Many property adjusters and policyholders often think of business income and interruption claims as being solely an accounting function. This is not true because there must be a determination of the “period of restoration.” A question sometimes arises whether the “period of restoration” is a coverage question reserved for courts or an issue that an appraiser and an appraisal panel may determine. A Michigan court recently ruled that an appraisal panel could make such a determination. 1
The dispute between Proto Gage and Federal Insurance Company stems from Proto Gage’s asserted business income losses resulting from the failures of two press machines. Federal Insurance argued that the appraisal award should be vacated due to manifest mistake because the award did not expressly state the applicable “period of restoration” for Proto Gage’s claims. Federal asserted there was no proof the loss amount in the award constituted actual business income loss incurred during the period of restoration as required by the policy. Federal claimed there was no mention in the appraisal award as to what the applicable period of restoration was for either Proto Gage’s 2015 claim or 2016 claim.
Proto Gage argued that Michigan law does not require appraisal awards to provide an explanation of the period of restoration applied. The court agreed with Proto Gage.
The court found that “Michigan law only requires that appraisal awards state valuation determinations for the categories of coverage under the policy.” The court found no mistake apparent on the face of the appraisal award regarding the period of restoration. By certifying the award, the appraisal panel indicated it had examined all relevant documentation and determined the business income loss amount in accordance with the policy provisions. Federal provided no evidence showing the panel neglected to consider the applicable period of restoration.
I suggest readers interested in appraisal and the period of restoration also review Blockbuster New York Appraisal Decision Impacts Causation and Period of Restoration Determinations.
Iris Kuhn wrote about the practical considerations for the period of restoration in Period of Restoration – Valuing Business Interruption Claims, Part I, and Period of Restoration – Should the Time to Adjust the Claim be Considered? Part II.
Thought For The Day
How does a project get to be a year late? One day at a time.
—Fred Brooks
1 Proto Gage v. Federal Ins. Co., No. 21-12286 (E.D. Mich. Aug. 29, 2024).
