The Current State of Appraisal and How Mutual Terms Can Prevent Appraisal

Appraisal is becoming its own sub-industry within the property insurance claims business. Many claims managers at various insurance companies have privately complained to me that the appraisal process is becoming fraught with gamesmanship and is used improperly as method of resolving a claim without adjustment or the fairness of litigation. Without a doubt, there has been an explosion in litigation regarding all aspects of appraisal.

Many adjusters, contractors, and so called “claims consultants” are now skirting state licensing laws by calling themselves “appraisers” rather than adjusters. While many of these individuals have adjuster, public adjuster, contractor, and even attorney licenses, they directly and indirectly solicit policyholders as “appraisers” and advise policyholders that the appraisal process should be invoked rather than continuing with claims adjustment or litigation. They claim that as “appraisers” that they are not subject to any licensing laws. I predict this scenario will not last much longer for a number of reasons.

Conflicts of interest occur with much greater frequency in the current world of appraisal. Many public adjusters and independent adjusters find themselves appointed appraisers or umpires on some matters, despite the fact that they are adjusting other claims that involve the same appraisers. Trading results is an obvious temptation and something every policyholder and insurance carrier should be concerned about. It does not take a genius to figure out that an appraiser may give up on one appraisal or claim to gain a much better financial result on another.

It is nearly impossible to prove trading occurs except when it is publicly or privately admitted. Insurance claims managers may be in a position to figure this out because of their large inventory of claims and resultant data, but many policyholders have no clue about this practice.

As a result, some insurance companies have removed appraisal provisions from their policies. In Florida, where appraisers can be retained on a contingent basis when they reveal the basis for the fee retention, many insurance claims managers have stated this contingent economic incentive was the impetus for some underwriters to remove appraisal from their policies. They believe appraisers will have an inherent bias if they are paid on a contingent basis rather than on an hourly or set fee basis.

A recent case, Citizens Property Insurance Corporation v. Casar,1 shows how one insurance company kept the appraisal provision in its policy, but only if both parties mutually agreed to terms of the appraisal. In that case, the unusual appraisal provision provided:

Appraisal. If you and we fail to agree on the amount of loss, either may request an appraisal of the loss by presenting the other party with a written request for appraisal of the amount of loss. If the other party agrees in writing to participate in appraisal, then appraisal shall proceed pursuant to the terms of a written agreement between the parties. (emphsis added)

The facts of the case are as follows:

The Casars filed a claim for water damage alleged to have been caused by a refrigerator line leak. Citizens inspected the property twice and concluded that the damage to some items being claimed was caused by water damage from the leak and, therefore, was covered, but that damage to other items being claimed was not caused by the leak and, therefore, was not covered. The Casars disagreed with Citizens that damage to some property was not caused by the leak and disagreed with Citizens's [sic] valuation of the property deemed covered by Citizens. The public adjuster for the Casars sent a written demand for appraisal of the entire claim. Citizens forwarded an Appraisal Agreement wherein Citizens listed for appraisal only those items both parties agreed were damaged by the water but could not agree as to the amount. Citizens excluded from appraisal any of the items determined by Citizens not to have been damaged by the leak. The Casars refused to sign the Agreement and Citizens informed the Casars that, since they were not able to agree to the terms of the appraisal agreement, Citizens was unable to proceed to appraisal.

Based on these facts and the policy language, the result is not surprising:

The appraisal provision of the Citizens' policy unambiguously requires a written request for appraisal and a written agreement between the parties in order for appraisal to take place. If the parties do not agree to the terms of the written agreement, appraisal will not take place. Because of the disagreement between the Casars and Citizens as to which items of property were damaged by the water leak, leading to disagreement as to which items would be valued at appraisal, the Casars never consummated the Citizens proposed Agreement for Appraisal. Therefore, pursuant to the policy, as there was no written agreement between the parties, Citizens was not required to participate in appraisal.

… In the instant case, Citizens complied with the appraisal provisions of the Policy. Citizens forwarded an Agreement for Appraisal. The Casars would not agree to the terms. Therefore, appraisal could not take place. Citizens complied with the policy provisions and, as such, the trial court had no basis to compel Citizens to appraisal.

Many more property insurance policies will be written with this language. I will write more about the topic of ethics in appraisal tomorrow.

1 3D11-2843 , 2012 WL 6741083 (Fla. 3rd DCA Jan. 2, 2013).


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Comments (4) Read through and enter the discussion with the form at the end
SHIRLEY HEFLIN - January 15, 2013 5:38 PM

Dear Chip:

What were the Casars supposed to do about their claimed damage that Citizens did not "agree" to go to appraisal about? Is there an addendum to the "Agreement" saying that "..let's agree to appraise this stuff.. but the stuff we don't agree on, sue us?"

Seems kind of one-sided to me. Seems like an advantage for the insurance companies as well because all they have to do is put something in the "Agreement" that they know the insured won't agree to (such as leaving out the most expensive claimed damages) and so long as they tried to "agree," they're excused from the Appraisal process?

Geez, if the parties could agree on things, their would be no need for Appraisal, litigation, etc.

Finally, Appraisals and Appraisers have become their own little financial industries. I recall when Mediation Conferences - and then Mediators - became their own little financial industries. It's like finding a good dr. or lawyer. One asks around and finds out which dr. or atty. is used the most by others (w/good results) and the word spreads - it's the same thing w/Mediators and Appraisers. Some Appraisers and/or Mediators started working from their home and now have buildings of their own w/their own little "Mediation" group(s).

(Tampa, FL)

Chip Merlin - January 16, 2013 12:35 AM


My guess is that they were given advice by non-lawyers. They should have hired an attorney with your property insurance experince as a paralegal helping attorneys.

Why don't you call and find out what really is the case?

Many people without ethical appraisers are being told how they can file motions compelling appraisal. Pro se litigants make bad law for all of us.

Here, the case says they are pro se which is almost non-existent without somebody illegally explaining to them what to do.

Let us know what you find.

- January 22, 2013 12:53 PM


Appraisal topic, different situation. For the first time as a PA/NJ Public Adjuster representing Sandy Storm victims, I was not properly addressed in my demand for appraisal to capture overhead and profit on a PA claim with clearly 7 trades associated. SF did not comply with the 20 day acknowledgement requirement as written in the policy and have yet to provide any response (at all) to my appraisal request. Is it correct to assume they are not adhering to policy language and therefore, by default, responsible to pay the insured for this amount as paid to other SF policy holders suffering losses by the same storm, with even fewer trades? Or, should I give them a second request with a deadline to respond?

H Kent Desselle - December 22, 2015 10:41 AM

If the State (ie Missouri) has adopted the New York Standard Fire Policy, the appraisal provision is a part of that and cannot be modified.

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