A dispute over storm damage to a Virginia church’s roof has resulted in a decisive legal ruling that reinforces the distinction between insurance appraisals and arbitration. On April 8, the Court of Appeals of Virginia affirmed a lower court’s dismissal of Church Mutual Insurance Company’s petition to modify a $1.69 million appraisal award issued to Ephesus Richmond Seventh-Day Adventist Church.
The case arose after Ephesus filed a claim in 2021 under its property insurance policy with Church Mutual, alleging that wind and hail had damaged the building during the policy period. Church Mutual’s inspection concluded that only the sloped roof, gutters, and HVAC units were affected by storm damage. It denied coverage for the flat roof and interior, attributing those damages to wear and tear and disbursed $59,084.05.
Ephesus disputed the insurer’s valuation and invoked the policy’s appraisal clause, set forth in Form A 100, § C(2) (Jan. 2001). That provision required each party to appoint a “competent and impartial appraiser,” with a third-party umpire resolving disagreements. The insurer’s appraiser valued the net replacement cost at $68,148.78, while the church’s appraiser submitted an estimate of $1,692,642.89. The umpire agreed with the higher estimate, resulting in an appraisal award that significantly exceeded the insurer’s valuation.
Church Mutual asked the Circuit Court of the City of Richmond to modify or correct the award under Virginia Code § 8.01-581.011, part of the Virginia Uniform Arbitration Act (VUAA). The insurer argued that the appraisal process functioned as arbitration and was therefore reviewable under the statute.
Ephesus responded with a demurrer, later renewed, asserting that the process defined in the contract was appraisal—not arbitration—and thus not governed by the VUAA. The circuit court agreed, emphasizing that the insurance contract used the term “arbitration” elsewhere (specifically, in a separate coverage form addressing defense costs) and deliberately used “appraisal” in the property loss clause.
The court found it lacked jurisdiction to review the award under the VUAA and dismissed Church Mutual’s application with prejudice.
On appeal, the Court of Appeals of Virginia affirmed. Writing for the panel, Chief Judge Marla Graff Decker held that the insurance contract’s language made clear that the appraisal clause was not an arbitration agreement. The court emphasized that the VUAA applies exclusively to arbitration and that Church Mutual failed to demonstrate the parties intended to treat the appraisal as such.
“The terminology in the insurance contract itself resolves the matter before the Court,” the opinion stated, underscoring that the appraisal process was structured to determine the amount of loss, not liability or legal disputes.
The appellate court also ruled that three of Church Mutual’s assignments of error were waived due to briefing deficiencies and vacated factual findings made by the circuit court beyond what was necessary for its jurisdictional ruling. Both parties’ requests for appellate attorney fees and costs were denied.
This decision serves as a critical reminder for insurers: appraisal and arbitration are not interchangeable. The use of precise language in policy drafting is essential. Courts will look strictly to the contract terms to determine whether an appraisal can be reviewed under arbitration statutes.
For claims and legal teams, the case reinforces the binding nature of appraisal processes in property policies when contractually defined as such. Unless an insurance policy clearly states that an appraisal is to be treated as arbitration, efforts to contest high-value awards under arbitration statutes are unlikely to succeed.
