Umpires appointed or selected to an insurance appraisal panel should be fair and unbiased. However, I am certain that parties to an insurance appraisal hope the umpire is "unbiased" in their favor. That thought may get a chuckle and a nod of the head from many readers of this blog because many spend a great deal of time and thought when choosing just the right unbiased and fair umpire.
Choosing an umpire that seems unbiased but carries "silent" conflicts of interest is disastrous. However, this situation happens all the time. One way to prevent it is to make an inquiry. The other is for the umpire to voluntarily explain any potential conflicts.
Jim Whiddon is a formidable adversary as an accountant who does business interruption analysis for insurance carriers. While researching insurance appraiser bias as a basis for overturning an appraisal award, his name came up as the appointed umpire in Weinger v State Farm Fire & Casualty Company.1 My first thought was that ‘Whiddon should never have been an umpire because all his work is for insurance companies.’ You remember what they say about Tigers not changing their stripes?
As it turned out, the parties did not appoint Whiddon; a judge selected him. Here are the important facts of the case:
[A]ppellants moved to recuse Mr. Whiddon because it had come to their attention that he had previously been hired as an accountant by State Farm. The trial court denied the motion, and after the disposition of other motions the appraisal went forward. The award was signed by the appraiser appointed by State Farm and by Mr. Whiddon. [Appellants] moved to vacate the award because of the bias of the umpire, and at that time submitted the deposition of Mr. Whiddon in which he detailed his connection with State Farm. While he worked for other insurance companies and insureds evaluating losses, his collected revenues from State Farm alone ranged from $11,000 in 1987 to $61,000 in 1989. In 1990 he collected $48,000 from State Farm. These figures amounted to a considerable portion of his annual collected fees. He further testified that State Farm had retained him during the course of 1991 (the year he was appointed as the neutral umpire) but he did not know how much he expected to earn that year from the company. Despite these revelations, the court denied the motion to vacate the award.
You can probably guess the outcome:
We are convinced that the extent of Mr. Whiddon’s prior and continuing business dealings with State Farm should have been disclosed to the court when it was asked to select a neutral third appraiser. It was error for the court to fail to recuse him and vacate the award, upon being apprised of the substantial contact between the umpire and State Farm.
The rule from this case is that Umpires should disclose conflicts of interest at the time of their appointment. The best practice is to make an inquiry in writing.
I will show inquiry letters we use at the September 18 speech I will be giving next week at the Insurance Appraisal and Umpire Association conference. Here is a link if you have not registered.
Positive Thought For The Day
"The best thing about umpiring is seeing the best in baseball every day. The cardinal rule of umpiring is to follow the ball wherever it goes. Well, if you watch the ball, you can’t help seeing somebody make a great catch… That’s what makes umpiring so much fun."
— National League Umpire Shag Crawford