Dogs and cats harmoniously together? It happens at the Windstorm Insurance Conference where insurance company representatives and policyholder advocates analyze property insurance claims handling trends. Jonathan Held, Steve Badger, and I will present and analyze some of the most cutting-edge issues surrounding appraisals of property insurance disputes. This year’s Conference will be held virtually February 1-4. The live Conference will be held May 24-26.
The Windstorm Network was substantially founded by Janet Brown over twenty years ago. Today, the Windstorm Conference is one of the largest attended educational events for those interested in claims handling issues involving windstorm claims. A short history of the Windstorm Conference indicates in part:
It Started With a Simple Idea
The Windstorm Insurance Network, Inc. (WIND) was officially incorporated the same day Hurricane Floyd hit the North Carolina coast: September 16, 1999.
It was a fitting start date for an educational association created for property and windstorm insurance claims industry professionals.
Although many hurricanes have blown since 1999, one thing has remained constant:
WIND is the only member association to bring together both defense and policyholder professionals together to connect, engage, and learn about important topics in the property/windstorm insurance claims industry.
‘The idea for WIND was born out of a casual conversation with our firm’s managing partner, Rick Boehm,’ says Janet L. Brown, partner of Boehm Brown Harwood, P.A, an Orlando-based insurance defense firm.
‘Rick was curious as to why we were constantly sending our attorneys out of state for conferences on property issues and catastrophic losses. He inquired why we didn’t have something similar in Florida,’ recalls Janet.
‘Finally, he asked me to explore the idea for an association focused on training and educating property insurance claims professionals. The goal was to be balanced with participation from both the insurance industry and policyholder sides,’ says Janet.
One case which will be analyzed by us at the Virtual Conference is this week’s holding in State Farm Florida Insurance Company vs. Parrish.1 When considering what a “disinterested appraiser” would be, the appellate court noted that:
Mr. Keys, as the president of Mr. Parrish’s public adjusting firm, ‘has a vested interest in obtaining the highest possible recovery because [his] compensation will be a percentage of it.’ . . . KCC’s ten percent interest in the amount awarded in the appraisal process necessarily makes its president interested in the outcome of the process. For that reason alone, he is not a ‘disinterested appraiser.’ We are not the first court to reach that conclusion . . . . When an appraiser has a direct financial interest in the outcome of the appraisal, the appraiser is not disinterested.”
A contingency form of payment is uniquely problematic under this provision because the amount of the appraiser’s remuneration is inextricably tied to the amount of the award the appraiser will ultimately recommend. The bigger the award, the bigger the payment. It is that link between payment and award that makes the contingency-paid appraiser prohibitively interested in the outcome of the appraisal process, which is a condition the policy expressly prohibits.
Besides the interest KCC and Mr. Keys hold through KCC’s ten percent stake in the appraisal award, there is also the separate, broader, and glaringly apparent interest they have in the appraisal process by virtue of the fact that KCC is representing Mr. Parrish in the underlying dispute. Even if KCC is not, as Mr. Parrish stresses, his ‘fiduciary’ or his ‘agent’ (which we need not decide), KCC is contractually bound to negotiate with State Farm on Mr. Parrish’s behalf. And as Mr. Parrish’s public adjuster, KCC’s adjusters are professionally bound to handle Mr. Parrish’s claim ‘with dispatch and due diligence’ and not ‘approach investigations, adjustments, and settlements in a manner prejudicial to the insured.’ See Fla. Admin. Code 69B-220-201….
Other than nominating Mr. Parrish himself (or a member of his family), it would be difficult to imagine a more self-evidently interested person in an appraisal process than the person or firm that represents Mr. Parrish in that very process, especially since the policy’s “disinterested appraiser” is essentially acting as an independent adjudicator of a dispute.
The holding was not surprising given the aforementioned discussion:
We hold that a public adjuster that has a contingency interest in an insured’s appraisal award or represents an insured in an appraisal process is not a “disinterested appraiser” under this insurance policy’s appraisal provision.
For a much better and insightful discussion of appraisal issues like this, do not miss the presentation, The Changing Appraisal Landscape – What are the Top Trends? that Jonathan Held, Steve Badger, and yours truly will make at the Virtual Windstorm Insurance Conference on February 1. Here is a link for you to sign up.
I will also be discussing this case today at 2 pm EST at our Friday Forum, where we briefly discuss highlights of key developments in property insurance for the week. Here is our link for today’s Friday Forum.
Thought For The Day
I am fond of pigs. Dogs look up to us. Cats look down on us. Pigs treat us as equals.
1 State Farm Florida Ins. Co. vs. Parrish, No. 2D19-130 (Fla. 2d DCA Jan. 6, 2021).