Gebers

Insurance Code section 2071 requires that all fire insurance policies include a provision requiring disputes as to the amount of a loss to be arbitrated by a panel composed of “disinterested” appraisers selected by the insurer and the insured. State Farm General Insurance Company instead placed in its policy a provision describing the party-designated appraisers not as “disinterested” but as “independent.” On the basis of this changed language State Farm argues that it can select an appraiser who may be biased in the insurer’s favor by reason of a pecuniary interest in an ongoing employment relationship with the insurer. We hold that such a result is impermissible in that the language of the policy must yield to the language of the statute requiring that the appraisers be disinterested.

Background

The homeowners policy issued to plaintiffs Richard and Georganne Gebers by State Farm had a provision specifying that a dispute as to the amount of a loss would be resolved by a process akin to arbitration: insured and insurer would each select an appraiser, the appraisers would select an “impartial umpire,” and agreement by two of the three would fix the amount of the loss.…