Arbitrator Factual Error Must Stand
Barry Zalma
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In Martinique Properties, LLC v. Certain Underwriters at Lloyd’s of London, Subscribing to Policy Number W1551E160301; Beazley Lloyd’s Syndicate 2623; Beazley Lloyd’s Syndicate 623, No. 21-3561, United States Court of Appeals, Eighth Circuit (March 1, 2023) the Eighth Circuit interpreted the Federal Arbitration Act as applied to an insurance appraisal.
FACTS
Martinique Properties, LLC sued the Certain Underwriters at Lloyd’s, London (Underwriters) seeking to vacate an arbitration award. The district court dismissed the complaint for failure to state a claim for vacatur. Martinique Properties appealed.
Martinique Properties owned apartments in Omaha, Nebraska, for which it had property insurance coverage through Underwriters. In May 2016, while the policy was in effect, the apartments sustained hail and wind damage. Martinique Properties submitted an insurance claim for reimbursement of its repair costs and the Underwriters and Martinique disputed the amount owed for the repairs.
The insurance policy included an appraisal provision, which governed the process for resolving disagreements as to the amount of loss or the value of the property. Under the provision, a panel of appraisers was to evaluate the property damage and determine the amount of loss. If the panel came to a decision, its agreed-upon appraisal award would be binding on the parties.
Martinique Properties invoked the appraisal provision. A panel of appraisers agreed on a binding appraisal award in June 2020. The suit against Underwriters sought a declaration that the appraisal process and award were invalid. According to Martinique Properties, the award incorporated incorrect figures and measurements.
The district court granted Underwriters’ motion to dismiss, finding that none of Martinique Properties’ allegations presented appropriate grounds for vacatur.
ANALYSIS
The Arbitration Act is a congressional declaration of a liberal federal policy favoring arbitration agreements. Under the Act a court may only vacate an arbitration award in four limited circumstances, and in the absence of one of these grounds, the award must be confirmed.
Martinique Properties argued that the appraisal award must be vacated because the appraisers used figures and measurements which are contrary to the actual conditions of the Property and failed to consider certain buildings and certain portions of a damaged roof when determining the appraisal award.
Martinique Properties alleged only factual errors that challenge the merits of the appraisal award, and the Eighth Circuit had no authority to reconsider the merits of an arbitration award, even when the parties allege that the award rests on factual errors.
An arbitrator does not exceed his or her powers by making an error of fact. Accordingly, the appraisers’ use of certain figures and measurements in calculating the amount of loss and their alleged failure to consider particular buildings and portions of roof damage, even if incorrect, are not sufficient for vacatur under the act.
Since the parties bargained for the arbitrator’s decision; if the arbitrator got it wrong, then that was part of the bargain.
ZALMA OPINION
Appraisal of the extent of loss in a first party property insurance policy is, in the Eighth Circuit, an arbitration. Arbitration is designed to avoid or limit litigation. When insured and insurer agree to appraisal in accordance with the terms of the policy is binding on both parties except in the case of fraud or misconduct. Arguments over fact belong in the appraisal proceedings and neither a state nor a federal court may place its evaluation over that of the appraisers. Martinique chose appraisal and must accept the findings of the appraisers.
(c) 2023 Barry Zalma & ClaimSchool, Inc.
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Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and [email protected]
Write to Mr. Zalma at [email protected]; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library
Barry Zalma, Esq., CFE is available at http://www.zalma.com and [email protected], Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://lnkd.in/gfFKUaTf.
Consider subscribing to my publications at substack at https://lnkd.in/gcZKhG6g
Go to Barry Zalma videos at Rumble.com at https://lnkd.in/gV9QJYH; Go to Barry Zalma on YouTube- https://lnkd.in/g2hGv88; Go to the Insurance Claims Library – https://lnkd.in/gWVSBde
Happy Law Day
ZIFL – Volume 30, Issue 9 – May 1, 2026
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THE SOURCE FOR THE INSURANCE FRAUD PROFESSIONAL
ZIFL – Volume 30, Issue 9 – May 1, 2026
Zalma’s Insurance Fraud Letter (ZIFL) continues its 30th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year and is written by Barry Zalma.
DOJ Creates National Fraud Enforcement Division
Will the Feds Take on Insurance Fraud? Possibly as Part of a National Anti-Fraud Effort
On April 7, 2026, the Acting Attorney General, Todd Blanche, issued a memorandum establishing the Department of Justice National Fraud Enforcement Division (NFED). The memo describes an ambitious, but perhaps redundant, vision for this ...
When Abalone Died As a Result of Multiple Causes The Efficient Proximate Cause Requires Payment
Post number 5345
Read the full article at https://www.linkedin.com/pulse/efficient-proximate-cause-doctrine-saves-claim-barry-zalma-esq-cfe-yndlc, see the video at and at and at https://zalma.com/blog plus more than 5300 posts.
In American Abalone Farms, LLC v. Star Insurance Company et al., H052643, California Court of Appeals, Sixth District (April 27, 2026) the Court of Appeals dealt with an insurance coverage issue that required application of the efficient proximate cause doctrine.
FACTS
American Abalone Farms, LLC ("American Abalone" ) operates an aquaculture farm in Santa Cruz County, California, raising abalone in tanks. In August 2020, the CZU Lightning Complex Fires led to a prolonged power outage and road closures near the farm. As a result, the farm’s water pumps failed, causing the death of most of the ...
Breach of a Specific Condition Precedent Is a Complete Defense
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In United Services Automobile Association and State Farm Mutual Automobile Insurance Company v. Anthony Wenzell, 2026 CO 25 (Colo. Apr. 27, 2026) Anthony Wenzell was rear-ended in a car accident. He had a significant prior 2014 accident that required back surgery.
Wenzell claimed underinsured-motorist (UIM) benefits under three policies: (1) the tortfeasor’s liability policy, (2) his own primary UIM policy with State Farm, and (3) an excess UIM policy issued by USAA (under his brother’s policy, which contained an “other insurance” clause making USAA’s coverage excess over any collectible insurance).
After receiving the claims, both USAA and State Farm repeatedly requested that Wenzell execute comprehensive medical-release authorizations so they could obtain his full medical records and ...
It is Fraud to Make the Same Claim Twice
Read the full article at https://www.linkedin.com/pulse/fraud-make-same-claim-twice-barry-zalma-esq-cfe-c4g8c and at https://zalma.com/blog.
Chutzpah: After Being Paid for a New Roof Insured Makes Second Claim For Same Damages
Post number 5347
No One is Entitled to be Paid for the Same Loss Twice
In Mohammed Ali Khalili v. State Farm Lloyds, No. 14-25-00611-CV, Court of Appeals of Texas (April 30, 2026) Khalili maintained a State Farm Lloyds homeowners insurance policy for decades. In 2008 he filed a roof-damage claim; State Farm paid him to replace the entire roof (shingles and gutters). Khalili never replaced the roof and repeated his claim.
BACKGROUND
In 2021 he filed a second roof claim. State Farm’s inspectors found the roof “very old” with extensive non-storm-related damage. The claim was denied because (1) the damage did not exceed the deductible and (2) State Farm had already paid for a full roof replacement.
PROCEDURAL HISTORY
State Farm filed motion for summary...
It is Fraud to Make the Same Claim Twice
Read the full article at https://www.linkedin.com/pulse/fraud-make-same-claim-twice-barry-zalma-esq-cfe-c4g8c and at https://zalma.com/blog.
Chutzpah: After Being Paid for a New Roof Insured Makes Second Claim For Same Damages
Post number 5347
No One is Entitled to be Paid for the Same Loss Twice
In Mohammed Ali Khalili v. State Farm Lloyds, No. 14-25-00611-CV, Court of Appeals of Texas (April 30, 2026) Khalili maintained a State Farm Lloyds homeowners insurance policy for decades. In 2008 he filed a roof-damage claim; State Farm paid him to replace the entire roof (shingles and gutters). Khalili never replaced the roof and repeated his claim.
BACKGROUND
In 2021 he filed a second roof claim. State Farm’s inspectors found the roof “very old” with extensive non-storm-related damage. The claim was denied because (1) the damage did not exceed the deductible and (2) State Farm had already paid for a full roof replacement.
PROCEDURAL HISTORY
State Farm filed motion for summary...
What Must be Done after Notice of a Claim is Received by the Insurer
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A first party property policy does not insure property: it insures a person, partnership, corporation or other entity against the risk of loss of the property. Before an insured can make a claim for indemnity under a policy of first party property insurance the insured must prove that there was damage to property the risk of loss of which was insured by the policy. The obligation imposed on the insured ...
