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. 

Appraisal Clause In Homeowner's Policy Is A Useful Tool

Most homeowners' insurance policies provide disputes over the value of the claim can be taken to appraisal and the amount determined by disinterested parties. The appraisal clause has its roots in the statutory fire policy addressed in earlier posts. The statutory provision provides for appraisal upon the request of either party to the claim. The insurer can request appraisal or the insured can request it. The process is one in which each side selects a competent and disinterested appraiser to determine the extent of the loss. Before the appraisers ever meet to appraise the damage, they select a competent and disinterested third person to serve as an umpire for the resolution of any disputes between the appraisers. If the two appraisers cannot agree upon an umpire, there is a provision made for appointment of the umpire by the court.

Initially, it is the job of the appraisers to try to reach an agreement as to the amount of the claim. The umpire is supposed to resolve any dispute upon which an agreement cannot be reached by the appraisers.  In many cases, the umpire is never actually utilized as the two appraisers are able to reach an agreement. In other situations, the dispute is so contentious that the decision of the appraisers and the umpire is rejected by one or both parties and suit filed.

It is important to remember in Oklahoma that the party invoking the appraisal process is usually bound by the decision of the appraisers, while the non-requesting party has the right to litigate the amount of the award.  You will want to carefully consider the aspect of the appraisal provision before actually making demand for the procedure.