During the appraisal process, which according to KCOM had gone awry, KCOM sued EMC seeking damages arising from EMC's allegedly unreasonable delay in failing to pay the full amount due under the policy. Count I of KCOM's complaint alleged EMC's breach of contract, Count II alleged unreasonable delay and denial of benefits, and Count III alleged bad faith breach of an insurance contract.

The district court stayed the matter pending completion of the appraisal process.

The umpire and EMC's appraiser agreed to an appraisal award of $208,445.57. KCOM objected to the award and refused EMC's tender.

When KCOM refused to dismiss its lawsuit, EMC filed a motion to confirm the appraisal award in the district court. In its motion, EMC posited that the appraisal award was subject to the provisions of the Colorado Uniform Arbitration Act (“CUAA”) and, therefore, it asked the district court to confirm the award pursuant to Colo. Rev. Stat. § 13-22-222.

KCOM opposed EMC's motion, and in its own motion for partial summary judgment asked the district court to hold the CUAA inapplicable to the appraisal process and to declare the appraisal award invalid due to procedural improprieties. In the alternative, KCOM moved to vacate the appraisal award pursuant to CUAA § 13-22-223.

The district court denied both parties' motions.

EMC filed a notice of appeal from the denial of its motion to confirm the appraisal award.

The circuit court's clerk entered an order directing EMC to “explain [ ] any federal law or rules that would permit the Court to exercise jurisdiction over this attempted appeal.”

EMC responded that because the appraisal process outlined in the insurance policy sufficiently resembled classic arbitration, the process fell within the purview of the Federal Arbitration Act (“FAA”), which provides for an interlocutory appeal from the denial of a motion to confirm an arbitration award. The clerk referred the jurisdictional question to the Tenth Circuit.

The Employers Mutual Policy

The Employers Mutual insurance policy provided:

If we [EMC] and you [KCOM] disagree on the amount of loss, either may make written demand for an appraisal of the loss. In this event, each party will select a competent and impartial appraiser. The two appraisers will select an umpire…. The appraisers will state separately the amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will be binding. Each party will:

a. Pay its chosen appraiser; and

b. Bear the other expenses of the appraisal and umpire equally.

If there is an appraisal, we [EMC] will still retain our right to deny the claim.

CUAA § 13-22-222, under which EMC brought its motion to confirm, provides:

After a party to an arbitration proceeding receives notice of an award, the party may make a motion to the court for an order confirming the award at which time the court shall issue a confirming order unless the award is modified or corrected pursuant to § 13-22-220 or § 13-22-224 or is vacated pursuant to § 13-22-223.

(Emphasis added.)

The Federal Arbitration Act

Section 9 of the FAA provides:

If the parties in their agreement have agreed that a judgment of the court shall be entered upon the award made pursuant to the arbitration, … then at any time within one year after the award is made any party to the arbitration may apply to the court … for an order confirming the award, and thereupon the court must grant such an order unless the award is vacated, modified, or corrected as prescribed in §§ 10 and 11 of this title.

(Emphasis added.)

The Tenth Circuit's Decision

The circuit court dismissed EMC's appeal for want of appellate jurisdiction.

In its decision, the circuit court explained that it could exercise jurisdiction over EMC's appeal only if federal law empowered it to do so. For instance, it said, if EMC had brought its motion to confirm the appraisal award under Section 9 of the FAA, and had the district court denied the motion, the circuit court's appellate jurisdiction under 9 U.S.C. § 16(a)(1)(D) “would be crystal clear” because that section “undoubtedly provides for an interlocutory appeal from an order denying a motion to confirm brought under FAA § 9.”

EMC, however, had not so moved in the district court (perhaps because FAA § 9 conditions judicial confirmation upon the parties' prior agreement to have judgment entered upon an award) but, rather, sought to confirm the appraisal award under Colorado state law.

The Tenth Circuit then found no basis for its appellate jurisdiction, rejecting EMC's attempt to rely on the collateral order doctrine (designed to “accommodate[ ] a 'small class' of rulings, not concluding the litigation, but conclusively resolving 'claims of right separable from, and collateral to, rights asserted in the action'”) as a way of bypassing FAA § 9 and declining EMC's invitation to remand to the district court for the limited purpose of permitting EMC to seek certification for an interlocutory appeal.

The case is KCOM, Inc. v. Employers Mutual Cas. Co., No. 15-1218 (10th Cir. July 19, 2016). Attorneys involved include: L. Kathleen Chaney (Max S. Gad with her on the briefs), Lambdin & Chaney, LLP, Denver, Colorado, for Defendant-Appellant; George A. Vaka, Vaka Law Group, Tampa Florida (Nancy A. Lauten, Vaka Law Group, Tampa, Florida, and William C. Harris and Brandee B. Bower, Merlin Law Group, P.A., Denver, Colorado, with him on the brief), for Plaintiff-Appellee.