Appraisal Process As A Substitute For Trial

If the goal of both the insurer and the insured is to obtain a prompt resolution of a property damage dispute, appraisal is sometimes an appropriate means to end the discussion and allow everyone to move forward.  I have seen appraisal used in $1,000,000.00 disputes and $5,000.00 disagreements.

The Supreme Court in Oklahoma has ruled the party requesting the appraisal is bound by the decision while the non-requesting party is not.  The rule makes sense from the perspective of both the insurance industry as well as the individuals or companies having purchased the coverage in the sense that neither side can be forced into a binding appraisal award.  The right to jury trial is a constitutionally protected right in Oklahoma. 

If you want to insist upon forcing the other side through the appraisal process, then you have to agree to be bound by the decision of the appraisers and/or umpire.  On the other hand, if you are forced to go through the appraisal process, you will not be bound by the decision. 

Does the appraisal process always work?  No.  Just like the jury system and any other dispute resolution device created by man, it is imperfect.  On the other hand, when a dispute needs to be resolved without years of litigation, expert witnesses, depositions, appeals, and legal maneuvering, the appraisal process offers an alternative to people.

While care should be given to the choice of both the appraisers and the umpire, I have witnessed situations in which there was so much maneuvering by the participants the parties ended up in litigation.  Both sides clearly want their own appraiser to be competent and knowledgeable, but it is also important to have one that is reasonable and fair-minded.  If both sides merely hire their own advocate to serve solely as their "fighter in the ring" it creates more disputes for resolution by the umpire.  Locating an umpire who has some experience can be extremely beneficial.  Since the umpire's job is strictly intended to resolve disagreements between the appraisers, prior experience in how appraissals function is helpful.  More important is willingness to listen, fairly look at the circumstances, and make a rational decision.

Having personally served as an umpire at the request of attorneys representing insureds as well as insurance companies, there is a keen responsibility that you feel as an umpire to try to do the right thing.  In particular, I recall one situation in which the appraisers with me acting as the umpire essentially reached a conclusion unanimously as to the amount.  The determination was exactly the midpoint between the polarized positions of the parties.  I recall thinking before the award was entered that we would probably hear grumbling that we simply "split the baby" and divided everything down the middle.  I personally disdain the practice of some umpires submitting a decision in the middle to avoid the appearance of showing favoritism.  The practice of "splitting the baby" is not the purpose of appraisal.  The job of the umpire is to make the right decision.  He should not be concerned with future work from the parties or making either side unhappy.

At the end of the day, lawyers, adjusters, and insureds owe a duty to try to reach results that are fair and appropriate for the situation. 

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