Court Declines to Compel Appraisal Where Coverage is Disputed[1]
In FutureCare Health and Management Corporation v. Affiliated FM Insurance Company, 2026 WL 1947844 (D. Md. 2026), the United States District Court for the District of Maryland held that appraisal was not appropriate where the insurer disputed coverage for all claimed losses, rather than merely disputing the amount of loss. The decision highlights the distinction between disputes over the value of a covered loss and disputes over whether any coverage exists in the first instance.
Facts
The case arose from a claim involving a nursing home property owned and operated by the plaintiffs. In November 2023, staff discovered a failing ceiling near a nurses’ station. Subsequent investigations determined that structural trusses in the building, which had been treated with fire-retardant chemicals decades earlier, had deteriorated and allegedly lost their ability to support the structure. According to the insureds, the condition caused damage to ceilings, walls, HVAC systems, plumbing, electrical components, and resulted in business interruption losses while repairs were performed.
The insurer issued property policies covering the nursing home. Those policies contained exclusions for, among other things, wear and tear, deterioration, latent defects, faulty workmanship or design, and settling or cracking of structural components. The parties agreed that the policies could potentially cover resulting damage to separate property not inextricably related to the defective trusses. They sharply disagreed, however, on whether any such covered damage existed. The insureds contended that the loss constituted a covered collapse and that all damage other than the trusses themselves was covered. The insurer maintained that all claimed losses fell within applicable exclusions.
Legal Analysis
The insureds sought to invoke the policy’s appraisal provision, arguing that appraisal functioned similarly to arbitration. The insurer responded that appraisal was premature because the parties were not disputing the amount of loss; instead, they disputed whether the claimed losses were covered at all.
The court agreed with the insurer. In reaching its decision, the court distinguished prior decisions that had compelled appraisal where the parties agreed that some portion of the loss was covered but disagreed about valuation. In those cases, appraisal served its intended purpose of determining the amount of an otherwise covered loss while preserving the insurer’s ability to litigate discrete coverage issues later.
By contrast, the court found that the dispute before it centered on coverage rather than valuation. The insurer was not challenging the accuracy or magnitude of the insureds’ claimed damages. Instead, it contended that all claimed losses were excluded from coverage because they were intertwined with the defective trusses. Because the threshold question was whether any covered loss existed, the court concluded that the coverage dispute had to be resolved before appraisal could be utilized. The court therefore denied the motion to compel appraisal without prejudice, leaving open the possibility that appraisal could become appropriate if the court later determined that some portion of the loss was covered and the parties disagreed about its value.
Conclusion
The ruling in FutureCare underscores that appraisal provisions generally address disputes concerning the amount of a covered loss, not disputes over whether coverage exists at all. Where the parties fundamentally disagree about the existence of coverage, courts may require those issues to be resolved before the appraisal process can proceed.
[1] This blog focuses solely on the court’s appraisal ruling and does not address the decision’s other issues.