Law professor Johnny C. Parker recently published a law review article, Understanding The Insurance Policy Appraisal Clause: A Four-Step Program, where he claims that resolving property insurance disputes concerning amounts of loss is an “almost perfect method.” Here’s the quote:

More than one hundred years of judicial and legislative scrutiny has shaped appraisement into an almost perfect method of alternative dispute resolution. Over the past twenty-five years it has stepped out of the shadow cast by arbitration and taken on a life of its own. In the context of insurance, it has become the methodology of choice for resolving disputes over value of property and the amount of an insured loss.

Many appraisers and umpires probably agree that appraisal is the best and most efficient manner to resolve insurance disputes. Yet, many probably think judges, who are not familiar with appraisal, are making it more difficult than it has to be with many different rules which vary significantly from state to state.

For those judges, Professor Parker correctly notes that appraisal is not arbitration:

Appraisement, in particular, is perhaps most often confused with arbitration. While some of the rules of law that apply to arbitration apply in the same manner to appraisement, and the terms have at times been used interchangeably, there is a plain distinction between them. In the proper sense of the term, arbitration presupposes the existence of a dispute or controversy to be tried and determined in a quasi-judicial manner, whereas appraisement is an agreed method of ascertaining value or amount of damage, stipulated in advance, generally as a mere auxiliary or incident feature of a contract, with the object of preventing future disputes, rather than of settling present ones. Liability is not fixed by means of an appraisement; there is only a finding of value, price, or amount of loss or damage. The investigation of arbitrators is in the nature of a judicial inquiry and involves, ordinarily, a hearing and all that is thereby implied. Appraisers, on the other hand, where it is not otherwise provided by the agreement, are generally expected to act upon their own knowledge and investigation, without notice of hearings, are not required to hear evidence or to receive statements of the parties, and are allowed a wide discretion as to the mode of procedure and source of information?

I will be discussing with appraisers and umpires the recommendations that Professor Parker makes concerning disclosure of interest, partiality, and bias this Friday. If you are actively involved with appraisals as part of your livelihood, I strongly suggest you consider attending the Insurance Appraisal and Umpire Association Conference. Here is a link if you have not registered.

Positive Thought For The Day

It’s time for us to turn to each other, not on each other.
         —Jesse Jackson