would include more liberal areas than the state court.  An early assessment of whether snap removal is possible and advantageous based on the forum is the initial step.    

Rounding the Turn: A Wrinkle in the Game Play.   

It is well-established that defendants can remove a case to federal court if all defendants and all plaintiffs are citizens of different states (and the amount in controversy requirement is met).  28 U.S.C. § 1332(a).  However, as laid out above, under the forum defendant rule, a civil action that is “otherwise removable solely on the basis of [diversity of citizenship] may not be removed if any of the parties in interest properly joined and served as a defendant is a citizen of the State in which such action is brought.”  28 U.S.C. § 1441(b)(2) (emphasis added).  But what does “properly joined and served” mean?  Is it as simple, as defense attorneys contend, that a defendant must receive service of process?  Or does that produce an “absurd and bizarre result?”  Encompass Ins., Inc. v. Stone Mansion Rest., Inc., 902 F.3d 147, 152 (3d Cir. 2018).    

Snap removal was first mentioned in passing by a federal appellate court in 2001 in McCall v. Scott, 239 F.3d 808, 813 n.2 (6th Cir. 2001), spurring a flurry of snap removals across the country.  As defendants nationwide raced to the courthouse, federal courts were faced with the dilemma of whether snap removal is a viable strategy or merely a questionable ploy to avoid unfavorable forums.  The answer, of course, is a lawyer’s favorite rejoinder – “it depends.”  

Federal circuit courts are divided when it comes to permitting snap removal. The Second and Fifth Circuits both approve snap removal under the plain reading of 28 U.S.C. § 1441(b)(2).  See, e.g., Texas Brine Co. v. Am. Arbitration Ass’n, 955 F.3d 482 (5th Cir. 2020); Gibbons v. Bristol-Myers Squibb Co., 919 F.3d 699 (2d Cir. 2019).  For example, in Texas Brine, Texas Brine, a Texas plaintiff, sued the American Arbitration Association (the “AAA”) and two of its arbitrators, Anthony DiLeo and Charles Minyard, both residents of Louisiana, in Louisiana state court to vacate an arbitration award granted against it by the AAA.  However, before Texas Brine could serve DiLeo or Minyard, the AAA removed the case to the United States District Court for the Eastern District of Louisiana.  Based on the plain reading of the “properly joined and served” language contained in 28 U.S.C. § 1441(b)(2), the Fifth Circuit held that the case was “otherwise removable” at the time the AAA filed its notice of removal because neither DiLeo nor Minyard had been served.  Id. at 486.  In other words, the forum defendant rule did not prevent a non-forum defendant from removing a case to federal court if the case was removed before the forum defendant was served.  

However, district courts in other jurisdictions have held that courts cannot ignore a named, non-diverse defendant simply because it has not been served at the time of removal.  In 2020, the United States District Court for the District of New Jersey held that when applying the forum defendant rule, the “assertion that only the citizenship of defendants who have been served is relevant to the diversity jurisdiction analysis” is incorrect.  Mecca v. Ecosphere, LLC, No. 20-cv-12769, 2020 U.S. Dist. LEXIS 210076, at *10 (D.N.J. Nov. 10, 2020).  In other words, all of the named defendants, whether properly served or not, must be taken into account when determining diversity for removal purposes.  A year later, in 2021, the New Jersey federal district court held in Victorin v. LaSalle that “diversity is determined for removal purposes based on the citizenship of defendants named in the complaint; a court cannot ignore a defendant simply because that defendant was not yet served.”  2021 U.S. Dist. LEXIS 31196, at *12 (D.N.J. Feb. 18, 2021).  Likewise, the Eastern District of Pennsylvania remanded an action removed from state court when complete diversity between the plaintiff and defendant did not exist on the face of the complaint, notwithstanding the plaintiff’s failure to serve the non-diverse forum defendant before removal.  Janaski v. Dettore, No. 15-0072 (JP), 2015 U.S. Dist. LEXIS 46594, at *1-2 (E.D. Pa. Apr. 9, 2015).    

Many circuits have not yet officially weighed in on the issue of snap removal.  See, e.g., HSBC Bank, USA, N.A. v. Fid. Nat’l Title Grp., Inc., 2022 U.S. Dist. LEXIS 54707 (D. Nev. Mar. 25, 2022).  The Sixth Circuit, for example, has not yet offered its interpretation of 28 U.S.C. § 1441(b) and snap removal beyond a single sentence footnote in McCall.  Nonetheless, in 2018, the Northern District of Ohio rejected the literal interpretation of § 1441(b)’s “properly joined and served” language, opining that this interpretation encourages an end run around the forum defendant rule.  El Hassan v. URS Midwest, Inc., No. 5:18-cv-1227, 2018 U.S. Dist. LEXIS 197832, at *3 (N.D. Ohio Nov. 20, 2018).   In January 2022, the Northern District of Ohio revisited its rejection of snap removal, reasoning that interpreting the forum defendant rule to permit snap removal encourages defendants to engage in impermissible gamesmanship.  Gordon v. Goodyear Tire & Rubber Co., 2022 U.S. Dist. LEXIS 673, at *16 (N.D. Ohio Jan. 3, 2022).  Likewise, the Seventh Circuit continues to hold out on delivering an explicit ruling regarding snap removal; however, the Northern District of Illinois has condemned snap removal as a “loophole [that] essentially writes the forum-defendant rule out of existence for any defendants with the resources and wherewithal to monitor exhaustively local court filings.”  Norwegian Air Shuttle ASA v. Boeing Co., 530 F. Supp. 3d 764, 770 (N.D. Ill. Mar. 30, 2021).    

Snap removal law is still developing.  When practicing in circuits where the law is less than clear on snap removal’s viability, a defense attorney should always brush up on the recent case law decided by the federal district court to which she seeks removal.   

A final consideration is who can effectuate snap removal.  In jurisdictions permitting snap removal, it is common for a non-resident defendant to file for removal.  This aligns with the strategy behind snap removal – avoiding favoritism for in-state litigants.  However, the Third Circuit has permitted a not-yet-served forum defendant to effectuate removal to federal court.  Encompass Ins., 902 F.3d at 147 (allowing a Pennsylvania defendant sued in Allegheny County, Pennsylvania, to remove to federal court).  It is more likely than not that other courts permitting snap removal will follow suit.  See Latex Constr. Co. v. Nexus Gas Transmission, LLC, 2020 U.S. Dist. LEXIS 122244 (S.D. Tex. July 13, 2020) (permitting snap removal by a not-yet-served forum defendant who was the sole defendant named in the case).  No matter which defendant seeks removal, it is important to be aware of any wrinkles in play that may arise, especially when forum defendants are named in a complaint or there is not complete diversity.   

The Home Stretch: Steps in a Successful Snap Removal.  

28 U.S.C. § 1446(b)(2)(A) provides procedural requirements for effectuating snap removal: (1) removal must be joined by all defendants “who have been properly joined and served”; and (2) “[e]ach defendant shall have 30 days after receipt by or service on that defendant of the initial pleading or summons … to file the notice of removal[.]”  
After determining if snap removal is viable and benefits her client, a defense attorney should move quickly to accomplish three things before a forum defendant is served.  The timing of these three steps is key; if even one step is incomplete before the forum defendant is served, snap removal will likely fail.  
First, the removing defendant must file a notice of removal in federal court.  Second, the removing defendant must promptly file a notice of removal in State Court.  Third, the removing defendant must provide notice to all named defendants.  28 U.S.C. § 1446(d).  All defendants who have been properly joined and served at the time the notice of removal is filed must consent to the removal.    

Practical Tips and Tricks.  

Defense attorneys should have a system in place for anticipating and executing a successful snap removal.  Electronic docketing facilitates snap removal by allowing constant monitoring of lawsuits filed against clients.  A good rule of practice is to review state court dockets at least once a day to check for any new complaints filed against one’s corporate clients.  Early detection of a lawsuit may make all the difference in removing to federal court.  This is especially true with snap removal, when every second counts.    

In certain types of litigation, the same actors are frequently sued in a single action.  For this reason, some defense attorneys compile lists of the most commonly served defendants and their counsel so that they can quickly check with a forum defendant to see if they have been served.  Having such a list decreases the amount of time needed to identify and contact the various defendants identified in a new complaint.  It is advisable to contact each named forum defendant to confirm that they have not been served.  Defendants should also be on alert for a plaintiff’s counsel who requests a waiver of service, which can sever the possibility of snap removal. 


Despite courts’ inconsistent guidance, snap removal remains a viable option, depending on the case law in the district and circuit courts to which a defendant seeks removal.  However, time is of the essence.  Developing a cohesive strategy early, after evaluating the merits of removal, can lead to a successful run out of the starting gate and give your client a better position down the track.   

Christopher JacksonChristopher L. Jackson is a partner in the Lexington office of Dinsmore & Shohl LLP. Chris’s passion for finding creative solutions to clients’ needs makes him a valued member of Dinsmore. He focuses his practice on defending clients in product liability litigation in a wide variety of industries, including medical devices, recreational products, industrial equipment, power tool equipment, and automotive products. He is the Vice Chair of the DRI Product Liability Recreational Products Specialized Litigation Group.  

Kyle BunnellKyle R. Bunnell is an associate in Dinsmore & Shohl LLP’s Lexington office.  He received his J.D. from the University of Kentucky J. David Rosenberg College of Law.  Bunnell focuses his practice on commercial and tort litigation, equine law, and appellate advocacy.  For his work, Bunnell has been designated as a Super Lawyers - Rising Star in Business Litigation for 2022. Bunnell was twice elected as the Kentucky Bar Association Young Lawyers Division Representative for the Fifth District. He has co-authored several articles in the area of product liability in DRI’s “For the Defense” and “Strictly Speaking” publications.  Additionally, he is a member of the Fayette County Bar Association, the Central Kentucky American Inn of Court, and serves as Treasurer of the University of Kentucky College of Law Alumni Association, and as a board member for non-profits such as the Children’s Law Center and Seedleaf Inc.    

Madison StewartMadison C. Stewart is an associate in Dinsmore & Shohl LLP’s Lexington office. She received her bachelor’s degree, summa cum laude, from the University of Kentucky and her J.D. from the University of Kentucky J. David Rosenberg College of Law.  Stewart focuses her practice on tort and product liability litigation.  She is a member of the Fayette County Bar Association and the Fayette County Bar Association Women Lawyers’ Association and serves as a board member for OperaLex, a non-profit. 

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Employee and Labor

Employment and Labor Law: The Job Description

Court Weighs Question of Whether BIPA Covers System Used in Health Care Setting

By Joe Gagliardo 

In Mosby v. Ingalls Memorial Hospital, 2022 IL App (1st) 200822 (Feb. 25, 2022), two plaintiffs who were involved with patient care brought separate class actions on behalf of them- selves and others, alleging that their medical employers required them to scan their fingerprints and did not com- ply with the Biometric Information Privacy Act (BIPA), 740 ILCS 14/1, et seq. The fingerprints were used, among other things, to have access to medication for patients, as well as the confidential medical information of patients.  

After significant motion practice in each case before the Circuit Court, the following question was ultimately certified for interlocutory appeal in both cases:  
“Does finger-scan information collected by a health care provider from its employees fall within the Biometric Information Privacy Act’s exclusion for ‘information collected, used, or stored for health care treatment, payment or operations under the federal Health Insurance Portability and Accountability Act of 1996,’ 740 ILCS 14/10, when the employee’s finger-scan information is used for purposes related to ‘health care,’ ‘treatment,’ ‘payment, ‘and/or ‘operations’ as those terms are defined by the HIPAA statute and regulations?”  

The parties do not dispute that the fingerprint scans of the plaintiffs and other similarly situated hospital employees is a biometric identifier and, when stored, this fingerprint constitutes biometric information as out- lined in the act.  

Section 10 of the act pro- vides exclusions to the protections of the act; specifically at issue is the following language:  
“Biometric identifiers do not include information captured from a patient in a health care setting or information collected, used, or stored for health care treatment, payment, or operations under the federal Health Insurance Portability and Accountability Act of 1996.”  

On appeal, the defendants maintain that the medication dispensing system that is at issue in this case is permitted to collect information for “health care treatment, payment, or operations” as defined by HIPAA. 45 C.F.R. Sec. 164.501(2) (2018).   

This includes the fingerprint scan of its employees who facilitate the dispensing and administration of medications to patients. They further contend: (1) that the collection, use, and storage of health care workers’ bio- metric information is  for “health care” and “treatment” that is provided to its patients and those terms are defined by HIPAA; (2) that this medication dispensing system also acts to provide an audit trail, which includes diversion, fraud, and abuse detection; (3) that this system additionally aids in patient safety, quality of care, and accurate billing; and (4) that the biometric information collected through the medication dispensing system is also used for “health care operations” and “payment.”  
The plaintiffs argued that BIPA only excludes patient biometric data from its protections because patient data is already protected by HIPAA. The plaintiffs further argued that acceptance of the defendants’ arguments would in effect leave thou- sands of hospital workers unprotected from the risks that the act was designed to protect against.  

The appellate court, in rejecting the defendants’ arguments, stated:  

“We find that the language of the statute is clear and simple…. What is excluded from the protections of section 10 are (1) information from the patient in a health care set- ting and (2) information that is already protected ‘under the federal Health Insurance Portability and Accountability Act of 1996.’ 740 ILCS 14/10  
(West 2018). Consistent with the plain language of the Act, we find that the legislature did not exclude employee biometric information from its protections, and we answer the certified question in the negative.”  Based on its ruling, the cases were remanded for further proceedings consistent with the appellate court’s opinion. 

Joseph M. Gagliardo

Joseph M. Gagliardo is a lawyer with Laner, Muchin Ltd. He has counseled and represented private and governmental employers in a broad range of employment matters for more than 30 years.   

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Cybersecurity and Data Privacy: Data and Security Dispatch

Jackware: A Primer on this Not-So-New Type of Malware

By Elie Laskin 

Most people have heard the term "ransomware" thrown around. Maybe some of your clients have been the victims of a ransomware attack. Individuals, businesses, hospitals, and entire counties have experienced these attacks. For example, the Russian-based Conti gang's ransomware attack on the Costa Rican government's systems for collecting taxes, paying pensions, overseeing exports, and paying government employees. See Joseph Marks, "Costa Rica shows the damage ransomware can do to a country", The Washington Post (10 May 2022), online: Now "jackware" is the not-so-new variation on this theme. Jackware itself is not new. However, the term has gained traction in the cyber community over the last two-three years, so it's worth being familiar with it. 

What is jackware?

Jackware is malicious software that hijacks control of the operational functions of a computer device. 

How is jackware different from ransomware?

Both ransomware and jackware are in play through an individual(s) hacker remotely taking control of a computer. With ransomware, however, the hacker is typically targeting information. They may prevent you from sending or receiving information and / or may be copying your information in order to sell it. In contrast, jackware targets the operational functions of the computer. 

The following examples illustrate the difference:

Ransomware attack: You work at a company that sells widgets to customers. You log on to your work computer and a message pops up advising you that access to your company's servers are blocked and will remain so unless you transfer cryptocurrency to a certain crypto wallet. You are also told that all of your company's information, including your clients' information, will be publicized unless you pay the ransom. 

Jackware attack: You log on to your work computer and you notice that the software responsible for placing widget orders to customers is already running, even though you haven't opened it. Rather than seeing the names of your customers though, you see that all your widgets are being shipped to an address that you cannot trace. You may get a message asking you for a crypto payment to stop the widget shipments. Or you may not. 

Why should you be concerned about jackware?

The goal of a typical ransomware attack is payment of a ransom in exchange for your data. Jackware may be more malicious because its end goal may not simply be the payment of ransom.  A jackware attack can affect anything with embedded software. These days almost all of our widgets have some type of software that support their operations.  Consider self-driving cars, cellphones, thermostats, and pacemakers. 

Jackware attacks aren't new:

In 2015, the power grid of Ukraine was hacked by a Russian group known as Sandworm, causing unscheduled power outages affecting approximately 225,000 customers. In 2016, hackers trying to profit off Minecraft (a popular video game) left a large part of the United States' East Coast without internet when they infected computers with a malware known as a "botnet". Cybersecurity & Infrastructure Security Agency, ICS Alert (IR-ALERT-H-16-056-01) (released 25 February 2016, revised 20 July 2021), online: In 2020, the US Department of Homeland Security warned that computer hackers could easily gain access to implanted cardiac defibrillators and could interfere with, generate, modify, or intercept a device's radio frequency communications. Cybersecurity & Infrastructure Security Agency, ICS Medical Advisory (ICSMA-19-080-01) (8 April 2021), update to ICSMA-19-080-01 Medtronic Conexus Radio Frequency Telemetry Protocol (Update B) (4 June 2020), online: 

Earlier this year, a 19-year-old from Germany was performing a security audit for a French company when he discovered a software program on the company’s network that exposed all the data about the chief technology officer’s Tesla. He also discovered that he could push commands to Tesla vehicles whose owners were using the program, enabling him to hijack some functions on those cars, including opening and closing the doors, turning up the music and disabling security features. Jordan Robertson and Monica Raymunt, "Teen Cyber Prodigy Stumbled Onto Flaw Letting Him Hijack Teslas", Bloomberg (13 January 2022), online:

The term "jackware" for these kinds of malware attacks is gaining traction. And, it is worthwhile learning about this threat because ultimately no industry is immune. As more aspects of our lives and our businesses are facilitated by computers and their software, the potential for jackware attacks increases. 

What are some implications of jackware? 

As the prevalence of jackware attacks increases, so too does the potential for loss. With a ransomware attack, the primary loss is generally monetary: the ransom paid and / or the cost of replacing equipment. With a jackware attack, the losses can be much greater. If a hacker takes control of a computer system and causes property damage or injury, there may be potential liability concerns. Practically, this could mean jackware attacks will have an impact on a wider range of insurance policies than ransomware attacks. Policyholders are well advised to review their coverage carefully in light of emerging risks posed by jackware. Companies should also be ensuring their employees are trained in cybersecurity best practice, which includes understanding how to secure connected devices.

Elie LaskinElie Laskin is a lawyer in the litigation group of Gowling WLG (Canada) LLP’s Toronto office. Elie practices commercial litigation, with a focus on class actions (in particular, data breach class action defence), contract disputes, and municipal liability. Elie has acted as counsel before the Ontario Superior Court of Justice, American Arbitration Association, and Ontario Human Rights Tribunal. Elie graduated from Osgoode Hall Law School. Prior to law school, Elie graduated from Columbia University with an MSc in bioethics and McGill University with a BA in psychology.

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Insurance Law

Insurance Law: Covered Events

Coverage Issues in Intentional and Negligent Conduct Cases

By Justin Wine, Ashley Galmore and Joseph P. DiPino 

Edited by Albert K. Alikin 

Mr. Blackhat is in a rush to get home after a long workday.  As he drives down the road, Mr. Whitehat changes lanes in front of Mr. Blackhat.  They both stop at the next intersection’s red light.  Mr. Blackhat becomes upset and exits his car.  He walks up to the driver’s side window of Mr. Whitehat.  The two exchange words and Mr. Blackhat punches Mr. Whitehat in the face and drives off.    

Mr. Whitehat calls the police and reports the incident.  He also provides the police with Mr. Blackhat’s license plate number.  The police locate Mr. Blackhat and charge him with battery.  While the battery charges pending, Mr. Whitehat calls his lawyer.  Mr. Whitehat’s lawyer files suit against Mr. Blackhat.  Count I alleges battery.  Count II is for ordinary negligence.  Mr. Blackhat’s criminal defense lawyer sends the lawsuit into his auto insurer.    

Although the facts of the case sound simple, the situation for the insured, assigned defense counsel and the insurer is a road littered with potential landmines.  This paper addresses the landmines and hopefully gives some guidance to avoid them.    

Mr. Blackhat’s Auto Policy 

Mr. Blackhat had a policy of auto insurance with Green Insurance.  The policy covers Mr. Blackhat up to $100,000.00 for lawsuits arising out of an accident or an incident involving the operation, maintenance, or use of his car.  The policy obliges Green Insurance to provide him with a civil defense lawyer.  So, what should Green Insurance do with the lawsuit.    
In Illinois, the courts follow the four-corner rule.  In Thornton v. Paul, 74 Ill. 2d 135 (1978) the Illinois Supreme Court held that the four corners of the complaint determine an insurer's duty to defend.  The court reasoned that as a general rule, the insurer's duty to defend is to determine solely from the complaint’s allegations.  If the complaint's allegations contain facts within or potentially within the policy, the insurer's obligation to defend is triggered even if the allegations are groundless, false, or fraudulent.  Thornton, 74 Ill. 2d at 144-146.    

In our case, Mr. Whitehat's complaint has triggered Green Insurance duty to defend Mr. Blackhat.  Count II alleges Mr. Blackhat negligently swung his hands at Mr. Whitehat.  But what about Count I?  Count I alleges that Mr. Blackhat acted intentionally.  A plain and ordinary reading of the word "accident" fails to encompass his intentional conduct.  The solution is straight forward.  Green Insurance should send Mr. Blackhat a reservation of rights letter advising him that although Green will assign defense counsel, it is contesting the applicability of the coverage to count I in that the intentional conduct does not constitute an accident.    

Green’s Retained Defense Counsel

Green sends the Whitehat v. Blackhat lawsuit to one of its longstanding defense firms.  All of the materials are included together with the reservation of rights letter.  Green Insurance instructs counsel to defend Mr. Blackhat.  However, defense counsel has a greater obligation than to simply prepare responsive pleadings and introduce the firm to Mr. Blackhat.    

Defense counsel has a potential conflict of interest based on the complaint.  Green is paying counsel to defend Blackhat.  Defense counsel’s client is Blackhat.  Green's interest for Whitehat is to prevail on Count I which takes the matter out of the policy between Green and Blackhat.  Blackhat's interest is for Whitehat to prevail on Count II keeping the claim within his policy.    

Allstate Insurance Company v. Carioto, 194 Ill. App. 3d 767 (1990) lays out guidance for defense counsel.  In that case, defense counsel wrote to the insured disclosing that although Allstate engaged the firm, would pay its fees, and that a finding of intent would be in Allstate’s interest, counsel also advised that the defendant could hire his own counsel at Allstate’s expense.  The insured agreed to counsel provided by Allstate and their intention to defend him.  However, counsel omitted the long relationship between counsel’s firm and Allstate.  While the tort case pended, Allstate filed a declaratory judgment action contesting the policy’s applicability.   

 The appellate court criticized counsel for not disclosing to the insured that Allstate regularly used the firm.  Further, the court noted that counsel prepared and presented the insured for deposition in the tort case, failed to ask the court to stay the declaratory judgment action, and never retained an expert to assess whether the insured’s intoxication may have impaired his ability to form intent.  The court was also critical of the insured’s deposition being used in the declaratory judgment action to support Allstate’s position.  Carioto, 194 Ill. App. 3d at 777.  

The Carioto admonishments are instructive.  Unlike an ordinary case where counsel sends a letter to the insured with a follow up phone call and keeps in touch, in a matter with a potential conflict such as this, it is important to go further.  The topics listed by the decision should be addressed.  No one wants his or her firm taken to task in an appellate court decision.    

Green Insurance V. Blackhat

Green has sent its reservation of rights letter to Blackhat.  Blackhat has either consented to assigned counsel defending him or Green has agreed to pay defense counsel chosen by Blackhat.  Can Green prosecute a declaratory judgment action while the case of Whitehat v. Blackhat pends or must Green wait until Whitehat v. Blackhat has gone to verdict?  The answer is not clear, but the lack of clarity can be navigated.    

Green’s inclination, like any insurer, is to conclude the file.  To that end, Green would likely assign the matter to other counsel directing them to file a declaratory judgment action seeking a finding that the incident between Blackhat and Whitehat is not a covered event under the policy.  Depending on the evidence, Green’s declaratory may face some hurdles.    

Maryland Casualty Company v. Peppers, 64 Ill. 2d 187 (1976) illustrates the problem.  In that case, Maryland’s insured was at one of his buildings and heard a noise as if someone were trying to break in.  Mr. Peppers saw Mr. Mims fleeing and fired a shot gun wounding Mr. Mims.  Mr. Mims filed suit for his injury against Mr. Peppers.  Mr. Peppers turned the suit into Maryland Casualty.  Maryland filed a declaratory judgment suit seeking a finding that the policy failed to covered Mr. Peppers.  The complaint in the underlying action alleged intentional firing, negligent firing, and willful and wanton firing of Mr. Peppers’ shotgun at Mr. Mims.   

 While Mims’s tort case pended, Maryland’s declaratory judgment action moved ahead.  The trial judge found that Peppers’ shot Mims was intentionally, and that the policy failed to apply.  The appellate court affirmed.  The Illinois Supreme Court reversed.  The court held that the trial judge’s finding of intent on the part of Mr. Peppers was premature.  The finding was premature because the nature of Pepper’s conduct was an ultimate issue in the Mims’ case.  Accordingly, the court returned the case to the trial court pending resolution of Mims’ injury case.  Peppers, 64 Ill. 2d 198.  Parenthetically, the discussion of the court’s discussion foreshadowed the ethical predicament of assigned counsel set out subsequently in Carioto 64 Ill. 2d at 198.   

The Peppers holding that the trial court should have let the injury case decide the matter of Peppers conduct is known as the prematurity doctrine.  SeePekin Insurance Co. v. Johnson-Downs Construction, Inc., 2017 IL App (3d) 160601 and Allstate Insurance Co. v. Kovar, 363 Ill. app. 3d 493 (2006).  As Peppers shows, the nature of the insured’s conduct can halt the insurer’s declaratory when its nature is an issue in the underlying tort case. 

There are some exceptions.  In American Family Mutual Insurance Company v. Savickas, 193 Ill. 2d 378, the Illinois Supreme Court seemed to open the door it has closed in Thornton, 74 Ill. 2d 132.  Mr. Savickas shot and killed Thomas.  Thomas’ estate brought a wrongful death and survival action.  Meanwhile, Savickas was convicted of murder.  The court concluded that the murder conviction was as a result of a thorough criminal proceeding and that as a result, the conviction was sound, and that based on the criminal proceeding the policy did not apply to the underlying civil suit of Thomas’ estate.    

In Savickas, counsel for American Family did a complete job of detailing the proceedings in the criminal case.  The coverage attorney provided the entire criminal case record to the declaratory judgment judge.  As a result, the court essentially allowed offensive collateral estoppel against Savickas in the declaratory judgment case finding that the nature of this conduct was conclusively decided in the criminal proceeding.  

Another exception, however, is anAllstate v. Kovar, 363 Ill. App. 3d 493 (2006).  In that case, three teenagers were intoxicated began shouting at each other and during the shouting match, once teenager used a sharp object to cut one of the other teenagers.  The victim sued alleging that the defendant negligently cut him.    

Allstate filed the declaratory judgment action seeking a ruling that it had no duty to defend in the civil case.  In support of its summary judgment motion, Allstate’s counsel attached the tort complaint, the policy, and the criminal court order in which the teen pleaded guilty to battery.  Kovar, 363 Ill. App. 3d at 496.  The trial court granted Allstate’s summary judgment motion, but the appellate court reversed.    

The appellate court highlighted the absence of a transcript from the criminal proceeding and the lack of facts being recounted in the guilty plea order.  Kovar, 363 Ill. App. 3d at 502.  Further, the defense’s deposition showed that there were issues relating to intoxication affecting his ability to form intent and that the defendant pled guilty only in a return for a reduced sentence.  Kovar, 363 Ill. App. 3d at 504.  Accordingly, the appellate court reversed and held that the issue of intent must be resolved in the tort case and not in the declaratory judgment case. 363 Ill. App. 3d at 504.   

The coverage tension between intentional conduction, on the one hand, and carelessness, on the other, presents the insurer, the insured, and defense counsel with difficult challenges.  For the insurer and defense counsel, in particular, great care must be taken not only to protect the insured but also protect the insurer and the defense counsel.  Merely reading the complaint is not enough.  Any underlying criminal action must be thoroughly investigated.  Defense counsel must be fully upfront with the insured.  A thorough investigation, complete disclosure with the insured, and keeping a close eye on the matter will go a long way to avoiding the legal landmines these cases present.    

Justin Wine

Justin Wine joined Beverly & Pause in 2005. Since that time, he has brought numerous jury trials to verdict in the Civil Division of the Circuit Court of Cook County. He is currently a member of the Chicago Bar Association and Illinois State Bar Association. 

Ashley Galmore

Ashley Galmore of Beverly & Pause is currently a member of the Chicago Bar Association, Illinois State Bar Association and Women’s Bar Association. 

Joseph DiPino

Joseph P. DiPino joined Beverly & Pause in 1988. He has extensive trial experience involving premises, products liability and automobile accident claims. He has also briefed and argued cases in the Illinois Appellate Court and Federal Court of Appeals for the 7th Circuit. 

Leadership Notes 

By Keith Marxkors 

Edited by Albert K. Alikin 

In July of this year, I begin my 36th year in the insurance industry, specifically in the claim litigation area.  I was introduced to DRI early in my career by leaders at my then and current employer, State Farm.  It was clear then the DRI organization’s commitment to educating and informing the insurance defense bar was crucial to prevailing in challenging legal environments we face.  This still remains true today.  

My mentor, and future boss, Bill Graden developed and encouraged my active participation in the Insurance Law Committee.  It started with attending educational programs.  Before long, I was presenting topics at the Insurance Coverage and Claim Institute (ICCI) alongside wonderful colleagues Bill McVisk and Albert Alikin, now lifelong friends.    
When Bill Graden retired a few years ago, I proudly stepped into his role as Co-Chair of the Personal Lines – Home and Auto SLG, partnering with the distinguished Laurie Barbe (with a BIG assist from Kim Davis).  Our work spotlights legal issues and trends specific to personal lines insurers.  If you have interest in this area of insurance law, please join us on one of our quarterly virtual meetings.  No strings attached.  Just drop me a line and I’ll include you in our next meeting invitation.  

From my first issue of For the Defense years ago right up to our recent ICCI held in Houston earlier this year, DRI provides the opportunity to up our game, to network with experts, to meet and make wonderful friends, making new friends at every event.  I have served under excellent leadership in the Insurance Law Committee.  Committee Chairs Matt Foy, Lane Finch and Kathy Maas, thank you for your effort and commitment.  Vice Chair Jonathan Schwartz, I know you will continue this tradition.  

While the end of my career is nearing in a few years, I remain committed to recruiting, encouraging and supporting new members to this prominent legal organization.  I am encouraged at every DRI event by the high level of new talent joining our ranks.  The role Lawyers Representing Business serve in this world is as crucial now as it has ever been.    

Ours remains a noble profession. 

Keith MarxkorsKeith Marxkors is Counsel on Auto Claim issues involving policy interpretation, regulatory and legislative issues and Claim operations. He is a member of the Missouri and Illinois Bar, the DRI Insurance Law Committee (Co-Chair of the Personal Lines SLG), and the ABA Tort & Insurance Practice section. He has CPCU, CLU, ChFC and FLMI insurance designations and served in regional CPCU Chapter leadership. 

Senior Living Ad

Feasible or Futile?  Interlocutory Appeals from Federal Orders Compelling Insurance Appraisal

By J. Pablo Cáceres and Christian Lee González-Rivera

Edited by Albert K. Alikin 

Appraisal Has Become Ubiquitous 

Appraisal is the new normal in resolving first party property claims. It generates recurring literature. Compare, e.g., John C. Trimble & Meghan Ruesch, It’s a Twister! The Appraisal Process and the Insurer’s Dilemma, 58 No. 10 DRF For. Def. 40, 40 (2016) (offering an insurer perspective), with Mark Ticer, A Primer on Appraisal in Texas: One of the Most Frequently Abused and Misused Provisions in an Insurance Policy, 5 J. Tex. Ins. L. 41 (2004) (offering an insured’s perspective). But little in-depth analysis exists about the proper procedural vehicles for compelling appraisal, or the potential interlocutory appeal of such orders. Case law provides limited help because the law on enforcement and appeals of appraisal orders is in disarray. Different procedures exist even within the same federal circuit, pitting one district court against another.   
Few cases address the availability of an interlocutory appeal from a federal order compelling appraisal.  Indeed, these orders can be onerous because they require both sides to hire appraisers, umpires, and sometimes additional experts, to resolve certain issues extra-judicially rather than through a jury trial. Instinctively, there should be a right to immediate appeal from such orders.  It is not, however, so clear that one exists.  

We reviewed the few cases that address the issue and considered the nature of the remedy of appraisal. We believe that orders compelling appraisal can and should be immediately appealable as orders granting injunctive relief under 28 U.S.C. §1292(a)(1). But first, some background.  

Appraisal Has Lost its Way  

Insurance appraisals were designed to avoid greater exposure or expense in litigation. See Timothy Gray, Brian Odom, & Shannon O’Malley, Benefits, Pitfalls, and Trends in Property Insurance Appraisal, 44-SPG Brief 20, 22 (2015). However, appraisals have become expensive and are increasingly litigated. See Jonathan Wilkofsky, The Law and Procedure of Appraisal 5, 60 (3d ed., 2015). Insureds frequently sue mid-adjustment, seeing the advantages of having an appraisal panel consider expert opinions on causation and repair costs that ordinarily might not withstand a Daubert or other challenges in court. A “gold rush” like many others in nationwide litigation. Cf. Evan Stephenson & Kayla Scroggins-Uptigrove, "Just Win, Baby”: The Tenth Circuit Rejects the “Anything Goes” Tactics of the Hail-Litigation Gold Rush, 96 Denver L. Rev. 267, 267, 276 (2019).  

The sudden interest in appraisal results from the high stakes with little downside involved. Historically, appraisals were only invoked if agreement existed on the existence and scope of the loss (i.e., causation). Gray et al., supra at 21. But many states now allow appraisers to decide causation without meaningful judicial review. The perceived result is that any claim can now become a multi-million dollar one. With the right umpire, the humblest of claims will go from rags to riches overnight. Every disputed claim a blank check.   

Foreseeably, the process has encouraged the exaggeration of the amount of loss to set up, for the appraisal panel, a compromised amount that still far exceeds any fair assessment of the loss. See Michael Boyer & Barry Zalma, Property Investigation Checklists: Uncovering Insurance Fraud §1:42 (13th ed., 2021 update); Jim Sams, Appraisals, Water Damage Fraud Among ‘New Normals’ Discussed at PLRB, Claims Journal (April 5, 2022), (accessed May 13, 2022). Often, the insured may not even know what is happening. Id. Grossly inflated estimates are designed to create a margin of windfall if all the appraisers do is “split the baby.” A Solomonic result abhorred but still dignified as if it were a jury verdict. See Thomas E. Kos, The Appraisal Process, NU Property Casualty 360 (Nov. 2, 2007), /2007/11/02/the-appraisal-process/?slreturn=20220413104725 (accessed May 13, 2022).   

Twenty years ago, a nationwide survey of real estate appraisers found that 55% reported being pressured to inflate property values. Baxter Dunaway, 4 Law of Distressed Real Estate §44A:17 (2022 update). One wonders what those figures look like today among insurance appraisers, who are “not governed by any industry standards.” Charles Edwards, An Appraisal of the Appraisal Remedy in Property Insurance, 136 The Nat’l Rev. (Vol. XII) (May, 11, 2022), (last accessed May 16, 2022).   
In some states, appraisal on demand is sanctioned by statutes expressly governing appraisals or courts treating them like arbitrations. In most states, however, neither is the case. In many of these states, compelling appraisal lacks statutory or common law grounding, and nothing short of routine legitimizes the practice. Everywhere, federal courts sitting in diversity grow inconsistent in enforcing appraisal provisions as a result.   

Whether an order compelling appraisal can be immediately appealed depends on what the remedy “compelling appraisal” actually is, as well as what kind of trial court procedure enforces it.  Compare, e.g., Fireman’s Fund Ins. Co. v. Steele Street Limited II, No. 19-1096, 2022 WL 39392, at *1 (10th Cir. Jan. 5, 2022) (deeming appraisal order injunctive and appealable under §1292(a)(1)), and Hayes v. Allstate Ins. Co., 722 F.2d 1332, 1333 (7th Cir. 1983) (same), with Milligan v. CCC Info. Servs. Inc., 920 F.3d 146 (2d Cir. 2019) (deeming appraisal order final and appealable only under Federal Arbitration Act (“FAA”)), and Portland Gen. Elec. Co. v. U.S. Bank Tr. Nat. Ass’n, 218 F.3d 1085, 1085 (9th Cir. 2000) (same). But see Hartford Lloyd’s Ins. Co. v. Teachworth, 898 F.2d 1058, 1062-1063 (5th Cir. 1990) (deeming appraisal order to fall under FAA only if state law recognizes it as arbitration). The timing and kind of appellate review over these orders is unsettled in every other federal circuit.   

Notwithstanding the high stakes, federal courts are procedurally inconsistent in compelling appraisal even in the same circuit. For example, in the Eleventh Circuit, some courts correctly require appraisal to be pleaded and proven as injunctive or specific performance relief. See, e.g., Biscayne Cove Condo. Ass’n, Inc. v. QBE Ins. Corp., No. 10-23728-CIV, 2013 WL 2646828, at *3 (S.D. Fla. June 12, 2013). Others do not. See, e.g., Castillo at Tiburon Condo. Ass’n, Inc. v. Empire Indem. Ins. Co., 2021 WL 4438370, at *6 (M.D. Fla. Sept. 28, 2021). Some construe such motions to compel appraisal as essentially seeking summary judgment on specific performance relief. See, e.g., Palmer v. Fidelity Nat’l Prop. & Cas. Ins. Co., 2014 WL 12461372, at *5 (S.D. Fla. Nov. 7, 2014). Others do not. See, e.g., Waterford Condo. Ass’n of Collier Cty., Inc. v. Empire Indem. Ins. Co., 2019 WL 3852731, at *2 (M.D. Fla. Aug. 16, 2019). Examples abound from other circuits.   

Back to Basics: A Short History of Appraisal Enforcement

Although its origins are shrouded in mystery, “[a]praisal has been a part of property insurance for at least 200 years.” Gary Williams, Winning the Property Insurance Appraisal, 45-OCT JTLATRIAL 22, 26 (2009). The provision made its statutory debut in 1853, when New York mandated it as a standard for all fire policies. Many states—and most insurers—quickly adopted it. Wilkofsky, supra at 1, 7.   

Despite equivocation in early cases, interchangeably calling it appraisement or arbitration, “appraisal is appraisal regardless of what is called.” Williams, supra, at 26.  The Supreme Court distinguished appraisal from arbitration early on. See, e.g., City of Omaha v. Omaha Water Co., 218 U.S. 180, 195 (1910). Appraisal is an executory agreement to let third parties appraise value, triggered by the disagreement of the parties, whereas arbitration outsources partial or entire disposition of issues such as how much of that amount is owed. Id. at 195-199.   

Historically, appraisal was rarely, if ever, compelled. It was deemed specific performance relief. But “traditional courts of equity would not specifically enforce executory arbitration or appraisal agreements.” Cedant Corp. v. Forbes, 70 F.Supp.2d 339, 343 (S.D.N.Y. 1999) (citing Greason v. Keteltas, 17 N.Y. 491, 1858 WL 9045, *3 (1858)). See also Specific Performance of Contracts Containing A Provision to Arbitrate, 31 Y.L.J. 670, 670-671 (1922) (“Equity will usually not grant specific performance of contracts for valuation or arbitration, even though the legal remedy is inadequate.”)   

Yes, appraisal could be enforced in theory. Red Cross Line v. Atlantic Fruit Co., 264 U.S. 109, 120-121 (1924). But “a decree for a specific performance [wa]s a departure from common law.” Hepburn et al. v. Auld. et al., 5 Cranch 262, 279 (1809). So, courts often did not grant it, since an adequate remedy at law existed. See Saba v. Homeland Ins. Co. of America, 159 Ohio St. 237, 248-249 (Ohio 1953) (Hart, J., dissenting).  

The remedy?  Breach of contract damages, where a trial substitutes for appraisal. See 44 A.L.R.2d 850 §1 (1955) (insurer’s failure to appraise instead “abrogate[d] the appraisal clause,” freeing insured to “institute an action for damages for the breach”); Tscheider v. Biddle, 24 F. Cas. 253, 255 (E.D. Miss. 1877) (noting general rule not enforcing appraisals of value and availability of damages); Hanover Fire Ins. Co. v. Lewis, 28 Fla. 209, 247-249 (Fla. 1891) (reversing jury verdict for exceeding amount calculated by appraisers). Others would also allow suit for consequential damages from the refusal to appraise. Biddle, 24 F. Cas. at 256 (referring to bad faith). This is why, after setting aside an appraisal award, courts retained jurisdiction to settle the entire dispute. See 112 A.L.R. 9 (1938) (“[I]t is proper for equity, after setting aside an award or appraisal [,] to retain the cause and determine the full controversy, including the amount of loss[.]”).   

Federal courts continue to be aware of this hurdle to appraisal. Vista Pointe Townhome Ass’n, Inc. v. Auto-Owners Ins. Co., No. 16-cv-0973, 2018 WL 1773407, at *6 (D. Colo. April 13, 2018) (acknowledging “‘chicken-and-egg’ dilemma” that breach of contract claims “are premature because an appraisal has not yet occurred, but the Court will not compel an appraisal because there is no breach of contract claim for which specific performance of appraisal would be proper”).   

Until recently, some state courts did not even recognize the availability of specific performance of appraisals at common law and required statutory authorization before compelling it. See Happy Hank Auction Co. v. American Eagle Fire Ins. Co., 1 N.Y.2d 534, 538 (N.Y. 1956) (holding courts had no authority to compel appraisal “[d]espite the mandatory language of the standard policy”); Penn Central Corp. v. Consolidated Rail Corp., 56 N.Y.2d 120, 129 (N.Y. Ct. App. 1982) (deeming “specific performance of the appraisal agreement, a remedy not available at common law”).  

In response, many a legislature began enacting statutes abrogating the common law and allowing motions to compel appraisals. See, e.g., Clark v. Kraftco Corp., 323 F.Supp. 358, 361 (S.D. N.Y. 1971) (describing statutory power to compel appraisals as “newly delegated power” bestowed by New York CPLR § 7601); Kirkwood v. California State Automobile Assn. Inter-Ins. Bureau, 193 Cal.App.4th 49, 57 (Cal. Ct. App. 2011) (describing appraisal as encompassed by “arbitration agreement” under Code of Civil Procedure 1280(a)(3)). With the FAA, a new view arose that welcomed arbitrations “as [an] aide[] to judicial economy”, “revers[ing] centuries of judicial hostility” to such agreements, and “abrogat[ing] the common-law rule” against their enforcement. 1 Couch On Insurance §209:3 (3d ed., 2021 update).   

Yet, no analogous statute empowers federal courts to compel appraisals. See Battles, Inc. v. Nationwide General Ins. Co., No. 3:19-cv-13-DML-DCP, 2020 WL 6365513, at *4-*5 (E.D. Tenn. March 10, 2020) (ruling that diversity jurisdiction required federal procedure and sufficient showing of specific performance). Nor do most states have an appraisals statute. Undaunted, many federal courts in these jurisdictions continue to compel appraisal. Occasionally, some recognize their inability to do so. See Mapleton Processing, Inc. v. Society Ins. Co., No. C12-4083-LTS, 2013 WL 3467190, at *24 (N.D. Iowa July 10, 2013) (“A court can compel parties to comply with their discovery obligations. Appraisal, however, is a right created by contract, not a discovery procedure.”); Vista Pointe Townhome Ass’n Inc., 2018 WL 1773407, at *6 n.5 (“The Court notes that, to the extent it would grant specific performance of the Appraisal clause . . . [t]his Court has profound doubts that it would possess jurisdiction to select an umpire simply because the parties disagree.”).   

In a federal venue, a party seeking the substantive remedy of specific performance must appeal to the court’s equity jurisdiction. See Stephen N. Subrin, How Equity Conquered Common Law: The Federal Rules of Civil Procedure in Historical Perspective, 135 U. Penn. L. R. 909, 920 (1987). Packed into Fed. R. Civ. P. 65, this requires a showing for injunctive relief. See, e.g., Ferrero v. Assoc. Materials Inc., 923 F.2d 1441, 1448 (11th Cir. 1991) (federal “equity jurisdiction” incorporated to the rule); Western Surety Co. v. PASI of LA, Inc., 334 F.Supp.3d 764,  799 (M.D. La. Sept. 25, 2018) (“[T]he Court cannot enforce state law allowing specific performance absent proof of . . . Rule 65’s requirements.”); Vasquez v. Rackauckas, 734 F.3d 1025, 1040 (9th Cir. 2013) (specific performance of a contract “is, essentially, an injunction”); Westar Energy, Inc. v. Lake, 552 F.3d 1215, 1223, 1225 (10th Cir. 2009) (stating that “[s]pecific performance is an equitable remedy, and an interim grant of specific relief is a preliminary injunction”). But parties seldom move to compel appraisal under Rule 65. They don’t because they are convinced that compelling appraisal is something other than specific performance. An easier, non-remedial thing like compelling discovery.    

Corrupting Specific Performance of Appraisal: Rise of Shadow Procedures  

A few historical developments caused courts to ignore federal and state equity jurisprudence, and to afford remedies other than “conventional” ones in the appraisal context. 44 A.L.R.2d 850 §1 (1955). They explain the current practice of compelling appraisal upon mere motion, without pleading or proving specific performance.   

First, in 1953, the Ohio Supreme Court for the first time “went beyond the traditional remedies afforded the insured” and deemed it easier than before to obtain specific performance of appraisal. Id. at §2 (discussing Saba, 159 Ohio St. at 248-249). Pit against each other’s conception of settled common law on the issue, Saba and Happy Hank competed for influence nationwide on the issue. But even friendly commentators acknowledged that, in doing so, Saba’s approach was “new . . . within traditional equity jurisprudence.” See Wesley A. Sturges & William W. Sturges, Appraisals of Loss and Damage Under Insurance Policies, 13 U. Miami L. Rev. 1, 9, 13 (1958). Saba’s result was contrary to “strong and well-reasoned criticism” despite the “distinct dearth of direct authority on this particular point.” 44 A.L.R.2d 850 §1 (1955). Given the new status quo, Saba seems to have cast a longer shadow than Happy Hank.   

Second, statutes allowing motions to compel arbitration started a fire still raging today: the recurrent judicial analogy of appraisal and arbitration. “The distinction between [these] can have ramifications on the authority of the court.” 15 Couch on Insurance §209:10 (2021 update). Although “numerous courts around the country have taken guidance from cases and statutes relating to arbitration, insurance appraisal is actually distinct.” Wilkofsky, supra, at 21. A majority of states distinguishes the two. Id. at 22, 24. The persistent comparison has yielded “serious consequences” nationwide. Id. at 37. Florida’s earlier precedent, for example, compelling appraisals as arbitrations, caused “confus[ion] . . . with somewhat unpredictable consequences.” Id. at 23. What continues to animate the analogy is mere public policy, not law. Id. at 39. The analogy causes ambiguity in precedent. See, e.g., Amy M. Coughenourd, Appraisal and the Property Insurance Appraisal Clause—A Critical Analysis: Guidance and Recommendations for Arizona, 41 Ariz. St. L.J. 403, 413 (2009).  

The distinction is critical. Conflating appraisal with arbitration “impact[s] the applicability of state and federal laws, as well as the procedural protections afforded the participants.” Timothy P. Law & Jillian L. Starnovicha, What Is It Worth? A Critical Analysis of Insurance Appraisal, 13 Conn. Ins. L.J. 291, 298 (2006-2007). Again, take Florida, for example. In 2002, its Supreme Court abrogated precedent enforcing appraisals under its Arbitration Code. Allstate Insurance Company v. Suarez, 833 So. 2d 762 (Fla. 2002). Yet, since then, a judicial practice has emerged whereby federal district courts, emulating state courts, compel appraisal outside common law requirements of specific performance or federal procedure, through a parallel, shadow process—one divorced from pleading or evidentiary burdens. All despite Florida law construing such relief as specific performance. See, e.g., People’s Trust Ins. Co. v. Valentin, 305 So. 3d 324, 327 (Fla. 3d DCA 2020). The novel, parallel procedure performs an end-run around the strictures of Fed. R. Civ. P. 65.  

Analogy is a tool of reasoning, not a source of power. And as a tool, even courts increasingly disapprove of it in this context. See, e.g., Citizens Prop. Ins. Corp. v. Cuban-Hebrew Congregation of Miami, Inc., 5 So. 3d 709, 712 (Fla. 3d DCA 2009) (holding that “referring to the [Arbitration] Code by way of analogy . . . was misplaced” in court’s “confirmation” of appraisal award).  

Nevertheless, this novel practice has grown enough to become noticed. For example, despite holding that compelling appraisal entails a right to specific performance, one Florida court has noted, in dicta, that “it may [still] be more traditional” for a party to merely “move to compel an appraisal to seek enforcement of the policy provisions.” People’s Trust Ins. Co. v. Nowroozpour, 277 So. 3d 135, 136 (Fla. 4th DCA 2019). But that “more traditional” mechanism was not at issue in the case. And Florida’s—as well as nationwide—common law belies the proposition that there is anything “traditional” to it. The practice sails against the tide of common law everywhere. And regardless of how state courts of general jurisdiction may resolve this question, federal courts have limited jurisdiction: they may not just mirror state courts in granting remedies. See, e.g., Vista Pointe Townhome Ass’n, Inc., 2018 WL 1773407, at *6 n.5.  

This novel, parallel process compelling appraisal has no real authority guiding it, which is a fundamental problem. Often there are no pleading requirements and no clear answer regarding the standard and kind of proof necessary to obtain an order compelling appraisal.  Presumably a greater standard would apply to obtain a pleaded remedy—as opposed to what one can seek through mere motion. The lack of any applicable rules allows a party to proceed with a lighter burden of proof in obtaining the same remedy. And even to elect and plead the higher burden only to do an about-face later and choose the lighter one in its subsequent motion. Countenancing this in federal court with regard to Rule 65 is no different than allowing an easier, parallel process for summary judgment that does not satisfy the strictures of Rule 56. See, e.g., MaxLite, Inc. v. ATG Electronics, Inc., 2019 WL 3283077, at *3 (D. N.J. July 22, 2019) (refusing to enact “parallel procedure” to track state “summary action” practice and instead evaluating preliminary injunction claim to compel payment of fees through summary judgment under Fed. R. Civ. P. 56).   

Far from favoring extra-judicial adjudication, disarray in compelling appraisal in federal court is driven by the incorrect view that the purpose of appraisal is to “confirm” any ensuing award like an arbitration, or obtain summary judgment in the amount calculated, without allowing insurers to challenge elements of coverage or payment. On this, “[t]he federal courts . . . have [also] muddied the waters.” Gregory Dell et al., Florida Insurance Law & Practice §14:8 (2021-2022 ed.). Compare, e.g., Three Palms Pointe, Inc. v. State Farm Fire & Cas. Co., 250 F. Supp. 2d 1357 (M.D. Fla. 2003) (disallowing insurer from contesting elements of coverage post-appraisal), with Liberty American Ins. Co. v. Kennedy, 890 So. 2d 539, 541 (Fla. 2d DCA 2005) (disapproving Three Palms Pointe and allowing challenge of coverage elements post-appraisal); Fla. Gaming Corp. v. Affiliated FM Ins. Co., No. 07-20897-Civ-Ungaro, 2008 WL 11407210, at *1 n.1 (S.D. Fla. Apr. 21, 2008) (following Kennedy and refusing to follow Three Palms Pointe); Muckenfuss v. Hanover Ins. Co., 5:05-cv-261-Oc-10GRJ, 2007 WL 1174098, at *3 (M.D. Fla. Apr. 18, 2007) (rejecting Kennedy and following Three Palms Pointe). Again, these disagreements take place in the same circuit.   

Bringing Appraisals Back into Specific Performance Jurisprudence  

To ensure the best chance of a federal interlocutory appeal of an order compelling appraisal, the nature of the appraisal remedy must be explained to the district court. First, it should be advised how the applicable common law deems appraisal an equitable and injunctive remedy despite federal court being the forum. See 16 Couch on Insurance § 232:170 (2020 ed.) (“A policy’s requirement for an appraisal of a loss may be specifically enforced. When appraisal is not, by the terms of the policy, required, there is no basis for specific performance.”); Parkway Baptist Church, Inc. v. Guideone Elite Ins. Co., No. 10-23965-CIV, 2011 WL 13099891, at *3 (S.D. Fla. Sept. 21, 2011) (count seeking appraisal essentially seeks specific performance); Foster Real Estate Holdings, LLC v. The Phoenix Ins. Co., No. 3:21-cv-00135, 2021 WL 7084161, at *2 (M.D. Tenn. Aug. 3, 2021) (“[M]otion essentially seeks to compel specific performance of the contractual appraisal clause.”); Vista Pointe Townhome Ass’n, Inc., 2018 WL 1773407, at *6 (same); McCoy v. American Family Mut. Ins. Co., 189 F.Supp.3d 896, 900 (D. Minn. 2016) (same); Woodward v. Liberty Mut. Ins. Co., No. 3:09-cv-0228, 2010 WL 1186323, at *3 (N.D. Tex. Mar. 26, 2010) (same); St. Panteleimon Russian Orthodox Church v. Church Mut. Ins. Co., No. 13-1977, 2013 WL 6190400, at *3 (D. Minn. 2016) (same); Sauer v. Xerox Corp., 17 F.Supp.2d 193, 201 (W.D. N.Y. 1988) (same); Ice City, Inc. v. Ins. Co. of North America, 456 Pa. 210, 217 (Pa. 1974) (same); Mapleton Processing, Inc., 2013 WL 3467190, at *24 (same); Battles, Inc., 2020 WL 6365513, at *4-*5 (same). Explain why such relief requires a showing of no adequate legal remedy and compliance with Rule 65.   

Second, the argument should be made that specifically performing appraisal “‘is a remedy for breach of contract, a cause of action which requires proof the contract was breached.’” Macom Technology Solutions Holdings, Inc. v. Ifineon Technologies AG, 881 F.3d 1323, 1332 (Fed. Cir. 2018) (citation omitted). Logically, a remedy presupposes a breach. And a breach must be adjudicated before it can be redressed. This implies either a summary judgment or trial. See, e.g., McCoy v. American Family Mutual Ins. Co., 189 F.Supp.3d 896, 900 (D. Minn. 2016) (explaining that motion to compel  appraisal “seek[s] partial summary judgment on . . . claim that [insurer] has breached the Policy by refusing to participate in the appraisal process”); Morrison v. Harleysville Worcester Ins. Co., No. 3:19-CV-00011-JRG-DCP (E.D. Tenn. Oct. 7, 2019) (court “declin[ing] to exercise its power [to grant a motion to compel appraisal] without a motion for summary judgment or an adjudication on the merits”); Mapleton Processing, Inc., 2013 WL 3467190, at *24 (same); Battles, Inc., 2020 WL 6365513, at *5 (same).  

Third, the Court should be requested to prescribe minimal guidelines for the appraisers to safeguard everyone’s due process. The standard appraisal provision “leave[s] much to the imagination and the discretion of the . . . appraisers with regard to . . . procedure.” Wilkofsky, supra at 69. The high stakes make this intolerable. Cf. Walnut Creek Townhome Ass’n v. Depositors Ins. Co., 906 N.W.2d 205, 205 (Iowa Ct. App. July 19, 2017) (McDonald, J., dissenting) (“Empowering an appraisal panel to determine causation raises due process concerns.”). Rule 65 allows—indeed, requires—courts to tailor the remedy of specific performance. Samuel Bray, The System of Equitable Remedies, 63 UCLA L. Rev. 530, 557 (2016) (under Rule 65 “court is not limited to saying merely ‘perform the contract’, and it may impose further conditions . . . as needed”).  

So, demand minimal guidelines to safeguard due process at appraisal. See Auto-Owners Ins. Co. v. Summit Park Townhome Ass’n, 129 F.Supp.3d 1150, 1155 (D. Col. 2015) (imposing guidelines to “protect the integrity of the process[,]” “increase the likelihood of a valid appraisal award,” and “allow the appraisal process to proceed in an orderly and efficient manner that conserves the Court’s resources and minimizes the need for further involvement of the Court”); Villareal v. Owners Ins. Co., No. 16-cv-01862, 2016 WL 9735733, at *2 (D. Col. Dec. 1, 2016) (same);Am. Storage Centers v. Safeco Ins. Co. of Am., 651 F.Supp.2d 718, 720 (N.D. Ohio 2009) (reference to “instructions for the conduct of the appraisal process”); CIGNA Ins. Co. v. Didimoi Prop. Holdings, N.V., 110 F.Supp.2d 259, 275 (D. Del. 2000) (ordering issues to be addressed by appraisers); Terra Indus., Inc. v. Commonwealth Ins. Co. of Am., 981 F.Supp. 581, 607 (N.D. Iowa 1997) (parties may seek guidelines if intractable disputes arise).  

Fourth, the facts and record should be scrutinized to determine whether appraisal has been waived.  For example, a complaint may seek a jury trial of “all issues.” This may waive appraisal and run contrary to Rule 38(c). See, e.g., R & S Auto Sales v. Owners Ins. Co. distinguishable. 2015 WL 12434459 (S.D. Iowa Jan. 5, 2015) (noting that demand of jury trial can operate waiver of appraisal).  

Lastly, the issues referred to appraisal should be appraisable to begin with, and any award should be itemized. See Wilkofsky, supra at 70 (insured’s proper proof of loss sets what “logically and legally is to be . . . appraised”); Woodsworth v. Erie Ins. Co., 743 F.Supp.2d 201, 211 (W.D. N.Y. 2010) (noting dismissal of claim against insurer for alleged breach due to failure to appraise RCV, allowing only claim for failure to appraise ACV); Jossfolk v. United Property & Cas. Ins. Co., 110 So. 3d 110, 111 (Fla. 4th DCA 2013) (ordinance and law costs not appraisable where not incurred). 

Courts even lack Article III jurisdiction over replacement costs or ordinance or law benefits claims, where repairs have not been completed or costs incurred. See, e.g., Diamond Lake Condo. Ass’n, Inc. v. Empire Indem. Ins. Co., 2021 WL 6118076, at *3 (M.D. Fla. Dec. 27, 2021) (dismissing O&L claim for failure to complete and pay for repairs); Cresthaven-Ashley Master Ass’n, Inc. v. Empire Indem. Ins. Co., 2022 WL 873998, at *4 (S.D. Fla. Mar. 24, 2022) (dismissing O&L claim on eve of trial despite appraisal award calculating it for lack of actual loss under the Policy); Executive Plaza, LLC v. Peerless Ins. Co., 2010 WL 11632677, at *3 (E.D. N.Y. Feb. 8, 2010) (dismissing RCV claim for lack of repairs or replacements completed and paid for).   

Appealing from Appraisal Orders to Settle the Issues  

An order compelling appraisal should be an appealable, interlocutory one under 28 U.S.C. §1292(a)(1).   It is clear that an order compelling appraisal almost always constitutes specific performance. “[S]pecific performance . . . is of an injunctive character” under § 1292(a)(1). EGI-VSR, LLC v. Coderch, No. 21-12018-CC, 2021 WL 4166697, at *1 (11th Cir. Sept. 10, 2021) (citing Alabama v. U.S. Army Corps of Eng'rs, 424 F.3d 1117, 1127 & n.14 (11th Cir. 2005)). Other Circuits agree. See, e.g., Sheet Metal Workers’ Intern. Ass’n Local 19 v. Herre Bros., Inc., 201 F.3d 231, 238 (3d Cir. 1999) (“[O]rder of specific performance of a contract . . . [is] a classic form of . . . an appealable interlocutory order under 28 U.S.C. § 1292(a)(1)”); Union Oil Co. of Cal. v. Leavell, 220 F.3d 562, 566 (7th Cir. 2000) (specific performance order appealable under § 1292(a)(1) despite failure “[to] use the magic word ‘injunction’”).   

An order under §1292(a)(1) is defined as “[a] court order commanding or preventing an action.” U.S. Army Corps of Engineers, 424 F.3d at 1127. Labels do not control. What matters is whether the Order “ha[s] the practical effect” of an injunction. See Gulfstream Aerospace Corp. v. Mayacamas Corp., 485 U.S. 271, 288 (1988) (section 1292(a)(1) includes “orders” with “practical effect of granting or denying injunctions’”); Carson v. American Brands, Inc., 450 U.S. 79, 84 (1981) (same); Supreme Fuels Trading FZE v. Sargeant, 689 F.3d 1244, 1246 (11th Cir. 2012) (Pryor, C.J., concurring) (“[I]f a ‘specific-performance order is injunctive in character,’ then there is ‘little doubt’ that the order ‘is immediately appealable under § 1292(a)(1) as an injunction.’”) (quoting Petrello Petrello v. White, 533 F.3d 110, 114 (2d Cir.2008)). “When a district court fails to denominate its order as an injunction, but otherwise complies with the requirements of Rule 65(d), we will treat its order as an appealable injunction.” Id. at 1247. Under Rule 65(d)(1), an order must “state the reasons why it issued,” “state its terms specifically,” and “describe in reasonable detail . . . the act . . . required.” If the order compelling you to appraise satisfies these three formal requirements, it should be appealable.   

Second, the nature of the relief afforded matters as much as the form of the order. Focusing on this aspect, two circuits addressing the question agree that appraisal orders are appealable under §1292(a)(1). See, e.g., Fireman’s Fund Ins. Co. v. Steele Street Limited II, No. 19-1096, 2022 WL 39392, at *1 (10th Cir. Jan. 5, 2022) (“We conclude that the court’s order [compelling insurance appraisal] was indeed substantively injunctive, and . . . we may properly exercise jurisdiction over this interlocutory appeal.”); Hayes v. Allstate Ins. Co., 722 F.2d 1332, 1333 (7th Cir. 1983) (deeming jurisdiction over appraisal order falling under §1292(a)(1)).   

Lastly, appraisals do not fall within the plain meaning of “arbitration” under the FAA. See Salt Lake Tribune Publ'g Co., LLC v. Management Planning, Inc., 390 F.3d 684 (10th Cir.2004); Evanston Ins. Co. v. Cogswell Properties, LLC, 683 F.3d 684 (6th Cir. 2012). And there is no need to read such orders into the FAA so that they can become final, appealable ones later on. Compare, e.g., Camden Fire Ins. Ass’n v. KML Sales, Inc., 99 Fed. App’x 367, 368 (3d Cir. 2004) (order compelling appraisal after bench trial deemed final, appealable order under 28 U.S.C. §1291), with Jacobs v. Nationwide Mut. Fire Ins. Co., 236 F.3d 1282, 1285 (11th Cir. 2001) (reviewing final summary judgment order compelling appraisal). The matter, however, is unsettled in every other circuit.   


Federal disarray in compelling appraisal must be corrected circuit by circuit. Appraisal is a fundamental insurance policy concept. Its applicability to disputes over causation, coverage, and value of loss differs state by state. But there ought to be some uniformity among the federal circuits on the procedure to compel appraisal and the availability of immediate appellate review of orders granting such a significant remedy. We have outlined here how such orders can and should be appealed. But even past the jurisdictional hurdle, the likelihood of success on the merits of your appeal turns on the proper set up of the case below. And from the very outset.   

J. Pablo CaceresPablo Cáceres, a Partner at Butler Weihmuller Katz Craig LLP, joined the firm in 1997. He primarily litigates complex First and Third-Party Coverage matters in state and federal courts, including appeals. Pablo has successfully handled hundreds of hurricanes and other high-value property claims, totaling well into the hundreds of millions of dollars, and he has defended E&O claims asserted against multi-national insurance brokers. He also has significant litigation experience with first and third-party bad faith claims. Pablo handles insurance matters in both Florida (through his home Tampa office) and Texas (through Butler’s Dallas office).  He is active in the Defense Research Institute and is AV rated by Martindale-Hubbell.
Christian Lee Gonzalez-RiveraChristian Lee Gonzalez-Rivera is an Associate at Butler Weihmuller Katz Craig LLP’s Tampa and Miami offices. A member of Butler’s Appellate and First-Party Coverage Groups, his practice focuses on Property Coverage and Appeals. Before joining Butler, he worked as the senior Judicial Law Clerk to the Honorable Fleur J. Lobree at Florida’s Third District Court of Appeal, where he managed and recommended the disposition of approximately two hundred appeals and original proceedings.  Christian currently serves as Adjunct Professor of Law at St. Thomas University’s College of Law, teaching Appellate Advocacy, as well as Coach to the Moot Court Team in international arbitration competitions. 

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