A daily topic of conversation among those who work property damage claims is the appraisal process. As most of you know, most insurance contracts contain a clause that states that if there is disagreement between the insured and insurer on the claim handling process that either party may invoke the appraisal process. Each party selects its own fair and impartial appraiser and together those appraisers select an umpire. If necessary, a court can be asked to appoint an umpire.

Of interest lately is that the appraiser that each party appoints is to be "fair and impartial." But what does that mean? DORA, the Department of Regulatory Agencies, has issued Bulletin No. B-5.26 on this matter because it came to their attention that insurers may not be selecting "fair and impartial" appraisers. Further, claims being subject to appraisal are being delayed. DORA follows the Uniform Arbitration Act, Section 13-22-201, and specifically Section 13-22-211(2) which sets forth the standard for impartiality as an arbitrator as:

An individual who has a known, direct, and material interest in the outcome of the arbitration proceeding or a known, existing, and substantial relationship with a party may not serve as an arbitrator if the agreement requires the arbitrator to be neutral.

Thus, DORA requires the following for appraisers and umpires:

1. The appraiser and umpire must disclose to all parties, any other appraiser, and any other umpire, as well as any known facts that a reasonable person would consider likely to affect the impartiality of the appraiser including:

(a) A financial or personal interest in the outcome of the appraisal; and
(b) A current or previous relationship with any of the parties to the agreement to appraise or the appraisal proceeding, their counsel or representatives, a witness, or another appraiser or the umpire.

2. The appraiser shall have a continuing obligation to disclose to all parties to the agreement to appraise, the appraisal proceeding and to any other appraisers and the umpire, any facts that the appraiser learns after accepting appointment that a reasonable person would consider likely to affect the impartiality of the appraiser.

In accordance with Section 13-22-212 (3), C.R.S. if a party timely objects to the appointment or continued services of a selected appraiser the objection may be a ground under Section 13-22-223 (1), C.R.S. for vacating an award.

3. The insurer must not have ex parte communications with the appraiser or umpire during the appraisal process. Any communications between the appraiser, the umpire and the insurer shall include the insured or the insured’s representative.

4. Upon reaching an agreed upon value (either through the selected appraiser or an umpire) the insurer shall comply with the clean claim standards found in Colorado Regulation 5-1-14.

If you have a claim and are considering going through the appraisal process, please keep the above in mind when you are selecting your appraiser and when you find out who the insurance company has selected as their appraiser. If you question whether the insurer is using a "fair and impartial" appraiser, be sure to question them and get the facts you need to decide if you are going to object to their appointment.