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Ninth Circuit re-affirms that suit against an insurer in a property valuation dispute is premature pending appraisal

4/8/25

By: Rachel E. Hobbs

The Ninth Circuit Court of Appeals recently re-affirmed that when a property policy mandates an appraisal, the insured lacks standing to sue the insurer until the appraisal is complete. In 50 Exchange Terrace LLC v. Mount Vernon Specialty Insurance Co., No. 24-1612, 2025 WL 666363 (9th Cir. Mar. 3, 2025), a property owner suffered damage after frozen pipes burst and caused water damage to its property. The insurer paid the estimated value of the loss. The insurer also demanded an appraisal under the terms of the insurance policy. The insured agreed that the dispute was subject to an appraisal. Nevertheless, the insured sued the insurer in California state court while the appraisal was pending, arguing the insurer wrongfully withheld compensation. The insurer removed to federal court and moved to dismiss based on forum non conveniens. The district court ordered supplemental briefing on Article III standing and ripeness and then dismissed the action due to the lack of both. The insured appealed. 

The Ninth Circuit upheld the district court’s ruling dismissing the action.  In so doing, the Ninth Circuit observed that to have Article III standing, a plaintiff must have suffered an injury-in-fact traceable to the defendant’s conduct. Similarly, for a case to be ripe, it must present issues that are concrete rather than hypothetical or abstract. As the Ninth Circuit noted, the property policy at issue required an appraisal if the parties disagreed about the amount of the loss. In such a case, each party is to retain an appraiser to determine the amount of the loss. If they cannot agree, the appraisers then submit their differences to an umpire. The Ninth Circuit stated that since the insured acknowledged an appraisal was required, it was not possible for a court to determine the extent of any loss while the appraisal was pending. For example, if the umpire were to endorse the insured’s loss estimate, then the insured would not be injured. As such, any claim of injury before the appraisal process was complete would be too speculative to create an actionable claim. The Ninth Circuit recognized that its decision was straightforward and that it was not breaking new ground.  However, the Court issued a precedential decision to ensure that other parties cannot bring premature lawsuits while appraisals are ongoing.      

For any questions or further clarification, please contact Rachel Hobbs at rachel.hobbs@fmglaw.com or your local FMG attorney.