Today, I am debating and analyzing appraisal issues with Steve Badger at the Insurance Appraisal and Umpire Association (IAUA). Bob Norton is the current president. 

Appraisal awards often have one or both parties upset about the determination of the amount of loss. A case decided two days ago1 addressed complaints from a policyholder who asserted that the award had to be overturned because one appraiser and the umpire used the wrong method to determine the actual cash value of the loss. 

The relevant facts are the following:

[T]he parties then proceeded with the appraisal dispute resolution process required by Meier’s policy. Meier selected appraiser Paul Hausz, and Wadena selected appraiser Mark Stromberger. The appraisers chose William Marske as umpire. Because the appraisers could not reach an agreement, they submitted their differences to Marske. He concluded that Hartland Inn’s actual cash value was $939,136.58, about $100,000 more than Wadena had previously offered. Stromberger agreed with Marske’s valuation, and under the plain terms of the policy, this determination of the amount of loss became binding. Hausz refused to sign on, however, explaining that he disagreed with Stromberger’s and Marske’s use of the broad evidence rule to calculate actual cash value. 

Less than a month later, Meier filed this lawsuit in Outagamie County Circuit Court, naming both Wadena and the appraisal umpire, Marske, as defendants. She asserted claims for breach of contract and bad faith and sought to set aside the appraisal award, all on the grounds that Wisconsin law prohibited use of the broad evidence rule to calculate Hartland Inn’s actual cash value….

The first significant lesson from this case is that appraisers and umpires should seek liability insurance. The umpire was sued by the policyholder. Even though he was dismissed from the suit, it costs money to pay attorney fees to fight the allegations. Liability insurance will pay for this. Since parties are filing suits against panel members more often, those involved in the appraisal process should get liability insurance. 

The second lesson is more of a warning. Public adjusters should be careful when providing advice to policyholders to select appraisal over litigation. When public adjusters do this, it is giving legal advice.  In this case, the policyholder was represented by an excellent public adjuster, David Miller, who did not advise his client to go to appraisal.

However, the amount determined by the public adjuster to be the amount of damage was far greater than the appraisal award. Policyholders who accept the legal advice from a public adjuster to go to appraisal and the award does not come out like the public adjuster determined may sue the public adjuster for the wrongful legal advice given to go to appraisal.  

The court in this case found that the appraisal award was binding:

[B]ecause the record confirms that Meier’s lawsuit is an improper effort to sidestep the binding appraisal process required by the Wadena policy, Wadena’s motion will be granted, and the complaint dismissed.

In Farmers Automobile Insurance Association v. Union Pacific Railroad Company, 768 N.W.2d 596, 604-06 (Wis. 2009), the Wisconsin Supreme Court confirmed that a policyholder who agrees to resolve claim valuation issues through an appraisal process is bound by the result of that process. Because the ‘obvious point of contracting for an appraisal process’ is to submit valuation decisions to experts chosen by the parties, rather than judges and juries, courts have a duty to enforce the parties’ agreement and have ‘only limited power to review appraisal awards.’ Appraisal awards are thus ‘presumptively valid’ and ‘should not be lightly set aside,’ even if the Court would have arrived at a different valuation. Id. In other words, review is done with deference and humility; it is not the Court’s job ‘to determine whether the third party experts accurately valued the item (as if the court itself could do a better job), but [merely] whether the third party experts understood and carried out the contractually assigned task.’ ‘An appraisal may be set aside only upon the showing of fraud, bad faith, a material mistake, or a lack of understanding or completion of the contractually assigned task.’ And judicial review is generally limited to the face of the award, not a post-mortem of the appraisers’ analyses. 


This Court has no authority to rewrite the terms of the policy Meier entered into. Nor is it the Court’s job to interrogate the appraisers’ analysis. Yet these are precisely the remedies Meyer seeks. She asks the Court to find that Wadena initially used the broad evidence rule to calculate the value of Hartland Inn and then improperly influenced the panel to do the same by supplying an ‘Agreement for Submission to Appraisers’ that contained multiple variations of the following language: ‘When determining [actual cash value], the Broad Evidence Rule is used in the state of Wisconsin.’  This argument misunderstands the limited review courts apply to appraisal or other alternative dispute resolution processes. As the Wisconsin Supreme Court explained in detail in Farmers, such processes are favored because they ‘promote finality, are time and cost-efficient, and place a difficult factual question —the replacement value of an item—into the hands’ of experts, not the court system. If Meier disagreed with Wadena’s arguments before the appraisers, her remedy was to challenge them in that proceeding. For this Court to do as Meier requests and second guess the appraisers’ analyses or conclusions is improper and would risk undermining the entire process. Hence, judicial review is usually limited to the face of the award. Id. More expansive analysis, e.g., permitting parties to reargue legal and factual points the appraiser’s rejected, would erode the benefits (finality, efficiency, and expertise) the appraisal process provides.

Meier agreed to funnel disputes over actual cash value into a binding appraisal process. She cannot now assert that Wadena breached the contract by complying with that very process (which she invoked) simply because she is unhappy with the outcome she received.

The final lesson is that most appraisal awards are binding. Parties to an appraisal are usually subject to judges wanting to find the award binding. That is what this ruling stated. 

However, while this case found the award binding, there are cases finding that the method of calculation can be a factor in revoking an appraisal award. I will discuss some of those tomorrow. 

Thought For The Day 

The thing I’ve always liked about the playoffs is the finality of it and knowing there’s so much importance on every play.

—Troy Aikman

1 Meier v. Wadena Ins. Co., No. 23-cv-0158, 2023 WL 3821346 (E.D. Wis. June 5, 2023).