Meyer v. State Farm Fire & Casualty Co.

Court & Date:

Maryland Court of Appeals 1990

Parties:

Meyer - ¶®appellant

State Farm Fire & Casualty Co. - ∆® appellee

Procedural History:

∆ alleged ¶ failed to state a claim upon which relief could be granted and court

found merit in that defense and dismissed the action. ¶ appealed.

Facts:

· ¶ purchased a policy of fire insurance from ∆

· Policy contained a common clause which provided:

o that if the company and the insured are unable to reach an agreement on the amount of loss, either party can demand an appraisal to determine the amount.

o As part of the procedure each party selects an appraiser and then the 2 appraisers select an impartial umpire.

o If the 2 appraisers agree on the amount that figure becomes the amount of loss.

o If the appraisers disagreed on the amount, the amounts are submitted to the umpire and any 2 of the 3 can sign a written agreement stipulating the figure to be used as the amount of the loss.

o No action shall be brought unless there has first been compliance with these policy provisions.

· ¶ had a fire in their home

· ¶ and ∆ could not agree on the amount of loss from the fire

· ∆ sought to invoke the appraisal clause

· ¶ alleged appraisal clause was invalid and filed this suit for damages contending appraisal provision is invalid.

Issue:

Can a ¶ escape a policy because it was part of a contract of adhesion and ¶ was unaware of such a provision and did not knowingly, voluntarily and intelligently waive their right to a trial by jury?

Holding:

No. The appraisal clause is valid and the procedure required must be used in

good faith.

Reasoning:

· This is a contract of adhesion nonetheless it does not mean either it or any part of it is invalid or unenforceable.

· Courts only refuse to enforce terms it finds unconscionable and will construe ambiguities against the draftsman, but it will not ignore terms merely because they operate to the perceived detriment of the weaker party.

· There is neither ambiguity nor anything unconscionable about this provision.

· Appraisal process generally regarded by courts as a fair method.

· Appraisal provision is not buried in the contract.

· Waiver of Constitutional rights not ordinarily valid unless it is knowing and voluntary.

· Finding in favor of ¶’s position would mean putting the whole foundation of the Federal and uniform arbitration acts in jeopardy.

Rule:

The terms of a contract of adhesion are enforceable as long as the terms are not unconscionable and do not deprive individuals of their right to trial by jury.