Is There Any Chance that Appraisal Will Stay the Same in Florida?
Over the past several weeks I have had a number of public and private discussions with attorneys and public adjusters about the appraisal process. My post last week, Alternative Resolution Roundtable: Appraisal is the Hot Topic, had a comment from Mike Rump that I thought was worth sharing as this debate rages on:
When I began to invoke the appraisal clause on Hurricane Andrew claims, only rarely would a carrier deny the Insured's right to invoke appraisal. In addition, most of the appraisals were settled directly with the carrier's appraiser and the umpire was only involved in approximately 10% of the appraisals. At that time, the carrier's appraiser was generally independent, and was free to act on his/her own without repercussions.
When I worked as an appraiser for the carrier back in the 80's and early 90's, I was provided a copy of the original adjuster's estimate and the name of the other appraiser, period. When my appraisal was over, I would provide a final report which would detail the issues and when necessary, I would point out the error of the carrier's position. I was not worried about losing an account as the result of a perceived bad appraisal award.
As time has passed, I have noticed a disturbing trend towards more and more interference in the appraisal process by the carriers. This progression has become so blatant, that only rarely do I not involve the umpire in appraisals. Many times the carrier's appraiser will agree that the carrier's original adjuster was completely in error, but the carrier's appraiser will request that we involve the umpire in the final award to provide the carrier's appraiser with "cover."
In this scenario, the carrier's appraiser clearly does not feel free to act independently. They are clearly worried that future business is in jeopardy if for instance he agrees a roof should have been replaced when the carrier denied the roof replacement. I seriously doubt the carrier's appraiser will provide the carrier with an honest assessment and in fact, the carrier is probably told the process "broke down again".
Is it any wonder then why these carriers want to get out of a "broken system?"
Chip, the system isn't broken. In the event that these carriers continue to drop the appraisal clause from their policy, consumers will be left with no option but to file suit.
I realize this helps your profession, but it isn't necessary. Your position that anything that short circuits the policy holders right to due process is bad is also completely derogatory towards my chosen profession and extremely arrogant to boot. Who better to render an opinion as to damage, than someone who has done this for a living and is a professional at assessing damage???
Florida needs advocates who fight for the consumers NOW and we need to stay on the "side of the angels."
Sounds like Mike is calling me out on this issue. From my impression, he frames it as, “if you do not agree with me, you are on the side of the insurance company.” Mike Rump is a great guy, but I simply believe he is upset that the insurance industry is removing the appraisal clause and he does not want that to happen. Here was my reply:
Mike,
I appreciate your comments and views. Sometimes, there will be disagreements among people that are normally aligned in interest.
I believe that one of the fundamental differences in our country versus many others is that we have a system of justice that provides for "due process." This is so important that it is in our constitution and most state constitutions.
Many "informal" appraisals can be "Kangaroo" courts because there are no rules. No right to confront witnesses or examine evidence. I have heard of some appraisals being conducted in bars with drinks.
The Windstorm Network recognized some of these problems and has promulgated a Code of Ethics for its certified Umpires.
Maybe your appraisals go very well. When I am involved, most of mine go very well for my clients too. However, as an attorney that represents policyholders, I get brought the appraisals where the policyholder's outcome was not very good. Most of the time in those situations, the policyholder did not have a public adjuster or professional helping in the process. Possibly, your view would change if you saw those cases.
I have been of the view that appraisal with the arbitration rules as a procedure would be fair and practical. Indeed, this was the law in Florida for a number of years until the Florida Supreme Court said the procedure was "informal." Many would suggest "informal" means without rules.
Under the arbitration rules, parties can make the appraisal as formal or informal as they want. Or, if they cannot agree, arbitration rules apply so that everybody gets a "fair" binding process. The procedure is determined in advance. There is no binding procedure on either party or how appraisals are to occur in Florida, today.
Could you imagine playing a game of cards with no rules? How about a playing a game involving ten million dollars at stake with no rules?
If you win at that system, I guess you would want to perpetuate it. But, some may suggest that an element of fairness is to have some set criteria for how the game is played before it starts. Losers may think it was rigged against them. Clever winners may not want the procedure to change fearing that their "edge" of winning will go away if they have to play by some set of rules which both sides have to abide.
It would seem to many Americans that any system of justice which is binding and with serious consequences would have some set rules. This notion of having set rules to play by for both sides has been my chief concern for a long time.” (emphsis added)
This was the similar view and concern I previously expressed in Appraisers, Umpires and Appraisals as Valid Substitutions for the Right to a Jury Trial Depend on Viewpoint, where I stated:
…Many policyholder appraisers do not fully understand how to win the appraisal for the policyholder. They do not comprehend that the appraisal is truly an alternative dispute process that binds the policyholder.
Some may suggest that I am wrong, and that the goal of appraisal is a fair number for both sides. But, my policyholder clients may have a very different view of what fair is. So, if the insurer wants to dispute the amount in an appraisal, I want as much as I can get for my clients. After all, if there were no appraisal, my client would be asking a jury of peers for justice. But the insurance companies were historically so afraid of juries and costs, that a hybrid dispute process became standard in form insurance policies. Guess who benefitted most from that process?
Accordingly, my warning to all policyholders and those working with them in appraisals is that it is binding and should be taken as seriously as a public trial. I want the mindset of policyholders faced with an appraisal to be:
There is no second chance.
I started writing a reply that I feel better explains my impressions on this topic. Some suggest that I am opposed to appraisals for a number of reasons, including the possible loss of litigation revenue. These people do not fully understand the consequences of appraisal. I have a hard time explaining the historical importance of a jury as a core concept of American democracy, but I believe that giving up the right to a jury trial is the most important consequence of appraisal. Justice comes from the values of one’s peers in the community, not experts or government deciding what is fair and just. This is a fundamental concept of American democracy and protected by our Constitution.
Yet, if some courts and states deem a procedure without a jury and without rules to determine what a policyholder will obtain as “fair,” I have some very strong opinions about what policyholders should do and how appraisers selected by policyholders should go about their work…” (emphasis added)
The January 6 Roundtable in Tallahassee is going to be an interesting discussion. To the extent anybody has an opinion or suggestion about improving the appraisal process, I suggest that you write your opinions to the Office of Insurance Regulation or to me. I intend to submit a written view which includes much of the debate with others in other posts we have had on this topic.
Do I expect that there is a chance that appraisal will remain in insurance policies and work exactly how it has in the past? The clip below reflects my opinion on that:
Chip: I understand your arguement and certainly I am worried about the insured especially with citizens setting the rules. The other option is legal avenue and that is available but the attorney fees will have to come out of the awards won't they. Therefore the amount of money gained may be sharply altered depending on the final decision. Your point is very well taken and acknowledged.
Also, I know you did not pick the place for the round table, but I ask "why not have a round table discussion in the area or location of the state where the largest number of appraisal's occur?" Is the state perhaps seeking to place an undue hardship on the citizens who used the process to keep them away from such consumer oriented meetings?
Chip,
It sounds like what you are suggesting is adding the rules of arbitration to the appraisal process, while preserving due process. As a Public Adjuster, it would be worthwhile to understand how this would impact what I do. Perhaps this is a topic you could explore in another post.
But you later state: "Justice comes from the values of one’s peers in the community, not experts or government deciding what is fair and just." I believe that when you frame it so succinctly, I would have to argue that a trained, licensed "expert" certainly would be more qualified to determine the value of something like a structurally damaged tile roof for example, than would that homeowner's neighbors (peers), who in all likelihood have no knowledge or expertise in that subject. If "justice" in this case refers to fair and proper indemnification of the homeowner, it would certainly seem to make sense that professionals who work in the field and deal with these issues on a daily basis are better qualified to properly evaluate them.
As always, thank you for the clarity and passion you bring to your work, and for challenging your readers to think.
Richard,
Maybe we should move Florida Government to Dade County and out of Tallahassee?
Some of the attorneys in my firm have suggested that after we litigate the cases rather than appraise the cases, many insurers may want to go back to appraisal.
I am a victim of an "informal appraisal" which resulted in a much lower figure than my contractor estimates. Additionally, my insuror delayed 10 of 13 payments released to my public adjuster and myself by months, not just a few days. The insuror even took 5 months to pay the umpire's award after the appraisal was concluded. I engaged the services of an attorney who proceeded to file a complaint against my insuror and after several months of negotiations and trial was the obvious outcome this attorney withdrew due to time and economic considerations.
I then sent letters to several other attorneys and have been denied counsel. Every attorney I have contacted agree that the case has very good potential for bad faith recovery, but I believe the atorneys are reluctant to take cases which are contingency fee based. Especially since Florida law restricts the punitive damage awards to such an extent that the attorneys fee is not reasonable.
My point is that how will insureds in Florida get fair representation if the appraisal process is removed from the insurance policies? It appears very difficult to obtain legal services unless you can afford hundreds of thousands of dollars to pay for these services. This is very obvious if you examine the number of lawsuits filed against insurors for bad faith which is very small, especially compared to the number of appraisals.
Gary,
Thanks.
I have debated with many attorneys whether our system would be better served by special panels of judges. My view is that the in the United States, not England, France, China, or Russia, power is reserved to the people on a number of matters.
I have no problem letting "the people" make a decision for a community where disputes occur. I may not always agree, but it is one of the few remaining aspects of the American experience which is remaining from long ago. The trial by a jury of one's peers is under constant attack by corporations.
As a trial attorney, I believe that we should be judged by our peers, not our experts or government appointees. Many of our brothers and sisters have fought battles to preserve these principals. I feel the least we can do is to stand up to preserve these longstanding American ideals.
I am deeply troubled by the current wave which I believe incorrectly perceives problems with appraisal. What appears even more troubling is everybody invited to this round table in Tallahassee seems to be singing from the same hymnal which proclaims appraisal to be "the wild west" and "negotiations take place in a bar." This seems to really demagogue the issue. It simply isn't true, but seems to be accepted as truth by all. I feel like a small pebble in a big stream.
My main point is appraisal is a wonderful tool for the consumer and when all parties approach it properly, it is extremely fair as well. Yes, there are few rules, but there are enough guidelines to make the process fair for both sides. I don't want to see appraisal go the way of the dinosaur.
Respectfully,
Mike Rump, President
Continental Public Adjusters, Inc.