Nobody publicly admits that they are acting unethical. Yet, for many endeavors in life, there are neither established ethical standards nor many rules explaining what fair and just behavior should entail. Until recently, I would suggest that appraisers and the appraisal process in many venues was a process with few rules and no ethical standards. I gave at least one example of current unethical behavior in the appraisal process yesterday in, The Current State of Appraisal and How Mutual Terms Can Prevent Appraisal.

One of the shining programs of the Windstorm Insurance Network® has been its Wind Certified Umpire Program®. Following up on that program, I helped push through a Wind Appraiser Certification Program which WIND describes as follows:

WIND Appraiser Certification Program

"A training program for property insurance appraisers."

The WIND Certified Appraiser Program®, which was launched in 2012, seeks to enhance the professionalism and ethics of property insurance appraisers.

The first segment of four-hour class focuses on ethics and professionalism. Current law in various jurisdictions is reviewed and discussed in the second segment, and the third segment addresses the various forms to be utilized in the appraisal process.The class concludes with an open discussion regarding strategies employed by appraisers to bring the appraisal to a successful conclusion.

Upon completion of the four-hour program, professionals further their credentials by becoming a WIND Certified Appraiser.® by successfully meeting the strict guidelines and criteria set forth by WIND. After successful completion of this double-session workshop, the names of attendees will be listed on the WIND website for three years to confirm that they are a WIND Certified Appraiser."

Significantly, a Code of Ethics was adopted by Windstorm Insurance Network which provides the following:

The Code of Ethics for Appraisers in Insurance Appraisals was prepared in 2011 by a committee appointed by the Windstorm Insurance Network, Inc. It was approved by the Officers and Board of Directors in November 2011. Pursuant to the Bylaws of the organization, the Code was adopted by members at the Annual Business Meeting in January 2012 at the Windstorm Insurance Network Conference.

PREAMBLE:

The use of appraisal to resolve insurance disputes has grown extensively. Persons who act as an appraiser therefore undertake serious responsibilities to the public as well as to the parties. Those responsibilities include important ethical obligations.

Few cases of unethical behavior by appraisers have arisen. Nevertheless, this Code sets forth generally accepted standards of ethical conduct for appraisers, in the hope of contributing to the maintenance of high standards and continued confidence in the process of appraisal.

Although most proceedings are appraised pursuant to an insurance contract and voluntary agreement of the parties, certain disputes are submitted to appraisal by the Courts. In all such cases, the persons who have the power to influence the eventual outcome or Award should observe fundamental standards of ethical conduct. In this Code, those persons are referred to as an “appraiser.”

Appraisers, like attorneys, have the power to influence cases. However, unlike full-time attorneys, appraisers are usually engaged in other occupations before, during, and after the time that they serve as appraisers. Often, appraisers are purposely chosen from the different trades in order to bring special knowledge to the task of deciding the pending issues. This Code recognizes these fundamental differences between appraisers and attorneys.

NOTES ON CONSTRUCTION:

Various aspects of the conduct of appraisers, including some matters covered by this Code, may also be governed by agreements of the parties in any Memorandum of Appraisal, appraisal rules to which the parties have agreed, applicable law, or other applicable ethics rules.

All provisions of the Code should therefore be read as subject to contrary provisions of applicable law. They should also be read as subject to contrary agreements of the parties. Nevertheless, this Code imposes no obligation on any appraiser to act in a manner inconsistent with the appraiser’s fundamental duty to preserve the integrity or fairness of the appraisal process.

CANON I. AN APPRAISER SHOULD UPHOLD THE INTEGRITY AND FAIRNESS OF THE APPRAISAL PROCESS.

A. An appraiser has a responsibility, not only to the parties, but also to the process of appraisal itself, and must observe high standards of conduct so that the integrity and fairness of the process will be preserved. Accordingly, an appraiser should recognize a responsibility to the public, to the parties whose rights will be decided, and to all the participants in the proceedings.

B. One should accept appointments as an appraiser only if fully satisfied:

(1) that he or she have received and read the terms of the policy language governing the appraisal and can serve in compliance with the terms of the policy;
(2) That he or she will act with utmost integrity, full disclosure and transparency.
(3) that he or she is physically able to serve;
(4) that he or she is competent to serve; and
(5) that he or she can be available to commence the appraisal in accordance with the requirements of the proceedings and thereafter to devote the time and attention to its completion that the parties are reasonably entitled to expect.
C. An appraiser should have full authority to reach an agreement and execute the Award without consulting with his or her respective client.
D. An appraiser should conduct the appraisal process so as to advance the fair and efficient resolution of the matters submitted for decision. An appraiser should make all reasonable efforts to prevent delaying tactics.
E. Once an appraiser has accepted an appointment, the appraiser should not withdraw or abandon the appointment unless compelled to do so by unanticipated circumstances that would render it impossible or impractical to continue. If an appraiser is substituted, any written agreement previously endorsed by members of the original panel will remain unchanged.
F. The appraiser has a non-delegable duty to inform his client of the process, potential outcomes and costs of the appraisal process. The appraiser must provide the umpire with the name, address and contact phone number for the person directly responsible for payment of the invoice and allow them to contact them directly in advance of any work being completed.

CANON II. AN APPRAISER SHOULD AVOID IMPROPRIETY OR THE APPEARANCE OF IMPROPRIETY IN COMMUNICATING WITH THE UMPIRE.

An appraiser or prospective appraiser should not discuss any proceedings with the umpire in the absence of the other appraiser except in the following circumstances:
A. The appraiser may identify the parties, counsel or witnesses and the general nature of the claim; and
B. The appraiser may make inquiries of the umpire to determine his or her suitability and availability for the appointment.
C. Discussions may be had with the umpire concerning such logistical matters as setting the time and place of hearings or making other arrangements for the conduct of the proceedings. However the appraiser initiating the contact with the umpire should promptly inform the other appraiser; or
D. If an appraiser fails to be present at a hearing after having been given due notice, or if all parties expressly consent in writing, the opposing appraiser may discuss the claim with the umpire who is present.

CANON III. AN APPRAISER SHOULD MAKE DECISIONS IN A JUST, INDEPENDENT AND DELIBERATE MANNER WITH UTMOST INTEGRITY.

A. The appraiser should, after careful deliberation, decide all issues submitted for determination regarding the amount of loss. An appraiser should not participate in a discussion to resolve issues outside the scope of the appraisal.
B. An appraiser should decide all matters justly, exercising independent judgment and utmost integrity, and should not permit outside pressure to affect the decision.
C. An appraiser should not delegate the duty to decide to any other person.

CANON IV. AN APPRAISER SHOULD BE FAITHFUL TO THE RELATIONSHIP OF TRUST AND CONDFIDENTIALITY INHERENT TO THAT OFFICE.

A. An appraiser is in a relationship of trust to the parties and to the other appraisal panel members and should not, at any time, use “confidential information” acquired during the appraisal process to gain personal advantage or advantage for others, to affect adversely the interest of another. “Confidential information” is information of a private nature or of a proprietary nature that is not pertinent to the appraisal.
B. An appraiser may obtain help from an associate, a research assistant, expert or other person in connection with reaching his or her decision. Any of the above must abide by the Code of Ethics for Appraisers in Insurance Appraisals. It is the appraiser’s duty to advise all of the above of their obligations.

CANON V. AN APPRAISER MAY ENGAGE IN ADVERTISING OR PROMOTION OF HIS OR HER APPRAISAL SERVICES WHICH IS TRUTHFUL AND ACCURATE.

A. Advertising or promotion of an individual’s willingness or availability to serve as an appraiser must be accurate and unlikely to mislead. Any statement about the quality of the appraiser’s work or the success of the appraiser’s practice must be truthful.
B. Advertising and promotion must not imply any willingness to accept an appointment otherwise that is in accordance with the prevailing law and the insurance policy under which the appraisal process has been invoked.

Comment to Canon V.

This Canon does not preclude an appraiser from printing, publishing, or disseminating advertisements conforming to these standards in any electronic or print medium, from making personal presentations to prospective users of appraisal services conforming to such standards or from responding to inquiries concerning the appraiser’s availability, qualifications, experience, or fee arrangement.

® COPYRIGHT 2012, WINDSTORM INSURANCE NETWORK, INC.

Anybody regularly acting as an appraiser should seek this certification. The next course is at the 2013 Windstorm Conference, which will be in Orlando two weeks from now.

  • Don Phillips

    I commend Chip for his recent posts concerning the current state of the appraisal process. It is my belief that the appraisal process is no different than the claims adjustment process in that both rely on the insurer and insured, along with their advocates, acting ethically and honestly. Any process can be corrupted if the parties involved cross the ethical line. There is no question that there are bad players on both sides of the process who game the system. However I still believe they are very much in the minority and doing away with the appraisal clause is not the answer.

  • Chip, Thanks for your article and continued education in reference to the property claims world. I agree with Don above that there are just a few bad apples and the remainder of us are trying to do a good job to appraise the damages. Not as an advocate for the owner or insurer but for the property itself. I look at the building like a patient it either has a broken arm or one that has been sprained that may setting or just a some crutches and a wrap, and what will that procedure cost.
    Additionallly I would note that we almost had licensed appraisers and umpires in FL but the statute did not pass. I do know that there is now and since August “licensed” property damage appraisers in Louisiana. Thanks and see you @ windstorm – JM

  • SHIRLEY HEFLIN

    Dear Chip:

    First, your titles this week are creative and great!

    Second, what about the ethics of Umpires?

    As gleamed from Messrs. Phillips’ and Minor’s comments above, there are undoubtedly “bad apples” in every profession, however, calling attention to same (as you have by helping implement the course @ WIND) is a stride toward making the world a happier and fairer place for all.

    SHIRLEY HEFLIN
    (Tampa, FL)

  • Chip Merlin

    Don, John and Shirley,

    Thanks for your comments.

    It is always good to hear from you and I encourage you to keep doing so in the future.

  • Bob Schmidt

    Lately we have been having problems with the insurance companies naming their hired guns as appraisers and everything always goes to umpire resulting in higher costs for the insured. To combat this I started sending out disclosures questions for them to answer. The ins carriers are refusing to have their selected appraisers cooperate with us and answer the disclosures. How do I get them to cooperate.