This question about appraisers speaking with parties has been raised in a number of recent appraisal classes. Jonathon Held’s 2nd Edition of “The Appraisal Process: An Outline For Making Awards Useful and Final” has an answer to this question. I strongly urge those active in the appraisal process and property insurance claims to read it. Jonathon Held is a leader in the property insurance claims industry. When he speaks, people should listen.

His paper advocates for detailed appraisal protocols depending on the complexity of the matter. I certainly do not agree with many of his opinions and suggestions. But I find the paper and ideas very worthwhile to contemplate and understand.    

The introduction to this paper states:

Appraisal is a frequently used and often maligned method to adjudicate disputes in the property insurance world. Typically, appraisal is used for the purposes of evaluation only and will not bring finality to a claim in which coverage, or, in certain jurisdictions, causation is also being disputed. Although the perceived advantages of appraisal versus litigation are that it is considered fast, inexpensive, and relatively final, the appraisal process is often criticized because of unpredictable awards that are not helpful in settling a disputed claim and, in some cases, can lead to further protracted litigation. If, however, an appraisal is conducted with appropriate guidelines, the process can be valuable in bringing finality to valuation disputes.

The following is intended to outline a process which will result in unambiguous appraisal awards. Regardless of the size or complexity of a disputed claim, the appraisal process should always be approached in a thoughtful manner by the policyholder and insurer.

It is imperative that the disputed valuation(s) of loss be clearly and unambiguously communicated to, and understood by, the appraisers and umpire (the appraisal panel) who will decide the issue. It is equally imperative that the appraisal award be reported in such a manner as to ensure that the valuation dispute(s) is final.

Laws or statutes governing appraisal vary by jurisdiction and are not addressed herein. Issues regarding timeliness or enforceability of appraisal, disinterestedness of an appraiser or umpire, procedure for conducting the appraisal, reporting or enforceability of an award, etc., should always be reviewed by counsel when appropriate. The intent of this article is to provide parties to the appraisal process with an outline of issues to consider. The intent of the process is to produce a useful result, one that finalizes a dispute regarding the value of a loss.

I cannot tell you how much the last sentence resonates with me except for the last six words. I wish appraisal finalized the dispute. If it takes litigation after the appraisal, why not just file the litigation to finalize everything rather than drag everything out in two processes? From that perspective, arbitration can do both coverage and valuation issues, although policyholders lose their right to a jury trial under either appraisal or arbitration.  

Another concern is that the number and complexity of the detailed protocols will simply lead to more litigation. For example, one protocol calls for the appraisal proceedings to be recorded. I can guarantee that something will be said that somebody will take issue with after the award is entered. Can you imagine if we recorded jurors during their deliberations?       

Regarding communications, a protocol is listed as follows:

Neither the Insurer, the Insured, nor their respective counsel shall have any ex parte communication with the umpire or with the other party’s appraiser. The appraisers shall not have any ex parte communications with the umpire. Appraising Insurers and their representatives may communicate ex parte with Appraising Insurers’ appraiser, and the policyholders and their representatives may communicate ex parte with the policyholders’ appraiser.

Held and I agree on a point: Appraisers need information from the parties if the goal is to get all the information to come to a correct result. Appraisers should speak with the parties.

Thought For The Day

The courts of this country should not be the places where resolution of disputes begins. They should be the places where the disputes end after alternative methods of resolving disputes have been considered and tried.

—Sandra Day O’Connor