Texas Insurance Law: When an Appraiser is Deemed Biased
In Texas, courts have long held that the qualifications required of appraisers are that they be competent and independent. Similarly, the appraisal provision of most insurance policies typically contains language requiring an appraiser to be competent, knowledgeable, impartial, disinterested, etc. Although both Texas courts and most insurance policies require that appraisers be – in some form or fashion – competent and independent, it is not always clear how someone should interpret such language. Fortunately, Texas courts have shed some light on this topic.
In Franco v. Slovanic Mut. Fire Ins. Assoc., 154 S.W.3d 777 (Tex. App.—Houston [14th Dist.] 2004, no pet.), the insured claimed that the insurer’s appraiser was biased. The insured based its claim on the fact that, prior to being selected as the insurer’s appraiser, the insurer’s appraiser worked as an investigative engineer for the insurer on the same matter; he had conducted an investigation on the insured’s home, examining the premises to determine the cause of the damage. He later issued an engineering report to the insurer regarding his findings. The court in Franco concluded that:
The showing of a pre-existing relationship, without more, does not support a finding of bias. . . . [Here, the insurer’s appraiser] was not an employee of [the insurer] and the [insurer’s appraiser’s] report and conclusions regarding the cause of the plumbing leak were his own.
In other words, the court concluded that a person is not disqualified from being an appraiser based solely on the fact that the appraiser had a pre-existing relationship with the insurer. This also applies even in those instances when the insurer’s appraiser had done prior work on the very matter he was selected to appraise.
In Gardner v. State Farm Lloyds, 76 S.W.3d 140 (Tex. App.—Houston [1st Dist.] 2002, no pet.), the insured claimed that the insurer’s appraiser was biased based on its long-standing relationship with the insurer. In Gardner, the insured submitted evidence that the insurer’s appraiser: (1) had written a training program used by the insurer; (2) had written numerous publications about hailstorm evaluations and served as a consultant for the insurer on those matters; and (3) was paid by the insurer for assignments across the United States over seven years. In the end, the court ruled that there was no evidence raising a fact issue about whether the insurer’s appraiser lacked independence because there was “no evidence that the [insurer] directed the [appraiser] to reach any conclusions . . . .”
In Gen. Star Indem. Co. v. Spring Creek Village Apts. Phase IV, Inc., 152 S.W.3d 733 (Tex. App.—Houston [14th Dist.] 2004), the insurer argued that the insured’s appraiser was biased. Evidence demonstrated that the insured’s appraiser would receive additional compensation if the settlement met a certain pre-set amount. The court concluded that:
[b]ecause [the appraiser] had a financial interest in insuring that the appraisal award exceeded $2 million, [the insurer] raised a fact issue with regard to whether [the appraiser] was impartial.” Citing Texas Supreme Court precedent, the court noted that “[a]n appraiser with a financial interest in the outcome of the appraisal is not impartial.
In short, an appraiser will not be found to be biased based solely on a pre-existing relationship with the insurer or even on a long-standing relationship if there is no evidence that the insurer exercises some control over the appraiser. But if the court finds that the appraiser has a financial interest in the final outcome, that appraiser might be disqualified due to bias. So the next time you are considering an appraiser, make sure to ask him/her about any relevant relationships with the parties involved and about their compensation structure. The last thing you want is to have a court disqualify your appraiser due to bias. If that happens, you will find yourself back at square one.
Chip,
I was wondering if the Insurer's appraiser could be considered biased based upon the fact that we, who are in this business, have experienced and seen that when their expert does not produce the expected company benefit, the company no longer uses such expert again.
So the expert has a monetary investment / benefit - produce the expected result(s). Could this be considered benefiting from the end result, i.e. they get hired for more work, etc..... this was the very argument an apposing attorney used against me on a claim.....
Bob / Massachusetts
Personally, I think an appraiser that worked for the INSURED (and had an opinion) and then switched to the INSURER (and had an opinion) is TOTALLY BIASED!
Come on, how obvious is that? The appraiser is given free rein to view the insured premises, talk w/the insured, conduct tests (and whatever else they do)while employed by the insured and is privy to (I think) work-product objects/items/materials that he/she wouldn't otherwise be privy to BUT FOR his/her employment w/the INSURED! TO SWITCH OVER IN THE MIDDLE OF THE APPRAISAL PROCESS (or claims process) TO THE INSURED'S SIDE IS TOTALLY UNFAIR, BIASED, IMPARTIAL, (and a host of other things) TO THE INSURED!
IT'S JUST NOT FAIR! But, gee, let's think here - who has the most money to fight this? Who has the time, resources and doesn't have to worry if their home/business is repaired quickly or not? HMMMM....THE INSURED, OF COURSE.
IT'S NOT FAIR....and the poor little INSUREDS can scream that all the way to the end but, the truth and reality of the matter is sure, they may find Plaintiff's counsel that sees things their way and may even fight it for them (w/no costs up front) but, AGAIN, who's waiting on funds for their home and/or business to be repaired? THE POOR LITTLE INSURED. IT'S LIKE BEING THE POOR LITTLE RICH BOY/GIRL.
SHIRLEY HEFLIN