A policyholder wrote in and recently asked:

Q. I’m hoping you can help me with an answer to a quick question. I hired a public adjuster to do an insurance appraisal because the insurance company has been jerking me around. The public adjuster will not share the dollar amount of his appraisal with me. Is that standard practice? He is stating that there is a clause in my policy that requires the appraiser to be independent and impartial, which then prohibits him from sharing his appraisal value with me. I think he is incorrect and is simply waiting for the insurance company’s appraiser to submit his value before writing up his own. Can you please advise? Thank you.

A.  An insured from Indiana who has a dispute with his property insurer writes us about the appraisal process he is in and wants to know if he can discuss matters being appraised with his appraiser before the two appraisers meet.

He states that he hired a public adjuster as his appraiser but this person will not share the pricing of the loss or scope of the loss with him nor does this appraiser want to talk with him about any part of the upcoming appraisal.  His public adjuster says that the insurance policy requires that the appraisers must be independent and impartial, and this means the policyholder should not be involved in order to protect the sanctity of the process.

This is a great question, and one that has been debated and litigated extensively over the years with a most recent Colorado State Supreme Court publishing a case touching in part on this issue last week.

But without getting too far in the weeds, let me offer my opinion that it is my belief that when the appraisal clause was first introduced in property insurance policies, the purpose was to provide a method to settle disputes of covered losses where the insured and the insurance company did not agree on the scope of the loss or the price to repair/replace. Most policy forms required that two independent and impartial parties should be selected along with the appointment of a neutral Umpire who is only to be used if the two appraisers could not agree.

For as long as I have been in this business and looking back on the many hundreds of appraisals I have been involved with, there has never been a time when there was not some issue or fight over the definition of the terms “independent” and “impartial” when it came to the proposed appraisers. And remember, some policies have a somewhat different form that requires the appraisers only be “disinterested.”  As an aside, the appointment of an Umpire has now reached critical mass as it seems in the real world the independent and impartial appraisal folks are struggling to get a mutually agreed neutral Umpire on board.  So it may not surprise anyone, appraisals are now ending up in court with different opinions being offered, court decisions being published based on facts, and the backgrounds and relationship of the parties involved.

But back to the question our writer asked us. In your case, your appraiser is at least following the original intent of the drafters of this important resolution dispute clause. But I do not feel his opinion is correct when he says you cannot see or discuss his findings with him before he meets with the other party to the appraisal. In fact, I think this person should welcome your review of his work product, how he has taken your loss calculations, as there may be things he either left out or priced wrong or maybe the property has lost all or most of its identity and you need to provide input as to what was there pre-loss.

But make no mistake about it, you cannot control or interfere in this process once the appraisal panel begins their deliberations. Remember the purpose of this forum is to reach a fair and equitable resolution of your covered claim both for you and your insurance company. The appraisers should work using due diligence to come up with the amounts your insurance company owes based on the policy you purchased and the facts of the loss.

As an instructor in the Umpire Certification and Umpire Re-certification class at the Windstorm Insurance Network Inc. annual conferences for many years, I can tell you that rules we teach are that an insured or the insurer can be involved, review, and opine on the issues in appraisal up until the time the appraisal panel goes into deliberation. At that time, the insured and the insurance company will have to wait for the ruling just as you see in a legal trial sitting when a jury brings in the verdict.

In a real word example of this, is a case I was involved in some years back following hurricane damages to two high rise condominiums in North Florida. This case involved many millions of dollars that were disputed and not surprisingly ended up in appraisal. Also, the two appraisers could not agree, so ultimately, I was appointed as the Umpire. As those in the insurance world would likely agree, in a case of this magnitude, reports of every type detailing scope of work required and pricing of that scope were assembled by the two opposing sides.

After numerous meetings over a period of months, and with no end in sight, it was my opinion that the two opposing sides should gather ALL of their experts, consultants, etc. and provide the details and explanations of their findings and conclusions. This in fact did happen, in our conference room where the various parties were questioned by me as the Umpire and the two appraisers. As time passed, the differences and disputes became much clearer and the various advocates for the two sides were able to hear from the opposing side how various issues were arrived at. At the conclusion of the presentations, the various parties were instructed that they were dismissed and the appraisal panel began their deliberations.

Shortly thereafter, there was a meeting of the minds and the appraisal panel signed an award form. Had it not been for the insured, the insurance company and their respective experts and advocates attending a joint meeting, this case would likely have gone on for many more months with a high likelihood of litigation.  So, the more information that can be shared prior to the appraisal deliberation, in my view, the better the chance for a successful conclusion.

Finally, the question of independent and impartial is going to be debated forever as I have never had anyone explain to me how you can find people to serve as appraisers who meet that category when they are getting paid by the person who hired them. 

In closing, your appraiser should let you discuss the findings, opinions, compare differences, and if errors are found, that person can make the changes without violating the appraisal language of independent and impartial. But just remember, the final award should be rendered by a panel using their best judgement and experience without undue influence or bias during the deliberations. Or for that matter on your part while you are talking with your appraiser.

If you have questions regarding any property insurance claim related issues please call 800.321.4488 or contact us to submit a question to one of our public adjuster insurance claim experts.