Yesterday’s post, Appraisals Better Be Won Because They are Difficult to Overturn–Even if Unfair in Result or Procedure, generated a comment which I spent considerable time thinking about and responding to last night. I appreciate everyone that takes time to post comments to this blog. Many regular readers are from insurance companies, independent adjusting firms, insurance defense counsel, and those with interests and opinions often opposed to mine . The free exchange of ideas is important. True learning often results from the difficulty of understanding and respecting different views and philosophies.

This is the comment from Insurance Veteran that sparked this post:

“After thirty six years as an adjuster, insurance company claims manager, and head of a major restoration firm, I’ve looked at this issue from a multitude of vantage points.

Sometimes, the insured is seeking an outcome incompatible with the policy conditions. Hoping for renovations to unaffected areas, repairing damages caused by non-insured perils, and other similar unrealistic expectations, very frequently contribute to the "unhappy" syndrome.

I’ve also worked as a Public Adjuster and do not view this issue from one side of the fence. If an insured retains a knowledgeable, honest appraiser, the system does normally work.

Unfortunately, Christmas does only come once a year.”

Whether or not I agree with the comment, I have to respect anybody who has given thirty-six years of their adult life to the insurance business. Some of my policyholder colleagues have found it curious that I would allow a post, Sandy Burnette Defends Insurance Fraud Fighters, where the people that deny my clients’ claims are praised. But I feel that insurance fraud is wrong and, as unfortunate as it is, there is a true need for good, hardworking people devoted to catching fraudulent insureds.

Insurance is a fantastic product. Unfortunately, those who work for insurers are sometimes unfairly demonized simply because their work is not always consistent with policyholder interests. I am to blame for this at times.

I learn a lot from people like Insurance Veteran. Much of their knowledge is based on experience and learning at a level in the industry with which I have little contact. When people like Insurance Veteran explain how different carriers, contractors, and adjusters think and work through issues, it adds a bit of knowledge. If correct, I can use that knowledge to better understand issues and do my job for policyholders.

For example, I spent the last two Fridays working with a former State Farm adjuster who worked as a claim reinspector. His stories regarding the inner workings of how that job functioned, how his performance was criticized, who did the criticizing, and his job frustrations and joys lead me to a better understanding of an entity with which my law firm is in frequent litigation. His knowledge of State Farm’s current claims management, claims personnel, and claims processes provided me with a more accurate understanding of the industry.

So, to all insurance industry readers who want to make a comment, do not be afraid to make a point. Simply make up an alias if you want to remain anonymous. Many in the insurance industry who meet me actually find that, despite my pointed lawsuits and rhetoric, we can agree on many issues– even if they cannot be seen talking with me (fear of reprisal). I have quite a bit more freedom because my clients do not care who I talk with, so long as I show them the money at the end of the dispute.

Insurance Veteran made a point that everybody in the insurance business knows. There are certain policyholders who want much more than what is fairly owed, and they unrealistically believe they are entitled to the money. Some of these people go over the top and commit fraud. Others just want magic to happen, and the claims money to be paid regardless of any justification.

While I can certainly appreciate his comment, he may have missed part of the point of my post. Many policyholder appraisers do not fully understand how to win the apprasial for the policyholder. They do not comprehend that the appraisal is truly an alternative dispute process that binds the policyholder.

Some may suggest that I am wrong, and that the goal of appraisal is a fair number for both sides. But, my policyholder clients may have a very different view of what fair is. So, if the insurer wants to dispute the amount in an appraisal, I want as much as I can get for my clients. After all, if there were no appraisal, my client would be asking a jury of peers for justice. But the insurance companies were historically so afraid of juries and costs, that a hybrid dispute process became standard in form insurance policies. Guess who benefitted most from that process?

Accordingly, my warning to all policyholders and those working with them in appraisals is that it is binding and should be taken as seriously as a public trial. I want the mindset of policyholders faced with an appraisal to be:

There is no second chance.

I started writing a reply that I feel better explains my impressions on this topic. Some suggest that I am opposed to appraisals for a number of reasons, including the possible loss of litigation revenue. These people do not fully understanding the consequences of appraisal. I have a hard time explaining the historical importance of a jury as a core concept of American democracy, but I believe that giving up the right to a jury trial is the most important consequence of appraisal. Justice comes from the values of one’s peers in the community, not experts or government deciding what is fair and just. This is a fundamental concept of American democracy and protected by our Constitution.

Yet, if some courts and states deem a procedure without a jury and without rules to determine what a policyholder will obtain as “fair,” I have some very strong opinions about what policyholders should do and how appraisers selected by policyholders should go about their work:


I appreciate the view and you taking the time to share it.

Yes, sometimes policyholders have an unrealistic viewpoint. Sometimes, the appraisal process, whether informal or formal, results in awards where the policyholder has a poor result. Indeed, it happens in Courtrooms as well where the insurer simply prevails and the policyholder loses. No process guarantees a perfect and accurate judgment from differing evidence. That is reserved for the Almighty.

The policyholder has no protection in an informal appraisal process if the policyholder is ignorant. If a policyholder fails to obtain a very good appraiser as well as professional preparation of the evidence supporting damage, my impression is that insurers typically get a result with a far smaller award than when policyholders get the "right" appraiser and use professionals to provide, and work with, the appraiser towards a strategically prepared presentation to an Umpire.

My impression is that many policyholders in Florida come away with a good result because there is a very active public adjuster industry and knowledgeable policyholder bar that have experience with how to go about presenting evidence in an informal appraisal procedure so that policyholder recovery is fully realized.

This was not the case fifteen years ago in Florida nor in many other states today. In some situations, I have been approached for representation by policyholders, following a poor award, where they selected appraisers that are realtors, from restoration contractors that are on the insurers preferred vendor list, independent adjusters, and contractors with little insurance understanding that a simple estimate is generally going to result in an award far lower than what should have been obtained. If you select the wrong appraiser as a policyholder, you will lose.

The harder you work preparing an appraisal as if it were a full blown trial with a twist that it is not a trial, the better the results are generally obtained. Time, money and thoughtful preparation supporting the claimed amount as well as thoughtful preparation of rebuttal evidence is crucial to enhancing recovery for policyholders.

Selection of the Umpire is also important. Some umpires are slow and lazy. They take a lot of time to split differences. Some umpires are concerned about pleasing one side or the other–unfair awards may result. Ignorant appraisers sometimes agree to insurance industry Umpires. Getting the "right" umpire can make the difference between winning, having a so-so result, and getting killed because the "fix" is in. This is the real world of "Umpire shopping" that goes on everyday in the banter of the appraisal process. If a policyholder selects or has appointed the "wrong" umpire, the policyholder loses.

I applaud all Umpires that take their job seriously enough to become Certifide through the Windstorm Network and educate themselves enough to truly be worthy of what the position should be and requires.

The one aspect of all this is the right to have a jury of one’s peers determine the outcome of a dispute is completely abrogated through this process. Not only are there no procedural due process safeguards for policyholders which allow them to have a right to confront those with opposing views, there are no rules at all. These basic civil protections were first provided to subjects of Kings in the Magna Carta and they exist in our Constitution.

Maybe personal Constitutional rights and the liberties all of us enjoy do not matter much in this day and age. After all, Judges trained in the law and are sworn to uphold the Constitution and the important personal right to a jury trial, make simple rules that suggest expediency and cost is more important than the Constitutional right. So, why should others care?

Many of my colleagues and myself have taken an oath to support and truly (possibly naively) believe in our jury system with set rules and procedures of fairness. My personal and professional opinion is that Kangaroo courts subject to personal arbitrary rules should not be forced upon those that do not voluntarily agree. Policyholders with adhesionary policy terms not bargained for should question the wisdom of judges to say that somebody has relinquished such important rights merely by purchasing a standard form policy.

Yet, I live with what many Courts have found. If the rule is that there are no rules, I can get into the mud with the best of anybody. All I care about for my client is winning anyway I legally can if we go to an appraisal. Absent fraud, the Courts in informal situations have just about blessed that "anything goes."

This is what I teach and preach to public adjusters that attend our workshops. Unlike an insurer to its customer, I have no obligation to be fair and act in good faith to the insurance company during the appraisal process. Instead, my legal obligation is to zealously represent my client to the best of my ability and for the interest of my client. Insurers always have an obligation to be "fair" and thus cannot legally act only in their short term economic interest if they are acting in good faith and following the regulations that bind them.

From my view, insurers wrote this clause into the policy long ago when there were few public adjusters and experienced attorneys for the policyholder. It served them well to reduce claims payments at little cost when there was futile opposition.

"The worm turns."