Ohio Supreme Court Upholds Binding Appraisal Award, Rejects Insured’s Claim for Subsequently Discovered “Hidden” Damage

Recently, the Ohio Supreme Court held that an insured’s allegation that additional “hidden” damages were discovered after completion of a binding appraisal were insufficient to state a claim for mistake that would permit the appraisal award to be set aside.

In One Church v. Brotherhood Mutual Insurance Co., the insured church submitted a property insurance claim to Brotherhood Mutual Insurance Co. for damage allegedly caused by a February 2019 windstorm. When the parties could not agree on the amount of the loss, One Church invoked the policy’s appraisal provision. Each party selected an independent appraiser, and the appraisers ultimately agreed to an appraisal award of $313,271.98. Brotherhood Mutual paid the award, less the applicable deductible, and One Church accepted the payment.

Thereafter, One Church alleged that it discovered additional hidden damage and sought an additional $206,663.09 from Brotherhood Mutual. Brotherhood Mutual declined to pay the additional amount, and One Church filed suit asserting, among other claims, breach of contract. After filing an answer and counterclaim, Brotherhood Mutual moved for judgment on the pleadings. The trial court granted Brotherhood Mutual’s motion, finding that the appraisal award was binding and that One Church had not sufficiently alleged fraud, misfeasance, or mistake warranting reopening the appraisal process. Ohio’s Tenth District Court of Appeals reversed, concluding that One Church had sufficiently pleaded mistake.

Brotherhood Mutual appealed to the Ohio Supreme Court, which agreed with Brotherhood Mutual and reversed the appellate court’s ruling. The court explained that appraisal awards are ordinarily binding and conclusive between the parties and may be set aside only where there is a defect so egregious that it undermines the nature of the award, such as fraud or manifest mistake. A mere error in judgment is insufficient.

The court further held that, under Ohio Civil Rule of Civil Procedure 9(B), a claim of mistake must be pleaded with particularity. One Church’s allegation that additional hidden damages were discovered did not satisfy that standard because the complaint did not identify what damages were discovered, how or where they were discovered, why they were previously hidden, or facts demonstrating that the appraisers made a manifest mistake. Rather, the court determined that One Church was effectively alleging that the appraisal award was incomplete and seeking to augment the amount previously determined through the binding appraisal process.

Thus, the court held that the insured failed to state a claim for breach of contract or mistake and reinstated the trial court’s dismissal of the complaint, reinforcing that an insured seeking to challenge a binding appraisal award in Ohio must allege specific facts demonstrating fraud or manifest mistake. The subsequent discovery of additional damage, standing alone, is insufficient.