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FTI International, Inc. v. Cincinnati Insurance Co.

Case Date: 05/27/2003
Court: 2nd District Appellate
Docket No: 2-02-0697 Rel

No. 2--02--0697


IN THE

APPELLATE COURT OF ILLINOIS

SECOND DISTRICT

FTI INTERNATIONAL, INC., 

          Plaintiff-Appellant,

v.

CINCINNATI INSURANCE COMPANY,

          Defendant-Appellee.

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)
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) 		Appeal from the Circuit
Court of Winnebago
County.

No. 02--L--2

Honorable
Ronald L. Pirrello,
Judge, Presiding.

 

JUSTICE GROMETER delivered the opinion of the court:

Plaintiff, FTI International, Inc., appeals an order of thecircuit court of Winnebago County granting the motion of defendant, Cincinnati Insurance Company, to stay the proceeding below pendingthe outcome of an appraisal. The sole issue raised in this appealis whether the trial court's grant of the motion was consistentwith the provisions of the insurance contract. For the reasonsthat follow, we reverse and remand.

The dispute arises out of the destruction by intruders ofthree pieces of equipment on plaintiff's premises. Plaintiffmanufactures this equipment for sale. Plaintiff claims that it isentitled to an amount in excess of $500,000 by virtue of its policywith defendant. Defendant has paid less than $100,000 on theclaim, relying on a portion of the policy that it asserts limitsits liability to the amount necessary to repair or replace theequipment. Plaintiff, on the other hand, relies on a portion ofthe policy by which it claims it is entitled to the sales prices ofthe three items.

Defendant demanded that the case be submitted to appraisersand moved to stay the proceedings. The policy contains thefollowing provision:

"If we and you disagree on the value of the property or theamount of 'loss', either may make written demand for anappraisal of the 'loss'. In this event, each party willselect a competent and impartial appraiser. The twoappraisers will select an umpire. If they cannot agree,either may request that selection be made by a judge of acourt having jurisdiction. The appraisers will stateseparately the value of the property and the amount of 'loss'. If they fail to agree, they will submit their differences tothe umpire. A decision agreed to by any of the two will bebinding."

Defendant contends that the proceeding below was properly stayedbased on the terms of the policy.

An order to compel arbitration is injunctive in nature. Salsitz v. Kreiss, 198 Ill. 2d 1, 11 (2001). Such an order issubject to interlocutory appeal. Salsitz, 198 Ill. 2d at 11. Thesole question for a court of review is whether there was asufficient showing before the trial court to sustain its order. J&K Cement Construction, Inc. v. Montalbano Builders, Inc., 119Ill. App. 3d 663, 667 (1983). However, the construction of acontract presents a question of law and is thus subject to de novoreview. Fitzwilliam v. 1220 Iroquois Venture, 233 Ill. App. 3d221, 237 (1992).

The present case requires that we construe the portion of theinsurance contract providing for appraisal. The main goal in theconstruction of a contract is to ascertain and give effect to theintent of the parties. Omnitrus Merging Corp. v. Illinois ToolWorks, Inc., 256 Ill. App. 3d 31, 34 (1993). If a contract isclear and unambiguous, the intent of the parties must be determinedsolely from its plain language. Owens v. McDermott, Will & Emery,316 Ill. App. 3d 340, 344 (2000). Additionally, Illinois publicpolicy favors the resolution of disputes through informalprocedures like arbitration. Reed v. Doctor's Associates, Inc.,331 Ill. App. 3d 618, 621 (2002).

The interpretation of the following sentence is key toresolving this appeal: "If we and you disagree on the value of theproperty or the amount of 'loss', either may make written demandfor an appraisal of the 'loss'." For a stay to be appropriate, thedispute must be of a sort that the parties intended would fallwithin the scope of the appraisal process. Lundy v. Farmers Group,Inc., 322 Ill. App. 3d 214, 219 (2001). Thus, the question beforeus concerns what the parties meant by "appraisal."

We conclude that the plain meaning of "appraisal" does notencompass the type of dispute in which the parties are presentlyengaged. Black's Law Dictionary defines "appraisal" as "1. Thedetermination of what constitutes a fair price; valuation;estimation of worth. 2. The report of such a determination." Black's Law Dictionary 97 (7th ed. 1999). Webster's Third NewInternational Dictionary provides the following definitions: "1: anact of estimating or evaluating (as quality, status, or character)esp. by one fitted to judge *** 2: a valuation of property by theestimate of an authorized person." Webster's Third NewInternational Dictionary 105 (2002). Thus, the definitions of"appraisal" in two common sources suggest that an appraisal isprimarily concerned with ascertaining the value of something. There is no indication in either definition that resolvingquestions of law is something that takes place during an appraisal.

Furthermore, a leading treatise explains the differencebetween arbitration and appraisal this way:

"It is important to note at the outset that, as addressedbelow in detail, appraisal and arbitration are two distinctprocedures. Appraisal calls for the mere determination of aparticular fact or set of facts. In the insurance context,appraisal is most often used to determine the amount of theloss sustained under a property insurance policy. Arbitrationis a more far-reaching proceeding, by which the parties agreeto have a neutral person or persons resolve a disputedmatter." 15 Couch on Insurance 3d