There are times when I am troubled about what I write on this blog. This is one of them. I know that many people are going to read this who have very different viewpoints. When a number of people tell you in advance that they look forward to what you are going to write, there is some tendency to write for the readers rather than having the courage to just place what is in your heart on paper. There is no way I can write about all my thoughts, but I will share points.

Sometimes, the best course of action is to take simple steps to solve a problem rather than a radical departure. Tweaking a process may be the best course of action rather than setting in motion an entire new process that creates additional and often unforeseen adverse consequences. If I had to suggest one thing to Sean Shaw regarding his recommendations, it would be: “keep it simple.” There were so many new ideas being espoused at the roundtable without thorough thought as to all the consequences, that I am afraid he and others at the Office of Insurance Regulation could promote a new policy which could end up being more harmful than good.

Assuming that appraisal is a mandatory requirement in all property insurance policies, I still like what I proposed in my post, A Method for Keeping the Appraisal Clause in Property Insurance Policies Which Will Satisfy All Concerns. I have no problem saying that I may be persuaded with a better idea, but I heard none yesterday that provided a simple solution. After listening to others, I have changed my opinion regarding the licensing of appraisers. I think that there should be licensing of appraisers to help protect consumers from unregulated individuals giving legal and claim advice.

Policy should be reflected in law and regulation that promotes quick and full payment of property insurance claims. The implied performance duties of an insurer to adjust the claim are found nowhere in the insurance contract. Regulators and judges must understand that law and regulation are the only methods of placing adjusting performance claims duties contractually upon insurers. I agree with the insurance executive that spoke during the public comment portion of the session who said there needs to be accountability when those duties applied to the contract are violated. The Prompt Payment requirements championed by Senator Jeff Atwater should have greater teeth and the obligations of good faith claim handling should always have an aspect of accountability when breached.

The California law which requires disclosure of the insurer’s claims file to the insured upon request should be adopted in Florida. I raised this point in the session and nobody seemed to disagree. The first party claims file is the most relevant evidence of how the insurer is evaluating the claim. It seems to work in California and there should be no reason why it would not work here. Why shouldn’t an insurer be honest with its customer and honestly share how the claim is being handled? Only cheating adjusters would be afraid of honesty and transparency.

The individual largely responsible for this California law is Amy Bach, the executive director of United Policyholders. The California law provides:

The insurer shall notify every claimant that they may obtain, upon request, copies of claim-related documents. For purposes of this section, "claim-related documents" means all documents that relate to the evaluation of damages, including, but not limited to, repair and replacement estimates and bids, appraisals, scopes of loss,
drawings, plans, reports, third-party findings on the amount of loss, covered damages, and cost of repairs, and all other valuation, measurement, and loss adjustment calculations of the amount of loss, covered damage, and cost of repairs. However, attorney work product and attorney-client privileged documents, and documents that indicate fraud by the insured or that contain medically privileged
information, are excluded from the documents an insurer is required to provide pursuant to this section to a claimant. Within 15 calendar days after receiving a request from an insured for claim-related documents, the insurer shall provide the insured with copies of all claim-related documents, except those excluded by this section. Nothing in this section shall be construed to affect existing litigation discovery rights.

When I was speaking with Amy Bach about the Roundtable, she reminded me that California has optional appraisal where there has been a disaster. Either party may opt out. There, the insurers were abusing the process by outspending the policyholders and making the process so expensive for the consumer that it significantly lengthened the time to recovery and reduced the net payout because of the expense. Insurers leverage this fact with policyholders by threatening appraisal when negotiating settlements. As I pointed out yesterday, absent the obligations of good faith claims handling, the insurer often has no time pressure to pay claims quickly. Raising time and expense as a negative aspect to a consumer can provide insurers with enough leverage to achieve an underpaid claim result to the customer. Here is that portion of the California law:


In case the insured and this company shall fail to agree as to the actual cash value or the amount of loss, then, on the written request of either, each shall select a competent and disinterested appraiser and notify the other of the appraiser selected within 20 days of the request. Where the request is accepted, the appraisers shall first select a competent and disinterested umpire; and failing for 15 days to agree upon the umpire, then, on request of the insured or this company, the umpire shall be selected by a judge of a court of record in the state in which the property covered is located. Appraisal proceedings are informal unless the insured and this company mutually agree otherwise. For purposes of this section, "informal" means that no formal discovery shall be conducted, including depositions, interrogatories, requests for admission, or other forms of formal civil discovery, no formal rules of evidence shall be applied, and no court reporter shall be used for the proceedings. The appraisers shall then appraise the loss, stating separately actual cash value and loss to each item; and, failing to agree, shall submit their differences, only, to the umpire. An award in writing, so itemized, of any two when filed with this company
shall determine the amount of actual cash value and loss. Each appraiser shall be paid by the party selecting him or her and the expenses of appraisal and umpire shall be paid by the parties equally. In the event of a government-declared disaster, as defined in the Government Code, appraisal may be requested by either the
insured or this company but shall not be compelled.

Making the appraisal optional by law is an option which may be considered. Under this view, the inexpensive informal mechanism can stay in place by agreement. A negative aspect of my proposal is that policyholders may be better off simply litigating the matter rather than going through a full blown arbitration.

The insurance industry wants to push mediation. It wants to do this to avoid the perceived negative results of appraisal and still provide an alternative to litigation. My impression is that the insurer’s financial desire to achieve a reduction in the amount of claims severity (the average amount an insurer pays out for claims) can be achieved through a negotiation process where the insured can be leveraged by the prospect of delay and expense. Insurers train adjusters how to negotiate and even a voluntary mediation process can be abused. A Biloxi television station ran a feature of clients we represented that twice went through the Mississippi Department of Insurance mediation program following Katrina:

The real issue is how to get these disputes prevented in the first place. And, when they arise, how to get them resolved quickly and fairly. While it is easy for me to say that, coming up with an alternative dispute resolution process that is fair, quick and inexpensive, in a one size fits all format, is a puzzle that nobody has a perfect answer for. The prevention of the dispute and fair treatment can be accomplished as I have suggested with strong laws, transparency and good faith claims practice obligations.

But what about good faith disputes between parties? I still strongly feel that the insurer’s request for fair process of binding claim resolution with transparency is inherently sound. Indeed, that is what consumer’s want. And, what is often not said is that the result for the consumer once the dispute arises is often the skill of the appraiser or if litigated, the attorney selected by the policyholder. For example, our clients in the above video were advised by the first attorneys they hired to accept less in settlement than what the insurer twice offered in mediation. The skill of the right appraiser is something I noted in, Appraisers, Umpires and Appraisals as Valid Substitutions for the Right to a Jury Trial Depend on Viewpoint.

Insurance Veteran made a point that everybody in the insurance business knows. There are certain policyholders who want much more than what is fairly owed, and they unrealistically believe they are entitled to the money. Some of these people go over the top and commit fraud. Others just want magic to happen, and the claims money to be paid regardless of any justification.

While I can certainly appreciate his comment, he may have missed part of the point of my post. 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.

My impression is that the skills of consumers’ appraisers have become much better. There are now numerous seminars that provide knowledge to public adjusters which result in an understanding of how to obtain a fair settlement for the policyholder through the appraisal process. Indeed, there now seems to be a certain segment of public adjuster that cannot reach voluntary resolution and thus use appraisal as the actual adjustment of the claim. The response is that some insurers are now removing the clause. From their view, there is not first a good faith adjustment which is then subject to a process that has no rules and enough transparency for them to think it is fair. And, the most important reason insurers are removing the clause is that they losing.

Finally, I applaud Sean Shaw. I would love to participate and listen to the views of the insurance industry. I have a warning about the comment from the lobbyist from the insurance trade association. But, that is for another day.

Again, keep it simple.

  • Insurance Veteran

    I am a firm advocate of fair and prompt payment of legitimate insurance claims. You buy a product called a policy and are entitled to all it’s provisions. Where I find issue is with overinflated, unjustified, fraudulent claims.As a policyholder you are entitled to recover loss to the extent of the policy provisions,no more. I do not see where a jury that awards a payment not covered by either ignorance or misinterpretation of the policy conditions should be construed as being beneficial to anyone. What needs to be in place is a mechanism that insures fairplay for everyone in the process not winners and losers. Maybe claims tribunals staffed by claims people, company reps, public adjusters and lawyers could be formed as decision makers in a claims appeal process. The present adversarial process however defined benefits no one least of all the policyholder.

  • Tim Wobet

    The insurance trade association, their lobbyists and their money completely owns the legislators. Furthermore, the opposing lobbyists are destroying the lobbyists claiming to represent public adjusters and your side of the aisle. You have former adjusters and presidents of your association attempting to make a new living lobbying.

    How is that working out for all of you?

    It’s time to play in the big leagues. Sometimes you have punch the bully in the face and take it outside. Until public adjusters and plaintiff firms are willing to do that, prohibitive legislation will continue to pass without interference.

    You’re playing cards against a stacked deck. That’s not your game. Start rolling dice. Think Blue Ocean.

  • Insurance Vet,

    Claims tribunals? That is thinking outside the box. There is nothing like it in American justice that I know of.

    Thanks for your input.

  • Tim,

    You are very correct about the insurance industry having significant control over many in the Florida legislature. They have an army of full time attorney lobbyists, publicists, and political operatives, including claims executives and in house counsel that provide constant propaganda to our elected officials. None of this is illegal.

    In most states, attorneys are not friendly to public adjusters. The reason is many attorneys believe that public adjusters begin to provide legal advice and impact legal rights of policyholders. Indeed, I have caught considerable criticism from some public adjusters for suggesting that people be fully advised of their legal rights including whether to invoke appraisal and for my view that appraisal is improper and not fair if there is no procedure or rules. I would suggest that you should not lump attorneys interests and concerns as the same as all public insurance adjusters and as a unified lobbying front against the insurance lobby.

    In my view, consumers need respresentatives and consumer advocates that are more like co-panelist Frank Artiles who spoke publicly about what is really happening in Tallahassee and calling out those representatives that are supported by the insurance lobby and placate the insurance propaganda.

    But, I am pretty busy practicing law and helping policyholders. And that is part of the problem. Consumers and those of us in this business are not full time politicians. So long as huge insurance corporations that cannot vote, but can give money almost unlimited money, we are going to have problems. We need some very Deep Blue Ocean thinking and lots of new help.

    My hope is that Sean Shaw will become better educated and develop more of a voice that will be respected and reported as a Florida’s Insurance Consumer Advocate. I think he can.

    Thanks for your thoughts.

  • David


    Great blog as always. First and foremost I also want to thank Sean Shaw for setting up these roundtables as well as Vicki Twogood. It allows a forum that when done correctly brings ideas to the table.

    Like you, I am concerned about the current appraisal process which is binding. I like your ideas and hope the legislature agrees with what should be the core of appraisal which is a quick inexpensive forum to reach the proper settlement.

    1. quick settlement with little expense,

    2. it is a compromise settlement so most times they are not paying the full value of the claim, yes they will overpay some claims and

    3. most insureds do not understand what is in their policy and what they are entitled to.

    There are good and bad in all aspects of this complex business, and we need to learn to legislate to the majority of the good instead of worrying about the small percentage of the bad.

    When I started in the insurance business many moons ago, the PIP statute was a simple statute, look at it now.

    We need to keep simple a process and not create new problems in doing so. The appraisal clause has to be straight forward as well as flexible to work on the different types of claims available, i.e. a simple roof claim would not be handled by a complex commercial claim with business interuption. The expertise in each is different and must be represented in whatever the final outcome is.

  • Tim Wobet

    I may have been unclear in my rambling earlier. My point is that your lobbyists (lobbyists that represent Public Adjusters and therefore consumers), are getting destroyed by the insurance lobbyists and their ability to out-work you behind closed doors.

    Politicians fear bad press more than anything else in Politics. Forget about the top “opposers” who will be re-elected no matter what. Go aggressively after newer/young politicians that want to make a name for themselves and more importantly, can’t stomach the idea of losing an election. Target them and render the few power brokers ineffective. But, at the least, hire some P.R. firms and take this to the street and expose the truth. You will always, always win when/if you expose the truth. You know this, you do this every day. By you, I mean “your side of the industry.”

    One of the few “fears” all Floridians share is the possibility that another severe hurricane will hit us. And, as a result, we all pay a great deal for homeowners insurance policies that are more and more proving not to be worth the paper they’re written on. Insurance is a hot issue right now and if you want to hit the insurance companies in their weakest parts, go after their lobbying practices in the media as much or more as you go after their claims handling practices.

    I can promise you that if you dig into the legislators that are beholden to big insurance, the story will carry the day and Tallahassee will get turned upside down. And, I’m not even including Citizens.

    Think about it, how can the insurance industry possibly buy off every reporter in the state? They don’t buy that much print advertising. And politicians have a breaking point but not until they feel enough pain from their allegiance to bad insurance policy.

  • Don Phillips


    I am writing this to express my experiences with alternative claims resolution processes using both the Florida Mediation Program and the appraisal provisions of the insurance policy.

    Let me start by saying that I have a somewhat unique perspective on claims handling. I have spent my entire 35 year professional career in the claims handling industry in one form or another. The first 24 years of my career I worked on the insurer side in various positions including a 5 year stint as a regional claims manager for a property casualty insurance carrier and 13 years as an equity partner in a regional independent adjusting company. For the past 11 years I have owned my own public adjusting company. So I have had extensive experience in both mediation and appraisal advocating for both the insurer and the insured.

    First let me address the Florida Mediation program. To put it bluntly it is, in my opinion, an abject failure. Perhaps the first and foremost reason that it is a failure is that my experience has shown that the insurer’s representative almost always goes into the mediation without having full settlement authority. Without having that authority the insurer’s representative is unwilling or unable to offer a fair settlement to the insured simply because they either do not have the dollar authority to do so and/or are unwilling to go back to their supervisor for my authority. I have also experienced cases where the insurer agreed to go to mediation with an insured but at mediation they did not move one dollar from the original position that drove the claim to mediation in the first place. I have had an impasse declared within 10 minutes of the start of mediation with the insurer never making an offer above the original adjuster’s offer.

    However, perhaps the most insidious aspect of mediation is the way the insurance industry advocates to the insured to use the mediation process without the insured having any professional assistance with their presentation. The insurer’s representative at the mediation is a professional claims person who has been trained in the mediation process and negotiation tactics. An unrepresented insured almost never understands the process and certainly does not have the training of the insurer’s representative. In the words of one insurer representative that I know when an insured goes into mediation without professional help, ‘it is like leading the lambs to slaughter.’ It has reached a point now that I see no redeeming reason to recommend to my clients, even with my help, that they avail themselves to the mediation program as it currently exists.

    Next, let me relate my experiences with the appraisal process. In my career, I have appraised claims on behalf of both insurers and insureds. I have also served as an umpire on over 50 appraisals. I appreciate the appraisal process because it does give some finality to a claim. It is quicker and less costly than litigation and absent any coverage issues a properly crafted appraisal award is almost always binding on both the insurer and insured. The appraisal also gives the insured a professional advocate in the decision making process. That cannot be said for many mediation hearings. I also like appraisals because there is no such thing as an impasse in appraisal. I have yet to see an appraisal I was involved with that did not have an ending where at least two of the three appraisal panel members were able to reach an agreement.

    Now, let me speak to the appraisal process. I believe the appraisal process would be very well served if it had some guidelines on how the process was to be conducted, such as having utilizing the Florida Arbitration Code as a guide. I have issues with the conduct of insurers and their appraisers. I believe insurers have far too much influence on their appraisers when it comes to the selection of an umpire.

    As indicated by Umpires at the Roundtable, it is a very poorly kept secret that insurers have lists of umpires that they instruct their appraisers to never use, even if their own appraiser feels the person on that list is qualified and would make a good umpire on their appraisal. I have run across another problem in my capacity as umpire. I have had appraisals where the appraisers advise me they are at an impasse and need my umpire services to settle their differences. When I meet with the 2 appraisers they inform me that they really do agree on an amount of loss but the insurer’s appraiser informs me that he doesn’t want to sign the award. He won’t sign the award, even though he agrees with it, because he is afraid if he does sign it the insurer will stop using him on their appraisals. As an umpire I should be happy with this situation because it means more business for me. However that is not the case. I can’t help but think about the poor insured who has had his claim settlement delayed and now that an agreement has finally been reached he has to pay 50% of an umpire’s bill when in reality the umpire was not really needed. That is just wrong.

    As a former claims manager and a person very familiar with the industry, tt is naive to think that insurers, including Citizens, do not keep statistics and track which umpires and appraisers provide lower awards and then deselect those that give awards higher than what those insurers think is acceptable.

    Does the appraisal process have warts? Certainly it does. However, I believe any problems with the appraisal process are repairable. I do not feel the same way about the Florida Mediation program.

    Thanks for all your efforts on behalf of the policyholder.

    Donald A. Phillips

    Consumer Claims Associates, Inc.
    Public Insurance Adjuster
    Appraiser • Umpire • Court Approved Expert Witness
    P. O. Box 970701 • Coconut Creek, FL 33097