I was publicly debating at an appraisal conference in Denver with insurance defense lawyer Steve Badger about various matters regarding appraisals. I answered a question posed that if new evidence came up to the insured’s selected appraiser which indicated that the prior payment by the insurance company was more than enough and the insurance carrier clearly overpaid, did the insured’s appraiser have to agree to an value even lower than what was previously paid?

This is certainly strictly my opinion, but I said ‘yes, if there is evidence or something that comes up and the insured’s appointed appraiser finds that the amount of the loss is even less than what the carrier paid, that should be the appraiser’s finding.’

Now I know that some very knowledgeable readers will say that only the differences get appraised and since the insurance company agreed to pay at least that certain amount, the insured’s appraiser should not appraise less than that amount. But, absent some other agreement, the common appraisal clause states: 1


If we and you disagree on the value of the property or the amount of the ‘loss,’ either may make written demand for an appraisal of the ‘loss.’ In this event, each party will select a competent and impartial appraiser. You and we must notify the other of the appraiser selected within twenty days of the written demand for appraisal. The two appraisers will select an umpire. If the appraisers do not agree on the selection of an umpire within 15 days, they must request selection of an umpire by a judge of a court having jurisdiction. The appraisers will state separately the value of the property and the amount of the ‘loss.’ If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will be the appraised value of the property or amount of ‘loss.’

As one can see, the appraisers have to state the amount of the loss. There is nothing to say, “but not less than what the insurance company has paid.” It is the appraisers’ differences which then get submitted to the umpire. A hard-working appraiser appointed by the insured who is conscientious and making certain that the insurance customer gets a fair award may find information which leads to an honest opinion of loss less than what was even previously paid.

Getting the amount right so that the insurance customer is fully paid all benefits due should be “job one” for everybody in the insurance industry. “Job one” does not mean to overpay the policyholder. But it certainly does not mean to think or act in such a manner that paying less, as little as possible, or shortchanging the customer is proper, because it is not. Such an attitude is not reflective of good faith and breaches the public trust those in the insurance claims industry are ethically required to follow.

So, what happens when insurance company claims executives select appraisers on the basis of lowered appraisal awards? Is this ethical? I thought of these issues because of public documents concerning Citizens Property Insurance selection of appraisers, which an appraiser not selected noted in a letter to Citizens:

We don’t know what criteria Citizens uses for ‘Quality’ however our other clients use the appraisal results. The quality of our appraisals can be seen in the results that were submitted to Mr. Curtis Hutchinson two years ago (see attached). Of the 130 appraisals completed by Mr. Glenn Carlson and Ken Carman of All Claims the awards resulted in a 20% increase over what was already paid ($1,890,481.45) when the demand for new money was an average of 170% ($9,304,846.48). The savings indicate a consistent and high quality product.

I once used similar evidence as a showing of a general business practice of bad faith against an insurer. The insurer’s customers that were shown the document were outraged that they had to fight an appraiser that was not giving an honest opinion, but an appraiser motivated to fulfill their insurance company’s profit goals by reducing claims payments.

Thought For The Day

It were not best that we should all think alike; it is difference of opinion that makes horse races.
—Mark Twain
1 Johnny Parker. Understanding the Insurance Policy Appraisal Clause: A Four-Step Program. 37 U. Tol. L. Rev. 931 (2006).