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I thought you might be interested in a new case that just came down here in California that further defines the permissible scope of appraisal proceedings under Insurance Code section 2071. The law here in California is that the appraisal panel cannot get involved in making coverage decisions absent the agreement of both the insured and the insurer. This has led to some confusion as to whether the appraisal panel could decide issues of causation or whether those are coverage issues that are not within the purview of the appraisal panel. In my prior unreported decision of Pajaro Wall Street Inn, LLC v. CIBA Ins. Services (CA6 H032733, filed 2/9/09; not certified for publication or ordered published) I, on behalf of the insurer, argued that the appraisal panel could determine whether something was damaged or not, but could not determine the cause of the damage. The Appellate Court agreed with me.

The recent case of Li-Lin Sung Lee v. California Capital Insurance Company, reaffirms that prior appellate decision in a published opinion. The importance of this case is that the Appellate Court has stated that the appraisal panel can determine if an item is damaged at all or never existed, but cannot determine what caused the damage.

The Appellate Court also held that in an appropriate case the appraisal panel could determine different amounts of loss where there were stated differences in the assumptions about the condition of the property prior to the loss.