In a follow-up to a post last spring, Appraisals Can Lead to Nasty Legal Battles—Should Appraisers and Umpires Get Insurance Protecting Them, a federal judge has allowed the insurance company to file a counterclaim against the policyholder church, its appraiser, and a unilaterally appointed umpire.1 The counterclaim is one that readers of this blog should study because it raises issues about the propriety of appointing an umpire in a separate petition from a pending lawsuit concerning the controversy, how a new appointment of a new umpire after the first one resigns is to be handled, and whether the umpire was indeed appointed unilaterally.

The counterclaim alleges that the pre-suit estimate of the property damage was $10.6 million. Steve Badger is co-counsel for the insurer on this matter. We have debated what causes (and I have explained why) initial amounts of damage to be drastically different than awards in a trial, appraisal, or arbitration. However, just because there is a significant difference between claimed amounts and awarded amounts does not mean there was fraud.

The counterclaim alleges in part:

Brotherhood Mutual is informed and believes, and on that basis alleges, that [the appraiser] knowingly and intentionally misrepresented the existence, extent and amounts of damage purportedly sustained to the interior and/or exteriors of FBCO’s properties resulting from the June 14, 2017 hail event and included in the appraisal award and/or intentionally omitted and failed to disclose the true conditions of the properties and the lack of any significant hail-related damages throughout the interior and/or exteriors of FBCO’s properties.

Brotherhood Mutual is informed and believes, and on that basis alleges, that [the umpire] knowingly made the aforementioned intentional misrepresentations, or ratified, adopted and agreed to the intentional misrepresentations initially made by Choate, as to the existence, extent and amounts of damage purportedly sustained to the interior and/or exteriors of FBCO’s properties resulting from the June 14, 2017 hail event and included in the appraisal award and/or intentionally omitted and failed to disclose the true conditions of the properties and the lack of any significant hail-related damages throughout the interior and/or exteriors of FBCO’s properties.

Brotherhood Mutual is informed and believes, and on that basis alleges, that FBCO made the aforementioned intentional misrepresentations, and/or ratified, adopted and agreed to the misrepresentations by [the appraiser and umpire] as to the existence, extent and amounts of damage purportedly sustained to the interior and/or exteriors of FBCO’s properties resulting from the June 14, 2017 hail event and included in the appraisal award and/or intentionally omitted and failed to disclose the true conditions of the properties and the lack of any significant hail-related damages throughout the interior and/or exteriors of FBCO’s properties.

Given the amount in controversy, allegations of fraud, the roles of counsel leading to the umpire’s appointment, the allegations that the policyholder’s counsel had ex-parte communications with the judge appointing the new umpire, and reading the court Order allowing the counterclaim, it is evident that there are bitter emotions between counsel for the parties. The court noted:

The parties have displayed to the Court an inability to resolve disputes in good faith. The record reflects counsel’s hostility toward one another and certain parties. Specifically, multiple filings contain arguments personally targeting attorneys and some of the parties involved. Rather than focusing solely on the legal issues posed in the motions filed, the parties have chosen to engage in back-and-forth quarreling.

Given the allegations in the counterclaim, accusations that the pastor was acting without authority of the congregation board, the unique issues raised about a replacement umpire, and the high stakes nature of this lawsuit, I am certain there will be more to report and learn from this case. When reading the counterclaim, please remember that allegations are not actual proof nor a substitute for truth.

For those who are routinely involved with property insurance appraisals, my message has been very clear—obtain a good professional services policy that will cover you and pay for your defense costs, which can be huge if you get embroiled in a matter such as this.

Thought For The Day

Unfortunately, no matter how frivolous the lawsuit, you still, of course, have to pay people to defend you on it.
—Kelly Ayotte
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1 First Baptist Church Odessa v. Brotherhood Mutual Ins. Co., No 7:18-cv-00208 (W.D. Tex. Dec. 16, 2021).