Exodus of Appraisal Continues
Dan Luby of the Florida Insurance News forwarded an article to me, "United Property & Casualty Insurance Company Appraisal Clause." Dan does a fantastic job on relevant insurance news events in Florida and his piece today demonstrates the ongoing trend of appraisal clauses being removed from property insurance policies.
Significant is the reasoning provided by United Property & Casualty for removal of appraisal:
The Appraisal clause is being eliminated. We are taking this action because the current appraisal language, as it exists, does not give insurers recourse to meaningful judicial review. Furthermore, the basis of awards under Appraisal is outside the scrutiny of both policyholders and insurers.
Eliminating the appraisal clause will mean that our policy contracts will follow Mediation, which is the Florida Legislature’s preferred method of dispute resolution.
Interestingly, the Courts have approved appraisal as a means to keep the matter away from litigation. United Property seems to want a mechanism to get disputes into litigation.
I am not certain that mediation is preferred by the legislature. The legislature has enacted laws that demand that insurers fully investigate a loss and promptly pay claims for the full amount.
Certainly, if the insurers can get unwary policyholders into mediation without professional representation and threaten the potential of a lawsuit without the possibility of appraisal, insurers will gain "leverage" in the negotiation of a dispute because delay works to an insurer's advantage. This is not what Florida legislators, except those politicians in the pockets of the insurers, want for Floridians.
Still, the trend is clear---appraisal is becoming less of an option. Many insurers are not happy with the results of appraisal and think our judicial system provides a better forum to fairly resolve disputes.
Chip...have also noticed lately that some carriers are agreeing to go forward with Appraisal after they have been sued for breach of contract when there is no appraisal clause in the policy.
Eric Hyman
Eric,
I have had the same experience.
Sometimes, parties can work out agreements to resolve matters right after suit is filed. Appraisal, along with settlement discussions or mediation, can go on even if the policy mentions nothing about either of them.
Good point.
Hope you have a Happy New Year.
Chip
This trend is disturbing as it is completely anti-consumer. As I have stated before, it really troubles me to see so many in our industry and related industries accept this trend and act as if this "trend" is unstoppable. The arguments against appraisal are built upon the false premise that it is unfair to both sides because there aren't enough rules and "it's the wild west out there".
This current argument from United that "the basis of awards under Appraisal is outside the scrutiny of both policy holders and insurers" doesn't hold water at all. The independence of the appraisers and umpires is exactly what makes appraisal as effective as it is. I think it is safe to say that the reason a claim goes to appraisal is because the Insured and the carrier have reached an impasse and the "scrutiny" of each side has failed to render a resolution. It is very disingenuous of this carrier to say they are unable to scrutinize the award.
As I stated in a prior post, it is my opinion, carriers put alot of pressure on the appraisers they hire to represent them and I believe this is part of the problem. Carriers also maintain the right to deny the claim after appraisal. This carrier clearly wants to maintain complete control of the process.
I agree with you as I have never seen the legislature show a preference for mediation. If the legislature truly wanted to help the consumers, they would make appraisal mandatory in all policies. Appraisal has been around for a long time and has been a very valuable tool for both sides of this argument. You don't throw the baby out with the bath water because of a few perceived problems which may or may not even be true.
If this current trend towards eliminating appraisal continues unabated, our industry will suffer and so will the consumers. Many of my clients don't want to use the legal system to resolve their cases. As a very smart attorney once told me "Even when you win a lawsuit, you don't feel like you have won".
What real dispute resolution will these people have if appraisal goes the way of the dinosaur??
Mike,
A number of states require appraisal to be conducted as a more formal process so that due process concerns are met. It was this way in Florida for a period of time as well. What I have suggested with arbitration rules applying is not that unique of an idea.
Would you play a game of cards worth $10 million dollars with no rules if it were your money on the line? Maybe the insurance companies have a point since they are playing a binding game with their money, not yours. When you look at matters from the viewpoint of another, things can sometimes seem different.
So, I disagree with you on that point. A binding process with no rules invites unfairness and gamesmannship as I explained---tell me where my logic is a "false premise" if you want to make a point.
And, I agree with you about the problem of insurers placing pressure on their appointed appraisers. The insurer should still act in good faith and should ask the appraiser to quickly evaluate the loss so the policyholder gets every penny owed.
What often happens is that the insurance company's appraiser is doing everything it can to lower the amount paid regardless if it is proper to do so. The process gets dragged out and contentious.
The insurance customer is every bit the customer after the loss as before with the same promise of quick and fair payment. The insurer should be requesting that its appraiser make certain that the award does not result in underpayment. The appraisal should take place in good faith. But with no rules, anythinng goes, as you suggest and thus prove my point. Thank you.
Don't stop the comments. I appreciate the debate.
Greetings.
Taking from a comment above:
"...As a very smart attorney once told me "Even when you win a lawsuit, you don't feel like you have won".
Really? Wonder what that "smart attorney" feels like when he loses then?
SHIRLEY HEFLIN
Shirley,
I know that answer if it is me:
"Like a dummer, but smarter,(and luckier) in the short run, beat me until the next case, attorney won this time around."
And, I will never lose to that so and so ever again...and, that has been true for me so far.
Happy New Year!!!!!
It occurred to me that it's a matter of Honesty and Integrity that results in Indemnity.
I think both sides need to have this in order to accomplish Fairness in the dispute arena. Umpires and especially Appraisers need to be free from handling "daily claims for Carriers". Free from obligations to Carriers.
There is nothing difficult about specialist making a fair and impartial decision, all you need is honest expertise,apparently this is a formula that is hard to administer. There are plenty of qualified particiupants in the arena. The answer is not an easy one,however taking the Appraisal Clause out of the Policy's is just about as bad as the new Healthcare bill passed by the majority politicians,or the same Players.
It's strictly Politica
l!!HAPPY NEW YEAR TO All
Ed,
Sounds like appraisers are kind of like the Marines. All you needed to add was truth and the American Way.
I would suggest that "fair" is in the eyes of the beholder. Do you think my clients' view of "fair" is anywhere close to what the claims adjuster's view of what "fair" is?
They can both be honorable people and have integrity while accusing each other of ripping the other off if their views of fair indemnity are far apart.
Everybody wants "fair." What is "fair" is often open to significant debate.
Ok Chip. As one of our former presidents once said during a debate "There you go again".
I admire your concern for the carrier's stake in appraisal, but don't forget who cashes the check from the carrier. Correct me if I'm wrong, but once a policy holder has a claim, I believe due to contract law, that ten million $$ you mention belongs to the policy holder and what we are discussing is the process by which that Insured collects their ten million $$$.
Quite frankly, I believe the policy holder has more at stake in this process. The carriers can lose a ten million $$ case and continue to do business. How many businesses with a loss will continue to operate if they lose a ten million $$ claim?? My point is we should put the carrier's complaint about appraisal in it's proper perspective.
There is no question that I am an advocate for my clients to the nth degree, but I was also just as passionate on the carrier side. I can see this from both sides of the aisle Chip and this is the basis for my point of view. You mention again that "a binding process with no rules invites unfairness and gamesmanship". I guess this is the prevailing statement that so many seem to accept without question as fact. I don't!!!
It has been my experience that the vast majority of appraisers (on both sides) have been fairly honorable and truly try to evaluate the claim. There are exceptions and the process deals with that as well. I have seen umpires "scold" incompetent or dishonest appraisers when necessary. I have seen this process work quite well for many years and in my opinion, it is still working quite well. While appraisal isn't completely perfect, I don't see how the infusion of additional control and influence is going to be of any help.
Appraisal does have rules and guidelines and the infusion of additional control will not help this process. The current appraisal process actually does not favor one side or the other at all. For an easy example, let's talk about a good game of hopscotch (which I am terrible at by the way). The rules are simple and very fair for each side. Now I come along and because my feet are too big and my legs too long, I wan't to increase the size of the squares to my advantage. I am bigger than my small opponents and this will assure my future success in hop scotch.
Once these rules are changed, then my small opponents will begin to complain and a push will be made to decrease the size of the squares. On and on this goes until the players no longer feel the game is fair and nobody wants to play anymore. Now nobody wins and everybody has lost.
You know what's required for a successful appraisal "process"? I believe these adjectives are required:
1. Maturity.
2. Competence.
3. Desire (on both sides) to be fair, open minded and
SERIOUS about settling the case.
Otherwise, appraisal, mediation conferences, pre-suit settlement conferences, etc., are a waste of time and litigation is needed because a Judge (or someone in authority) has to be involved to "control & direct" the ADULT PLAYERS.
SHIRLEY HEFLIN
Shirley
So are you saying we do away with appraisal, mediation conferences, pre-suit settlment conferences, etc. in favor of litigation?? While we are at it, why don't we just do away with the entire adjustment industry because only lawyers and judges are capable of being 1) Mature 2) Competent 3) And clearly only attorneys and judges have the desire to be fair, open minded and serious about settling the case.
I don't buy that at all. There is no perfect system on earth. If people don't start to stand up to Shirley's way of thinking, we truly will wake up one day and our entire industry will be under the thumbs of attorneys and judges. This will not be an improvement. Be careful what you wish for.
Dear Mike: Hello.
I read (and was aghast) at your reply to my comment so I re-read what I wrote, re-read what you wrote and reply as follows.
First, no sir, I (in no way, shape or form) said that we should (I'M QUOTING YOU HERE):
"....do away w/appraisal, mediation conferences, pre-
suit settlement conferences, etc., in favor of
litigation?? While we are at it, why don't we
just do away with the entire adjustment industry
because only lawyers and judges are capable of being
1) Mature, 2) competent, and 3)
[YOU WROTE THIS #3, MIKE - NOT ME] :
And clearly only attorneys and judges have the
desire to be fair, open minded and serious about
settling the case.
Why do you feel this way? Do you really feel this way? You sound very angry. I hope - for your sake - that you do not believe and feel what you just wrote. Really, I do.
MY #3 READ AS FOLLOWS:
3. Desire (on both sides) to be fair, open minded and
SERIOUS about settling the case.
I do agree w/you that
"...there is no perfect system on earth" though, but NOT your
"...If people don't start to stand up to Shirley's way
of thinking, we truly will wake up one day and our
entire industry will be under the thumbs of attorneys
and judges. This will not be an improvement. Be careful
what you wish for."
I sincerely doubt that the world and/or insurance industry is going to "succumb" to "SHIRLEY'S WAY OF THINKING," though I'm flattered that you think I'm capable of controlling the "...ENTIRE INDUSTRY.." and (if not careful) will lead it to be "...UNDER THE THUMBS OF ATTORNEYS AND JUDGES."
As for "be careful what you wish for," I didn't see a "wish" in my comment.
So, Mike, in answer to your question:
"So are you saying we do away with appraisal, mediation conferences, pre-suit settlment conferences, etc. in favor of litigation??"
No, of course not, and I did not say that. Indeed, doing away with resolution proceedings would lead to lunacy and chaos. I could add that only a moron would think like that, but everyone is entitled to their own view - that's just not my view.
Further, I'm not an attorney or a judge and I do not believe that either is "smarter," "fairer," and/or more "open-minded" than anyone else. Indeed, we are all intelligent in whatever "industry" we choose to engage in - we just happen to be discussing insurance here.
I'm a Legal Secretary and it's been my educated observation that when both sides bring (at a minimum) MATURITY, COMPETENCE and a DESIRE(S) TO RESOLVE AN ISSUE to proceedings such as appraisals, mediation conferences, pre-suit settlement conferences, etc., that the chances of settling are (obviously - this is not rocket science) ENHANCED and settlement/resolution is more likely to occur.
I've scheduled enough of these proceedings to learn through "osmosis" (if you will) what's "going on." And I've re-scheduled enough of them to know why they're being rescheduled!
Finially, Mike, I stated my opinions herein and they were not intended to "offend" you.
Thank you and good day.
SHIRLEY HEFLIN