The recent federal court decision in Jazi Kat 4659 Rockridge LLC v. Travelers Casualty Insurance Company of America should serve as a reminder that winning the valuation battle through appraisal does not necessarily mean the policyholder will win the bad faith war. The facts are familiar to many losses. A fire loss occurs. The insurer makes initial payments. The policyholder disputes the scope and value of the damage. The disagreement leads to appraisal, which results in a higher award than what the insurer originally paid. That scenario plays out every day across the country.
The policyholder filed suit before the appraisal process concluded, alleging breach of contract and bad faith. But by the time the case reached summary judgment, the insurer had participated in appraisal and paid the award. That sequence proved fatal to the breach of contract claim. The court had little difficulty concluding that once the appraisal process was completed and paid, there was no remaining breach. In the court’s view, appraisal did exactly what it was supposed to do. It resolved the dispute over the amount of loss. Of course, property insurance policies also say the insurer does not have to pay until so many days after a judgment. Going to appraisal or being sued and then paying after those are finished does not mean an insurer acted in good faith before either of those methods of dispute resolution took place. I have discussed this before in Bad Faith Insurance Practices Shielded By “Get Out of Jail Free” Late Payments.
Unfortunately, some courts across the country often treat appraisal as a contractual mechanism that cures bad faith action by insurers. The troubling aspect of this case lies in what happened to the bad faith claim. The court found that the policyholder could not prove consequential damages caused by the insurer’s conduct.
The policyholder’s primary damages theory, that delays in payment caused lost rental income and loan problems, had already been struck as a discovery sanction. With that theory removed, the remaining damage claims fell apart quickly. The court ruled that appraisal costs could not be recovered because the policy explicitly required each party to bear its own appraiser and share umpire expenses. It rejected prejudgment interest because the claim was not “liquidated,” noting that construction valuation necessarily involves opinion and discretion. It dismissed punitive damages for lack of any evidence of the “evil mind” required under Arizona law.
In other words, even if the insurer had acted in bad faith during the adjustment process, the policyholder had no legally recoverable harm left to present to a jury. Too often, policyholders assume that proving underpayment, or even forcing an insurer to pay significantly more through appraisal, will naturally support a bad faith claim.
This case demonstrates the flaw in that assumption. A higher appraisal award does not, by itself, establish bad faith. Nor does it establish damages caused by bad faith. Courts are increasingly willing to separate the valuation dispute from the conduct of the insurer. If the only harm alleged is tied to delayed payment, the entire bad faith claim can collapse.
The court went even further. As a backup ruling, it held that the claim was “fairly debatable,” emphasizing that the dispute centered on differing expert opinions regarding whether demolition was necessary. Without evidence showing that the insurer lacked a reasonable basis for its position, the court concluded that no reasonable jury could find bad faith.
Appraisal is a valuable tool, but it can also become a shield for wrongful acting insurers. When appraisal is treated by courts as the end-all solution, it risks obscuring legitimate concerns about how the claim was handled before appraisal was invoked. Delay, inadequate investigation, and reliance on outcome-oriented experts do not magically become reasonable simply because an appraisal award is eventually paid.
For those representing policyholders, the lesson is to develop damages, protect evidence, and not rely solely on the difference between the insurer’s estimate and the appraisal award to prove bad faith conduct.
I also note that Travelers retained very familiar and competent defense counsel, Amy Samberg. Lawyers make a difference.
Thought For The Day
“It is not enough to win a war; it is more important to organize the peace.”
— Aristotle
Jazi Kat 4659 Rockridge v. Travelers Cas. Ins. Co. of America, No. CV-23-00716 (D. Ariz. May 13, 2026).