                IN THE COURT OF APPEALS OF TENNESSEE
                           AT KNOXVILLE
                              December 10, 2015 Session

    JOSEPH C. THOMAS, ET AL. V. THE STANDARD FIRE INSURANCE
                        COMPANY, ET AL.


                Appeal from the Chancery Court for Hamilton County
                 No. 12-0328       Jeffrey M. Atherton, Chancellor


            No. E2015-01224-COA-R3-CV-FILED-FEBRUARY 17, 2016



This appeal arises from an insurance claim for storm-related damage to the property of
the plaintiffs. The case was resolved on a motion for summary judgment. According to
the plaintiffs, the trial court erred by giving effect to the decision of the appraisal panel
because the policy‟s appraisal provision is unenforceable. The plaintiffs contend the
policy‟s appraisal provision constitutes an agreement to arbitrate subject to Tennessee‟s
version of the Uniform Arbitration Act (Tenn. Code Ann.§ 29-5-301, et seq.). The
plaintiffs further argue the appraisal provision does not comply with Tennessee Code
Annotated section 29-5-302(a) of the Uniform Arbitration Act, which requires
agreements to arbitrate over issues relating to property used as residences must be signed
or initialed by the contracting parties. We affirm the trial court‟s findings.


      Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court
                           Affirmed; Case Remanded

JOHN W. MCCLARTY, J., delivered the opinion of the court, in which THOMAS R.
FRIERSON, II., J., joined, and D. MICHAEL SWINEY, C.J., concurred with separate
concurring opinion.

Grace E. Daniell, Chattanooga, Tennessee, for the appellants, Joseph C. Thomas and
Grace E. Daniell.

Clint J. Woodfin, Knoxville, Tennessee, for the appellees, The Standard Fire Insurance
Company and The Travelers Property Casualty Companies.
                                       OPINION
                                  I. BACKGROUND
       On March 14, 2006, The Standard Fire Insurance Company (“Standard”), a
subsidiary of The Travelers Property Casualty Companies (“Travelers”) (collectively,
“Insurer”), issued a homeowners insurance policy to the plaintiffs, Joseph C. Thomas and
Grace C. Daniell (“Homeowners”) for their residence located at 2967 Folts Circle,
Chattanooga, Tennessee. The policy went into effect on March 14, 2006, and a high
value home endorsement was added through an agency based in North Carolina effective
from March 14, 2011, to March 14, 2012.
       Windstorms and tornadoes swept through the Red Bank and North Chattanooga
area on April 27, 2011. Homeowners contend their dwelling, other structures, and
surrounding premises were damaged, with several large trees falling on their house and
other structures. According to the complaint, over 130 trees on the property were
damaged. Homeowners quickly submitted a claim to Insurer for the storm-related
damage to their property. In May, adjusters for Insurer inspected the damage and issued
payment for the claimed damage to personal property and trees, as well as for tree
removal expenses. There is no dispute regarding the amounts Homeowners were paid for
those aspects of their insurance claim.
       The matter before us pertains to the amount Homeowners are due on the dwelling
and other structures portions of their claim. Insurer retained construction consultants to
determine the amount of loss. Homeowners likewise hired a contractor to prepare an
estimate. When the estimates differed, Homeowners claimed Insurer had greatly
underestimated the damage to their dwelling and other structures. According to
Homeowners, substantially reduced policy benefits were offered to them compared to the
actual damages they sustained.
       On September 14, 2011, Insurer invoked the appraisal process set forth in the
policy, found in subsection 6 of “SECTION I, CONDITIONS”:
             6. Appraisal. If you and we fail to agree on the amount of
             loss, either one can demand that the amount of loss be set by
             appraisal. If either makes a written demand for appraisal,
             each shall select a competent, independent appraiser and
             notify the other of the appraiser‟s identity within 20 days of
             receipt of the written demand. The two appraisers shall then
             select a competent, impartial umpire. If the two appraisers
             are unable to agree upon an umpire within 15 days, you or we
             can ask a judge of a court of record in the state where the
             residence premises is located to select an umpire. The
             appraisers shall then set the amount of loss. If the appraisers
             submit a written report of an agreement to us, the amount

                                           -2-
             agreed upon shall be the amount of the loss. If the appraisers
             fail to agree within a reasonable time they shall submit their
             differences to the umpire. Written agreement signed by any
             two of these three shall set the amount of the loss. Each
             appraiser shall be paid by the party selecting that appraiser.
             Other expenses of the appraisal and compensation of the
             umpire shall be paid equally by you and us.
(Emphasis added.). Per the terms of the policy provision, the parties each selected an
appraiser. After the two appraisers were unable to agree on the amount of loss, the matter
was submitted to an umpire. On December 3, 2012, the umpire determined the amount of
the loss to be $132,793.95. The appraiser for Insurer concurred with that determination.
Insurer agreed to issue payment in that amount. Homeowners, however, would not
accept payment.
       Homeowners filed this lawsuit, arguing Insurer breached the contract with them by
refusing to timely pay the benefits they are entitled to receive under the policy. They
contend Insurer engaged in unethical insurance practices involving delay and “low-
balling,” failed to conduct a timely and reasonable investigation of the damage, and
delayed the investigation and resolution of Homeowners‟ claims. An award of a bad
faith penalty pursuant to Tennessee Code Annotated section 56-7-105 was sought against
Insurer. Additionally, Homeowners alleged Insurer‟s actions violated the Tennessee
Consumer Protection Act, Tennessee Code Annotated section 47-18-109(a)(1), entitling
them to recover treble damages.
        After an unsuccessful motion to dismiss, Insurer filed a motion for summary
judgment based upon the appraisal provision. Insurer sought to bind Homeowners to the
amount of $132,793.95 for their loss. The motion was granted on June 12, 2015. The
trial court noted:
             [Insurer has] moved for summary judgment, arguing that the
             appraisal clause settles this issue and creates contractually
             binding obligations on both parties to – at least given the
             factual events in this case – accept the umpire‟s figure as
             correct and accurate. In response, [Homeowners] have
             argued that the appraisal clause is not binding on them in this
             matter and that they retain the right to challenge the total
             amount of damage in court. The issue in dispute is purely
             legal, not factual; thus, this matter is appropriate for summary
             judgment as no disputed material facts necessitate denying
             summary judgment.
             [Insurer‟s] burden under T.C.A. § 20-16-101 is not
             particularly lofty. Nonetheless, [Insurer] provide[s] more


                                           -3-
than sufficient evidence to carry [its] own burden and shift
the summary judgment burden to [Homeowners]. . . .
Under the now-shifted burden, [Homeowners] posit[] two
arguments to avoid summary judgment, each of which has the
same conclusion: the appraisal provision is not binding. The
first of [Homeowners‟] two arguments is, essentially, that the
appraisal provision is not the same as an arbitration clause
and therefore is not binding. The second, alternative,
argument is that the appraisal is essentially an arbitration
clause, but because it was not initialed separately in
accordance with T.C.A. § 29-5-302(a), it is an invalid
arbitration clause.
To address these in reverse order, [Homeowners‟] second
argument clearly fails because appraisal clauses are clearly
not arbitration clauses. The court of appeals in Merrimack
Mut. Fire Ins. Co. v. Batts, 59 S.W.3d 142 (Tenn. Ct. App.
2001), addressed this exact question. . . . [T]his Court
likewise concludes that appraisal clauses are not arbitration
clauses, and therefore the absence of initials here does not
impact whether that provision is binding on [Homeowners].
Before addressing [Homeowners] other argument – that
because the appraisal clause is not an arbitration clause, it is
not binding on [Homeowners] – the Court wishes to narrow
the issue and identify what is, and, perhaps more importantly,
what is not being challenged by [Homeowners] in this
lawsuit. [Homeowners] are not challenging the existence of
the appraisal clause in the contract. [Homeowners] are not
challenging the procedure dictated by the appraisal clause.
[Homeowners] are not challenging the application of the
procedure with regards to any type of bias or favoritism.
[Homeowners] are not challenging the credentials, credibility,
or any other specific qualification of the umpire that was used
in this case. [Homeowners] are not challenging the general
validity of the appraisal clause. Instead, [Homeowners] are
narrowly challenging the dollar-value conclusion reached by
the umpire and agreed-to by [Insurer‟s] appraiser. In other
words, [Homeowners] are not challenging the general process
or the application of the process, but merely challenging the
conclusion of the process.
Turning now to [Homeowners‟] other argument aimed at
avoiding summary judgment, [Homeowners] ask this Court to
                              -4-
hold the appraisal clause is not binding and that they retain
the right to challenge the determined value of damages in a
court proceeding. . . . [Homeowners] provide one argument:
that appraisal clauses related to residential property are not
binding. The Court finds this argument is not supported by
the holding in Merrimack and the fact the property in that
case happened to be residential did not actually factor into the
analysis. . . .
                             ***
In essence, the question in Merrimack dealt with the degree of
finality (or extent to which the parties were bound) from the
value of damages as determined by the umpire. The
homeowner argued that whatever number was determined by
the umpire was final, binding, and without exception. The
insurance company argued that the dollar amounts were final,
but which amounts were actually owed remained
undetermined. Here, in this present matter, it is particularly
noteworthy that [Homeowners] are only challenging the
dollar value of damages as determined by the umpire – in
other words, [Homeowners] ask this Court to increase those
numbers, not to decide any questions about coverage or
liability.
                             ***
To this Court, Merrimack stands for the following legal
principles. First, appraisal clauses are not the same as
arbitration clauses. Second, appraisers‟ (and eventually
umpires‟) scope of authority is strictly defined by the contract
or other agreement of the parties, and typically that scope is
limited to finalizing the valuation of damage. Third, the
umpire‟s determinations with regards to matters within the
scope of authority granted to the umpire are binding on the
parties and may not be challenged in court where the
challenge is only based upon the umpire‟s determined
amount.
This third principle, though not explicitly stated in
Merrimack, is the only possible inference based upon the
reasoning and holding of the case. The court discussed at
length why the insurance company was permitted to alter the
umpire‟s findings only when the alteration was based upon
issues of liability, causation, or other valid reasons of denied

                              -5-
coverage – because the insurance company was altering
matters outside the umpire‟s scope of authority. The one
facet not allowed to be altered, then, would be matters inside
the scope of authority – the value of the loss. . . . The
insurance company was only permitted to differ from the
umpire‟s findings on issues that were not within the umpire‟s
discretion to determine. Implicit here is that the insurance
company, then, could not ignore or disagree with the umpire‟s
determination on matters that fell within the authority given
to the umpire. The Merrimack decision spends considerable
time on the circumstances and issues where it is permissible
for a party to dispute the findings of an umpire. Obviously
where the umpire‟s findings cannot be disputed, that
determination would be considered binding upon the parties.
Put simply: an umpire’s determination on any matter
within the scope of authority granted to the umpire under
the appraisal clause is binding upon the parties to the
contract; any question outside that scope remains subject to
judicial challenge.
Artist Bldg. Partners v. Auto-Owners Mut. Ins. Co., 435
S.W.2d 202 (Tenn. Ct. App. 2013) – the other primary case
relied upon by both parties – lends further support [to] this
Court‟s reading of Merrimack. In Artist Bldg., the court
upheld the trial court‟s grant of summary judgment on an
issue related to an appraisal provision and umpire
determination. In sum, an umpire made determinations on a
host of matters, and those determinations were then
challenged in court. Both the trial court and court of appeals
found that the determinations made by the umpire that were
being challenged in court did fall within the authority granted
to the umpire. Because the challenges went to matters that
were within the umpire‟s authority to determine, summary
judgment was granted dismissing the challenges because of
“the binding nature of [the umpire‟s] decision.”
Furthermore, the insurance company raised several factual
issues that called into question whether or not the
determination made by the umpire was a good or sound
determination. The court did not even consider these facts,
instead noting that “[t]hese facts are irrelevant at this stage of
the proceeding,” because “the parties expressly agreed that
the [umpire] would decide” that issue. The court stated that
since the umpire reached a determination on that issue, “that

                               -6-
decision was binding.” In essence, the court determined that
for matters within the discretion of the umpire, those matters
are binding and not subject to judicial review of competing
facts or arguments that the umpire should have (or could
have) reached a different conclusion.
Applying these principles to the present case requires a
determination of what this contract authorizes the umpire to
decide and whether [Homeowners‟] challenge relates to
something within or excluded from that scope. This is not a
difficult application. The insurance contract is clear in its
terms that the determination of the umpire “shall” bind the
parties. Further, the provision is clear with regard to the
scope of authority granted to the umpire. It states the
appraisal clause is to be used to “set the amount of loss.”
Thus, based upon a plain reading of the unambiguous
language, the one aspect of the umpire’s determination that
is clearly binding is the determination with regard to the
monetary amount of loss.
The second step, then, considers whether [Homeowners] are
challenging something within the binding authority of the
umpire or outside that granted authority. . . . The only thing
being challenged by [Homeowners] in this case is the amount
of loss and nothing else.        . . .      Unfortunately for
[Homeowners], this is one of the few things they are unable
to challenge. They are bound by the terms of their contract
and this provision. The umpire was given express and
exclusive rights to set the amount of loss and [Homeowners]
are bound by, and thereby prohibited from challenging, this.
                             ***
The Court is aware that the contract at issue, being the
insurance policy, is an adhesion contract. Certainly, adhesion
contracts may be repugnant, at least from the perspective of
[Homeowners‟] ability to negotiate the terms of the
contract[.] However, under the facts presented to the Court in
this case and in light of the Court‟s understanding of the law .
. . the Court is constrained to enforce the contract as written.
Simply state[d], the terms relating to the appraisal clause are
not so unconscionable, oppressive, or outside the parties‟
reasonable expectation so as to be unenforceable.



                              -7-
             To summarize the Court’s findings: the appraisal clause is
             not an arbitration clause. An umpire’s authority is
             narrowly tailored based upon the authority contractually
             delegated to the umpire. All determinations made by an
             umpire on matters within that scope of authority are binding
             on all parties. Though certain aspects surround[ing] the
             processes might be reviewable by courts, the determinations
             themselves are not subject to judicial review. Here, the
             contract’s appraisal provision clearly gives the umpire
             authority to set the value of loss. The umpire did just that.
             [Homeowners] have only challenged the value that was set
             by the umpire, which is the precise determination [that] is
             binding and thus not challengeable.            Accordingly,
             [Insurer‟s] motion for summary judgment is granted.
(Emphasis added. Internal citations and footnotes omitted.). This timely filed appeal by
Homeowners followed.


                                       II. ISSUES
      The issues raised on appeal by Homeowners are as follows:
             A.     Whether the appraisal provision of Homeowners‟
             insurance policy should be enforced.
             B.       Whether Homeowners deserve prejudgment interest.


                             III. STANDARD OF REVIEW
      As this court recently noted in Fuller v. Banks, No. W2015-01001-COA-R3-CV,
2016 WL 409639 (Tenn. Ct. App. Feb. 3, 2016):
             For actions initiated on or after July 1, 2011, such as the one
             at bar, the applicable standard of review for summary
             judgment is set out in Tennessee Code Annotated Section 20–
             16–101. See Rye v. Women's Care Center of Memphis,
             MPLLC, ––– S.W.3d ––––, ––––, 2015 WL 6457768 at *11
             (Tenn. Oct. 26, 2015). The statute provides:
                  In motions for summary judgment in any civil action in
                  Tennessee, the moving party who does not bear the
                  burden of proof at trial shall prevail on its motion for
                  summary judgment if it:


                                            -8-
  (1) Submits affirmative evidence that negates an
  essential element of the nonmoving party's claim; or
  (2) Demonstrates to the court that the nonmoving party's
  evidence is insufficient to establish an essential element
  of the nonmoving party‟s claim.
Tenn. Code Ann. § 20–16–101. The grant or denial of a
motion for summary judgment is a matter of law; therefore,
our standard of review is de novo with no presumption of
correctness. Rye, ––– S.W.3d at ––––, 2015 WL 6457768 at
*12; Dick Broad. Co., Inc. of Tenn. v. Oak Ridge FM, Inc.,
395 S.W.3d 653, 671 (Tenn.2013) (citing Kinsler v. Berkline,
LLC, 320 S.W.3d 796, 799 (Tenn.2010)). “Summary
judgment is appropriate when „the pleadings, depositions,
answers to interrogatories, and admissions on file, together
with the affidavits, if any, show that there is no genuine issue
as to any material fact and that the moving party is entitled to
a judgment as a matter of law.‟” Rye, ––– S.W.3d at ––––,
2015 WL 6457768 at *12 (quoting Tenn. R. Civ. P. 56.04).
Pursuant to Tennessee Rule of Civil Procedure 56.04, the trial
court must “state the legal grounds upon which the court
denies or grants the motion” for summary judgment, and our
Supreme Court has instructed that the trial court must state
these grounds “before it invites or requests the prevailing
party to draft a proposed order.” Smith v. UHS of Lakeside,
Inc., 439 S.W.3d 303, 316 (Tenn. 2014).
Concerning the requirements for a movant to prevail on a
motion for summary judgment pursuant to Tennessee Rule of
Civil Procedure 56, our Supreme Court has explained:
  We reiterate that a moving party seeking summary
  judgment by attacking the nonmoving party‟s evidence
  must do more than make a conclusory assertion that
  summary judgment is appropriate on this basis. Rather,
  Tennessee Rule 56.03 requires the moving party to
  support its motion with “a separate concise statement of
  material facts as to which the moving party contends
  there is no genuine issue for trial.” Tenn. R. Civ. P.
  56.03. “Each fact is to be set forth in a separate,
  numbered paragraph and supported by a specific citation
  to the record.” Id. When such a motion is made, any
  party opposing summary judgment must file a response
  to each fact set forth by the movant in the manner
                              -9-
                 provided in Tennessee Rule 56.03. “[W]hen a motion
                 for summary judgment is made [and] . . . supported as
                 provided in [Tennessee Rule 56],” to survive summary
                 judgment, the nonmoving party “may not rest upon the
                 mere allegations or denials of [its] pleading,” but must
                 respond, and by affidavits or one of the other means
                 provided in Tennessee Rule 56, “set forth specific facts”
                 at the summary judgment stage “showing that there is a
                 genuine issue for trial.” Tenn. R. Civ. P. 56.06. The
                 nonmoving party “must do more than simply show that
                 there is some metaphysical doubt as to the material
                 facts.” Matsushita Elec. Indus. Co. [v. Zenith Radio
                 Corp.], 475 U.S. [574,] 586, 106 S.Ct. 1348 [(1986)].
                 The nonmoving party must demonstrate the existence of
                 specific facts in the record which could lead a rational
                 trier of fact to find in favor of the nonmoving party.
Fuller, 2016 WL 409639 at *2-3 (quoting Rye, ––– S.W.3d at ––––, 2015 WL 6457768 at
*22).
       Insurance policies are contracts. Merrimack Mutual Fire Ins. Co., 59 S.W.3d 142,
147 (Tenn. Ct. App. 2001). Questions relating to the interpretation of written contracts
involve legal rather than factual issues. Brandt v. Bib Enters., Ltd., 986 S.W.2d 586, 592
(Tenn. Ct. App. 1998). “As such, courts interpret insurance policies using the same
tenets that guide the construction of any other contract.” Am. Justice Ins. Reciprocal v.
Hutchison, 15 S.W.3d 811, 814 (Tenn. 2000); Hurley v. Tenn. Farmers Mut. Ins. Co.,
922 S.W.2d 887, 892 (Tenn. Ct. App. 1995). The terms of an insurance policy “must be
interpreted fairly and reasonably, giving the language its usual and ordinary meaning.
Naifeh v. Valley Forge Life Ins. Co., 204 S.W.3d 758, 768 (Tenn. 2006). The primary
rule of contract interpretation is to ascertain and give effect to the intent of the parties.”
Clark v. Sputniks, 368 S.W.3d 431, 441 (Tenn. 2012). The policy should be construed
“as a whole in a reasonable and logical manner, and the language in dispute should be
examined in the context of the entire agreement.” Id. (quotations omitted).


                                    IV. DISCUSSION
       Referring to the selection of two appraisers and an “umpire” appraiser, subsection
6 of section I of the policy states, “Written agreement signed by any two of these three
[appraisers and umpire] shall set the amount of the loss.” The umpire and one other
appraiser agreed the amount of loss was $132,793.95. Homeowners do not suggest the
appraisal was improperly conducted or there were any coverage issues with the award.
They simply desire more money. In a well-reasoned opinion, the trial court determined
Homeowners should be bound by the appraisal provision.

                                            - 10 -
       The parties agreed the appraisal panel would “set the amount of the loss.”
Homeowners, therefore, are not entitled to disregard the policy‟s expressed intent and
contest the appraisers‟ finding. See Artist Building Partners v. Auto-Owners Mut. Ins.
Co., 435 S.W.3d 202 (Tenn. Ct. App. 2014) (“[T]he parties expressly agreed that the
appraisal panel would decide . . . .”). Id. at 217-19. We affirm the trial court‟s finding
the parties are bound to the appraisers‟ determination of the amount of loss. The
determinations by the appraisal panel did not exceed the scope of its authority. There is
no genuine issue of material fact as to the binding nature of the appraisal panel‟s finding.
        Homeowners assert the appraisal provision is in effect an agreement to arbitrate,
and as such must comply with the requirements of Tennessee Code Annotated section 29-
5-302(a). In Merrimack Mutual Fire Insurance Company v. Batts, 59 S.W.3d 142 (Tenn.
Ct. App. 2001), we rejected the very same theory and held an appraisal provision of a
property insurance policy was not an agreement to arbitrate subject to the Uniform
Arbitration Act. Id. at 147-50. Referring to treatises and case law from other
jurisdictions, the Merrimack court concluded “arbitration proceedings and appraisal
proceedings are not the same thing.” 59 S.W.3d at 149. The decision described
arbitration as a formal proceeding used as an alternative to going to court to decide issues
of both law and fact. An appraisal, on the other hand, was described as a means to
quantify the monetary value of a property loss. Id., at 149-50. Thus, we have squarely
held an appraisal provision in a homeowners‟ policy is not an agreement to arbitrate
subject to the Uniform Arbitration Act. Homeowners have not presented us any basis for
abrogating our decision. None of the authorities cited by Homeowners are sufficient for
us to overturn Merrimack. The signature requirements of section 29-5-302(a) of the
Uniform Arbitration Act do not apply to appraisals. Id., at 150-52. The trial court
properly enforced the appraisal provision of Homeowners‟ policy and found the parties
are bound by the decision of the appraisers. Prejudgment interest is not warranted.


                                   V. CONCLUSION
       We affirm the decision of the trial court granting summary judgment to Insurer.
This case is remanded for further proceedings as may be necessary. Costs of the appeal
are assessed to Joseph C. Thomas and Grace E. Daniell.



                                          _________________________________
                                          JOHN W. McCLARTY, JUDGE




                                           - 11 -
