Appraisals Can Lead to Nasty Legal Battles—Should Appraisers and Umpires Get Insurance Protecting Them?

Appraisal is generally thought of as a quicker and more cost-efficient method of resolving property insurance controversies than litigation. That is not the case when an appraisal is followed up with litigation. Further, while infrequent, there are instances when appraisers and umpires can be drawn into the litigation controversy, as evidenced by recent filings in a Texas federal case involving a Baptist Church and Brotherhood Mutual Insurance Company.¹

The most recent filing by the Baptist Church tells a story of a property insurance claim in dispute where the Umpire told the policyholder’s appraiser he was too busy to continue the appraisal.

On June 1, 2020, Choate [the church appraiser] called Williams [Brotherhood Mutual’s appraiser] to request the appointment of a new umpire. Williams never responded. On June 5, 2020, Choate followed up with this request, asking Williams ‘[w]hen would you like to discuss new umpires?’ Williams ignored this email also. On June 12, 2020, Choate followed up with a third email and phone call asking Williams to give him a call or email to discuss appointment of a new umpire. Williams continued ignoring these communications. Given that the claim was approximately three years old and that Brotherhood was again causing delay of its resolution, MMA [the church counsel] retained attorney Chris Lyster to have a new umpire appointed.

On June 15, 2020, and as expressly permitted under the Policy, Lyster sent a letter to the Honorable Mike Moore of the 29th Judicial District Court of Palo Pinto County, Texas explaining the procedural posture of the Claim, the parties’ inability to resolve the appraisal, the resumes of potential umpire candidates, and requesting ‘that you appoint a competent and disinterested umpire to oversee the appraisal process.’ The following day, Judge Moore responded by appointing Mark Weeks (‘Weeks’) to act as umpire.²

The unilateral letter request for determining an umpire in a letter sent to a judge is something rarely done. In this case, it was sent to a Texas state court judge while this federal case was pending. In some jurisdictions, writing a unilateral letter to a judge knowing that another party is represented I would suggest could be a major ethical issue. Nevertheless, what happened after the new umpire was unilaterally appointed?

On June 19, 2020, MMA sent an email to Brotherhood’s counsel Jennifer Durbin advising of Weeks’ appointment. On June 22, 2020, Choate sent an email to Weeks and Williams advising that he would like to set up a conference call to discuss moving forward with the appraisal and requesting the appraisers’ availability. Weeks responded by email on June 23, 2020, proposing that the call be held on June 29, 2020. Williams responded that same day, stating that he had prior obligations on June 29, 2020, but that he was free on July 1 or 2, 2020. The following day, Choate and Weeks confirmed their availability for July 2, 2020.

Williams did not respond to the emails requesting availability for the conference call, but forwarded the email to Brotherhood’s attorney Amanda Hazelton. On June 25, Hazelton emailed MMA’s counsel, along with the appraisers and Weeks, advising of her opinion that Judge Moore was without jurisdiction to appoint Weeks as umpire and that Brotherhood did not agree to the appointment….³

Brotherhood Mutual apparently did not file a judicial objection, move to restrain or stop the umpire or formally move to vacate the state court judge’s appointment of the new umpire. Without the involvement of the insurance company appraiser—who was boycotting the proceedings apparently because the insurance company objected to the new umpire’s appointment—the church appraiser and new umpire came to an actual cash value award of $48,076,677.36. There must have been many “Alleluia Jesus” comments at the following Sunday service because the actual cash value amount sought before the appraisal was reportedly in the $10,000,000 range.

Brotherhood Mutual has filed a motion to allow counterclaims and claims against the new appraiser and the church’s appraiser.⁴ If allowed, these lawsuits against the umpire and appraiser just for legal fees can be expensive. While this is rare, suits against appraisers or an umpire are becoming more of a trend because they were almost non-existent 20 years ago.

For the record, I kept wondering why Steve Badger seemed so much more animated and argumentative at the Windstorm Insurance Conference panel, which I noted in, Impressions of The Windstorm Panel Involving Steve Badger and Jon Held. Part of the answer is obvious since he is co-counsel representing Brotherhood Mutual in this case.

This case is worthy of review since it raises a number of cutting issues with the appraisal process. For background information, we have previously noted The Umpire’s Role in Texas Appraisals, as stated in Texas insurance law:

The duty of the umpire under the terms of the insurance policy was to ascertain and determine, in the exercise of his own best judgment, the cash value of the items of property which the appraisers had disagreed, independent of the findings of the appraisers, or either of them… The umpire is required to act with the appraisers in matters of difference. He is the third appraiser. If the three are of one mind, or if two of them are in accord as to value and loss, the appraisal award is a finality.

I have noted that Texas requires the appraisal panel to be independent and unbiased and questioned how often that really occurs in, Texas Appraisers are Supposed to be Disinterested, Impartial and Not Biased: I Doubt This is Reality in Texas Appraisals. I was also critical of panels that did not work hard, trying to find an honest and fair amount of all damages:

I request that clients I represent in appraisal have an appraiser that works as hard as possible to find out all information about the loss from both my client and from the insurer’s viewpoint. It is my impression that the harder and longer one works on analyzing damage following a loss, the more damage is found that would simply go unclaimed as a result of ignorance. Getting an accurate and fair independent estimate of damage by either appraiser requires diligence, information, expertise and then an understanding of why other views are not accurate or subject to criticism.

This type of critical analysis is normal for those of us in insurance coverage litigation. However, it is often the exception rather than the rule in appraisals where, as noted by Buchman, the panel often simply splits amounts.

We will keep readers abreast of developments in this case. It is now high stakes for all.

Thought For The Day

Good stories are driven by conflict, tension, and high stakes.
—William Landay
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¹ First Baptist Church Odessa v. Brotherhood Mutual Ins. Co., 7:18-cv-00208 (W.D. Tex.).
² First Baptist Church Odessa v. Brotherhood Mutual Ins. Co., 7:18-cv-00208 (W.D. Tex. – Doc. 41, filed April 10, 2021).
³ Id.
⁴ First Baptist Church Odessa v. Brotherhood Mutual Ins. Co., 7:18-cv-00208 (W.D. Tex. – Doc. 36, filed April 2, 2021).