A Colorado jury has delivered what attorneys describe as a first-of-its-kind verdict targeting alleged fraud in the insurance appraisal process.
Calvary Baptist Church of Denver and Church Mutual Insurance Company v. Skyyguard Corp., tried by Spencer Fane partners Jeremy Moseley and Will Brophy, resulted in a win for Calvary Baptist Church and Church Mutual Insurance Company, stemming from a property insurance claim over repair work and appraisal valuations.
Jurors found the contractor liable for fraud, concluded the conduct caused the underlying litigation and awarded damages to both plaintiffs. The total judgment is expected to exceed $2 million before interest and fees.
The verdict signals increased scrutiny of appraisal practices and highlights the growing overlap between construction disputes and insurance litigation, particularly as contested repair valuations become more common.
Moseley discussed the path to the verdict with Law Week Colorado:
Law Week Colorado: This case is believed to be the first Colorado jury verdict involving direct fraud claims against a contractor tied to an allegedly manipulated insurance appraisal process. What makes this particular case the right vehicle to establish that legal precedent?
Moseley: This case presented a unique factual record in which discovery uncovered evidence that the contractor caused the insured to appoint a biased appraiser and influenced the appraisal process to create an inflated award. The evidence also showed that the contractor then claimed inflated repair costs that exceeded the inflated appraisal award, when the roof work was actually completed by a subcontractor roofing company for significantly less. When the insurance company would not pay more than the appraisal award and policy limit for code requirements coverage, the contractor pressured the insured to sue its insurance company, claiming the insured was still owed hundreds of thousands of dollars. Those facts established a direct connection between the contractor’s conduct and the ensuing insurance dispute.
The case also involved claims asserted by both the insurer and the insured against the contractor after the insured disavowed the conduct. That procedural posture allowed the jury to evaluate the full scope of the alleged misconduct and its impact on both the insurance claim and the repair contract.
LWC: During discovery, your team uncovered evidence that the contractor orchestrated an inflated appraisal process through a biased appraiser and inflated repair costs. How challenging was it to prove the appraiser’s bias to a jury?
Moseley: The contractor testified that he contacted a public adjuster to assist in the insurance dispute, who then inspected the property and recommended that he be named as an appraiser rather than retained as a public adjuster. This demonstrated that the appraiser had prejudged the outcome before the appraisal even began. The appraiser also claimed to charge an hourly rate for his time instead of charging a percentage of the claim, as he would as a public adjuster. However, his invoice consisted of a single line item for $75,000 and claimed 250 hours of work with no supporting documentation. In contrast, the insurance company’s appraiser spent 50 hours and billed approximately $10,000. This disparity demonstrated to the jury that the appraiser was not impartial and had an incentive to increase the appraisal award.
LWC: The total judgment is expected to exceed $2 million, including over $823,000 in punitive damages. When presenting your arguments to the jury, how did you frame the contractor’s conduct to justify the substantial punitive award?
Moseley: Our focus was on the evidence presented regarding the contractor’s conduct and the resulting litigation and damages. We presented evidence that the contractor’s actions allegedly manipulated the appraisal process, inflated the claimed repair costs and ultimately jeopardized the insured’s coverage, resulting in extensive litigation between the insurer and its insured. Further, the contractor continued to attempt to justify their conduct throughout the trial and argued that the underlying subcontractor costs had no relevance to what they charged for the work, even though the contract with the insured stated they would be paid 10% overhead and 10% profit.
The verdict reflects the jury’s conclusion regarding the seriousness of that conduct, the harm it caused and the contractor’s refusal to recognize its egregious conduct.
LWC: The litigation took an interesting path after Calvary Baptist Church settled with Church Mutual Insurance Company and assigned its claims against the contractor to the insurer. Did this assignment of claims give your team an advantage heading into the trial?
Moseley: The assignment allowed the claims involving the contractor’s conduct to proceed in a coordinated manner and demonstrated that the insured was not involved in the misconduct and was, in fact, unaware of how the contractor was presenting an insurance claim on behalf of the insured. That structure allowed the jury to see how a contractor seeking to game the system can take advantage not only of an insurance company but also of an insured, thereby jeopardizing the insured’s coverage.
LWC: Property insurance claims involving repair work and appraisal valuations are notoriously common in Colorado, especially after major weather events. Why might this verdict cause Colorado contractors to think twice about how they handle the appraisal process?
Moseley: This verdict reinforces that participants in the appraisal and claims process can face significant consequences directly if they engage in fraudulent conduct. Through the intentional interference claim, the insurance company was able to seek damages directly from the party responsible for the misconduct instead of bringing a claim only against the insured, as the principal whose agent engaged in misconduct. The jury’s findings and the resulting damages award underscore the importance of transparency and accuracy throughout the appraisal and repair process.
LWC: We are seeing growing scrutiny around inflated appraisals and repair estimates across the state. Do you view this verdict as an isolated warning to bad actors, or does it signal a broader systemic shift in how insurers will police the appraisal process?
Moseley: This case involved very specific facts, and the verdict reflects the jury’s evaluation of the evidence presented. At the same time, the case highlights the importance of maintaining integrity in the appraisal process and that fraudulent conduct tied to insurance claims can create significant exposure for those involved.
This case highlights an increasing overlap between standard construction disputes and high-stakes insurance litigation.
LWC: What unique challenges arise for trial attorneys when a construction defect or repair dispute morphs into a fraud and insurance case?
Moseley: Cases like this can involve overlapping contractual and insurance-related issues that require the jury to evaluate both technical repair questions and allegations regarding the claims process itself. The challenge is presenting a clear narrative that connects the underlying repair dispute, the appraisal process and the resulting insurance litigation in a way that is understandable and supported by the evidence.
LWC: If you are a Colorado business owner or property manager navigating an insurance-funded repair dispute today, what is the biggest takeaway or warning sign you should look out for based on this trial?
Moseley: One important takeaway is the need for transparency and independence in the appraisal and repair process. Property owners should carefully evaluate repair estimates, understand who is participating in the appraisal process and ask questions if costs or valuations appear inconsistent or unsupported.
LWC: What advice do you have for insurance defense and commercial litigation attorneys handling similar contractor disputes?
Moseley: This case began as a bad-faith claim filed by the insured against the insurance company, alleging that additional benefits were owed. Discovery from third parties revealed the actual costs of the work completed and the defects in the appraisal process. Focusing discovery on finding the truth, rather than simply defending the claims filed against the insurance company, brought this conduct to light.