In 453 Laurel Rd Holdings, LLC v. State Farm Fire & Casualty Co., No. 6:25-cv-00094-REW-HAI, 2026 WL 3230469 (E.D. Ky. Oct. 28, 2026), the United States District Court for the Eastern District of Kentucky vacated an appraisal award because the appraisers and umpire valued different scopes of loss.
Facts
The insured reported the theft of copper wiring and piping from one building of a six-building apartment complex. The police report, photographs, and two insurer inspections all focused on that theft. The public adjuster’s initial $448,936.50 estimate, however, included drywall, doors, windows, flooring, and other items across multiple buildings. A later sworn proof of loss on the insurer’s form claimed $116,953.17 without explaining why the claimed amount differed substantially from the earlier estimate. The insurer’s estimate was $114,634.91.
After the insured sued and demanded appraisal, the insurer agreed to appraise only the copper theft and requested time to investigate newly asserted damage. The insured disputed that limitation but proceeded. The insurer’s appraiser valued the theft at $200,571.93; the insured’s appraiser valued losses across all six buildings at $518,896.18. The umpire adopted the insured’s categories and awarded approximately $498,700 for items such as HVAC, cabinetry, and aluminum windows, without itemizing the copper wiring, plumbing materials, or labor associated with the theft.
Analysis
Under Kentucky law, appraisal awards are presumed valid but may be set aside for fraud, bad faith, material mistake, or a failure to understand or complete the assigned task. Kenneth D. Parrish, DMD, Ph.D., P.S.C. v. Schroering, 636 S.W.3d 133, 144 (Ky. Ct. App. 2021). With no fraud or bad faith alleged, the court held that the appraisers and umpire failed to understand, or were mistaken as to, the agreed scope of their task.
The court first determined that the appraisal was limited to the copper theft. Measured against the policy’s loss-reporting duties, the police report, the public adjuster’s engagement letter, inspections, photographs, and sworn proof of loss all described a single theft at one building, and only that claim had ripened into a valuation dispute. The award, however, valued a different and far broader loss. The court compared the error to Elswick v. Justice, 154 S.W.2d 714 (Ky. 1941), where appraisers valued 80 acres of a 176-acre property. The insurer’s appraiser attested that her assignment covered only the copper theft, and the insured offered no contrary affidavit.
The court also noted that, because the policy preserved the insurer’s right to deny a claim after appraisal, the insurer could condition the appraisal’s scope on claims it had investigated, and that enforcing the award would give the insured a windfall and undermine appraisal’s efficiency.
Conclusion
The court vacated the award and ordered the parties to proceed with discovery, noting that the insured’s broader claim remains to be determined. The decision illustrates that an appraisal award may be set aside where the record shows the appraisers and umpire valued a loss different from the one submitted to appraisal.