American politics and government can make people extraordinarily upset. The very nature of democracy, modern regulation, those being regulated and those regulating promotes active and emotional disagreements of what is the best public policy and how it should be determined. So, my first observation from yesterday’s post, Colorado House Bill 18-1153 Concerning Appraisals for Insurance Claims Killed in Finance Committee Hearing, is that Scott deLuise is very upset that the recent legislation he worked to draft with others and believed in, did not become law in Colorado—his lifelong and beloved state. I have been in similar losing situations and can empathize with him.

My second observation is the resolution of insurance claims through the appraisal process is of much greater concern and discussion than in the historical past. When I first started in this business in 1983 and until Hurricane Andrew in 1992, appraisals were rarely invoked. There were no organizations teaching appraisal methodology. The number of public adjusters and career “insurance” restoration contractors were relatively small. Policyholders were largely on their own and ignorant about what an appraisal meant.

During this time frame, most of my “appraisal” disputes came from policyholders that found their “appraiser” by looking in the “yellow pages” and choosing a real estate appraiser. On the other hand, the insurance company appraiser was skilled in construction and repair methodology. The Umpire was usually an “independent” adjuster. The real estate appraiser did not understand that “independent” meant working only for insurance companies, but not one in particular. The ignorant policyholder with a real estate appraiser was like a sheep to slaughter.

Between Hurricane Andrew in 1992, and the four hurricanes which struck Florida in 2004, the use of appraisal as an alternate dispute resolution process increased somewhat. The contractors in the “insurance restoration industry” grew as did their associations. The same was occurring with the public adjuster industry. As did the lawsuits raising important issues and discussion such as:

  1. Causation of damage being determined in an appraisal proceeding.
  2. The procedures to be used in appraisal and appraisal being viewed differently than arbitration by jurists.
  3. The degree of independence required by appraisers and umpires.

In 2003, The Windstorm Insurance Network started the Wind Certified Umpire Program:

The program, which includes the WIND Certified Umpire class and the WIND Certified Umpire Recertification class®, is a valuable educational resource for those wanting to further their understanding of the insurance appraisal process. Both classes are presented at the annual Windstorm Insurance Conference, have been taught to more than 1,000 professionals since 2003.

The four-hour WIND Certified Umpire and WIND Certified Umpire Recertification® classes provide the necessary certification to anyone who wishes to be included in the WIND Certified Umpire Directory®, or those wanting to further enhance their professional umpire credentials.

The classes focus on ethics and professionalism, process, case law, and the “how to” of acting as an umpire, as well as techniques, forms, awards, and more. WIND Certified Umpires must renew their certification every three years by completing the recertification class.

Both classes provide real-life scenarios are utilized to promote discussion of the duties and responsibilities of the umpire. Common issues and problems that often arise during an appraisal are addressed, as well as effective methods and techniques to facilitate an appraisal from beginning to conclusion. The classes also include a discussion of ethical considerations and changes in case law impacting the appraisal process.

If you look at the first sixteen points in the Code of Ethics for Umpires of the Wind Certification Program, you will notice how important the concern that umpires be independent and not biased for any party: (emphasis added)

An Umpire shall:

1. Be a neutral party.

2. Have no financial interest in any involved property or in the outcome of the appraisal.

3. Disclose any previous business relationship with any party, appraiser or attorney retained by a party.

4. Promptly disclose any potential conflict of interest before accepting an assignment as an umpire, and notify the parties immediately if a conflict or potential conflict arises during the course of the appraisal proceedings.

5. Not accept any assignment that he or she is not certain he or she is qualified to handle.

6. Confirm any fee arrangement with the parties in writing.

7. Confirm the issues to be addressed in the appraisal in writing with the parties.

8. Agree to inspect the property if requested to do so by either appraiser.

9. Maintain impartiality and neutrality throughout the appraisal process and uphold the integrity of the proceedings.

10. Share all communications with all members of the appraisal panel throughout the appraisal proceedings.

11. Be responsible to proceed diligently to conclude the appraisal proceedings.

12. Retain only unbiased, qualified and impartial experts.

13. Inquire of any retained expert as to any potential conflict of the expert.

14. Evaluate completely all presented facts and/or claims.

15. To the best of his or her ability, follow the law of the jurisdiction of the property.

16. Withdraw from the proceedings if a conflict arises and the conflict is not waived in writing by all parties after notice to the parties of the conflict….

Then, the use of appraisals skyrocketed following four major hurricanes in 2004, three in 2005, and meteorology being able to determine with virtual exactness where construction companies should look for hail damage losses. Indeed, there were people advertising as “appraisers” and providing legal advice to policyholders to seek redress through appraisal and skip hiring attorneys or public adjusters. This illegal practice still goes on.

The Windstorm Insurance Network then started an Appraiser Certification Program in 2012. The Appraiser Code of Ethics once is very different because it does not require appraisers to be unbiased:


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.

Still, while The Appraiser Code of Ethics is silent about bias, it still requires fairness and findings based on the facts:


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.

The Insurance Appraisal and Umpire Association was formed in 2009 as another organization concerning appraisers and umpires. While I have been to its classes and know that they instruct Umpires to always be independent and not biased, its Code of Ethics specifically allows appraisers to be advocates as long as the law allows them to do so:

V. Appraisers and Umpires shall conduct themselves in such a manner as to command respect and confidence and shall approach Appraisals with an unprejudiced and open mind, while advocating for their client as legally appropriate.

My third observation to yesterday’s post is that most appraisals are done with appraisers that can be somewhat known to work primarily for the policyholder side or the insurance company side, but that the Umpire must be independent, unbiased, and the party acting as the impartial to the appraisal proceeding. Virtually everybody in the property insurance adjustment business understands this concept and it is followed in practice in the vast majority of appraisals. Even the two bodies certifying appraisers and umpires acknowledge this in their Code of Ethics.

While Scott deLuise may be upset and think that consumers were big losers, I am not so certain. There is always another legislative session. The Colorado Supreme Court has yet to rule on the issue, and the common law is not set on the issue.

Another observation is the concern deLuise raises about the insurance industry having control of regulators and the legislature is not limited to Colorado. Most insurance regulators come from and to the insurance industry. The insurance industry is one of the wealthiest lobbyists and significant behind the scenes propagandists of laws and regulations in the United States. I do not think that will change, but it must be fought for the benefit of the consuming public which the industry is supposed to serve.

Thought For The Day

“Elections belong to the people. It’s their decision. If they decide to turn their back on the fire and burn their behinds, then they will just have to sit on their blisters.”
—Abraham Lincoln