Parties frequently fight over whether an appraisal is an arbitration after an appraisal award is entered. I recently noted that the Rhode Island Supreme Court found that appraisals function as arbitrations in “Is It Appraisal, or Is It Arbitration? Can Appraisal be Appraisal and Arbitration at the Same Time?” A Virginia court was recently faced with the same situation and found that appraisals are not arbitrations.
The case arose after Ephesus Richmond Seventh-Day Adventist Church filed a claim for wind and hail damage under its insurance policy with Church Mutual. The insurer disputed much of the claimed damage and issued only a partial payment. Pursuant to the policy, the parties initiated an appraisal to determine the amount of loss. Each side selected an appraiser, and an umpire was appointed. The umpire ultimately agreed with the church’s appraiser, resulting in an award far exceeding Church Mutual’s original estimate. Unsatisfied with this outcome, the insurer petitioned the circuit court to modify the appraisal award under the VUAA, claiming it should be treated as an arbitration award subject to judicial review.
The circuit trial court rejected Church Mutual’s argument, ruling that it lacked jurisdiction because the appraisal process was not arbitration within the meaning of the VUAA. The Court of Appeals of Virginia affirmed that ruling. 1 The appellate court emphasized that the insurance contract used the term “appraisal” in the relevant provision and included “arbitration” only in a separate section addressing disputes over defense costs. This demonstrated that the parties knew how to include arbitration when they intended to do so and deliberately chose not to do so in the appraisal context. The court reasoned that while both processes involve neutral third parties, their legal significance and procedural purposes are distinct. Arbitration typically resolves broader disputes, often encompassing liability and legal questions, whereas appraisal is confined to determining the value of a loss. The language of the court is helpful in understanding this reasoning:
We hold, based on our de novo review, that the parties’ contract fails to reflect an intention to classify the appraisal process followed in this case as a form of arbitration under the VUAA…The insurance contract includes express references to the arbitration of disputes between the insurer and the insured in a provision other than the one setting out the appraisal process…That usage addresses Church Mutual’s agreement to ‘pay ‘defense costs’[ ] incurred by any insured[ ] that result from a ‘suit’ to which th[e] insurance applies.’ …The policy expressly provides for ‘arbitration’ in the event that the insurer and the insured ‘cannot reach an agreement concerning any of the terms of th[at] Coverage Form’—the form addressing payment of defense costs….The word ‘arbitration,’ by contrast, does not appear in the contract provision covering appraisal awards, the specific provision that forms the basis of this suit… As a result, the terminology in the insurance contract itself resolves the matter before the Court. The contract reflects that the parties agreed to use arbitration as the means for resolving disputes over certain types of defense costs. They used a wholly different term—appraisal—in the portion of the insurance contract at issue here. Church Mutual, therefore, has not met its burden of proving that the appraisal award qualifies as an arbitration award under the VUAA. Due to this difference in terminology, the insurance contract does not establish that the parties reached an agreement to classify the appraisal process as an arbitration for purposes of Virginia law.
The appellate court also noted that the dictionary definitions of the terms supported its interpretation. Arbitration refers to a more formal dispute resolution process that substitutes for court adjudication, while appraisal involves determining value without resolving broader legal controversies. Because Church Mutual failed to prove that the parties intended for the appraisal to function as an arbitration, it could not use the VUAA to seek judicial review of the outcome.
In the Rhode Island appraisal blog post, I noted the following, which should be repeated:
For those involved in insurance appraisals, this ruling serves as a reminder that the legal framework governing appraisals varies widely across the United States. Policyholders, insurers, and appraisal professionals must be aware of how their state treats appraisals and adjust accordingly. In states like Rhode Island, parties should expect that appraisal decisions will be reviewed under arbitration rules. The rules regarding the eligibility to be part of an appraisal panel are generally more stringent regarding arbitration and should be carefully reviewed before selecting appraisers or umpires.
Appraisal rules are constantly changing, and those involved in the appraisal process must keep up with changes from state to state.
Thought For The Day
“When I come to Virginia, I feel I am walking on the pages of history.”
—Eleanor Roosevelt
1 Church Mut. Ins. Co. v. Ephesus Richmond Seventh-Day Adventist Church, 84 Va.App. 371, 914 S.E.2d 184 (2025).
#Appraisal #Arbitration #Virginia