Because the appraisal process is a common remedy utilized in Florida homeowner’s insurance claims disputes, policyholders should be aware of grounds that might result in an appraisal award not be enforced, such as bias or lack of independence. Policyholders also need to know that the appraisal process does not provide some of the safeguards of a lawsuit, such as formal procedural and evidentiary rules. The scope of discovery also might be less expansive. The differences between appraisal and litigation make it important for an insured to understand this form of alternate dispute resolution. This is the second installment of our two-part blog post highlighting some of the factors a Florida court might consider when determining whether an appraiser should be disqualified based on lack of impartiality.
Prior Relationship between the Party and the Appraiser
While a prior existing relationship with the insurer, policyholder, or witnesses will not necessarily disqualify an appraiser, this type of prior affiliation or cooperation could constitute a problem. Protection of an insured’s best interests involves inquiring about the relationship of a prospective appraiser with all parties, the referee, and witnesses. Prospective appraisers should disclose any potential or actual conflicts of interest that might justify disqualification. This is an issue that must be investigated prior to initiation of the appraisal process. Courts have ruled that neither the insurer nor insured have cause to complain if they allow an appraisal to proceed despite knowledge of facts indicating bias of the appraiser.
The type of prior relationship between an appraiser and a party to an insurance dispute can determine whether a disqualification request will be granted. For example, California courts have ruled that an appraiser can be disqualified when a significant business relationship exists between the appraiser and the party. However, states vary in how they approach the issue of prior relationships between a party to an insurance agreement and an appraiser.
Texas courts have indicated that the mere fact that an appraiser has acted in a similar capacity in the past for a party does not necessarily require disqualification or the setting aside of an appraisal award. Courts also have permitted individuals or entities that have provided investigative engineering reports during the adjustment process to serve as an appraiser in the same claims dispute. The key in these situations often involves whether there is any relationship existing at the time of the appraisal that permits the insured or insurer to exercise control over the person against whom disqualification is sought. As a Texas appellate court indicated, “[t]he showing of a pre-existing relationship, without more, does not support a finding of bias . . . . Here, the insurer’s appraiser was not an employee of [the insurer], and the report and conclusions regarding the cause of the plumbing leak were his own.” The court noted that there was no evidence that the insured exercised any form of control over the appraiser or input into the appraiser’s report.
Generally, long-standing relationships with involvement in many other claims might constitute a basis for disqualification depending on the terms of the policy and state law. However, courts might still refuse to disqualify an appraiser without evidence of control. In one Texas case, the court ruled an appraiser was independent despite common assignments furnished to the appraiser by the insurance company over a seven year period. The court concluded there was no evidence that the insurer instructed or compelled the appraiser to reach any particular opinion.
Attorney for the Insured as Appraiser
Courts in some states have permitted a public adjuster to function as an appraiser, assuming the adjuster is not still under contract or otherwise subject to the control of the insured. However, a Florida court was less permissive of this approach when the proposed appraiser was the attorney for an insured. The court in Florida Ins. Guaranty Ass’n v. Hanse disallowed an insured from having the policyholder’s attorney act as an appraiser. The court reasoned that an attorney owes a fiduciary duty to an insured, so the attorney cannot act in a “disinterested” or “impartial” fashion toward the policyholder.
Competence vs. Independence
In the Florida case, Citizens Property Insurance Corp. v. M.A. & F.H. Properties Ltd., the reasoning of the court exemplifies the importance of the policy language in disputes regarding appraiser bias. The homeowner’s policy imposed a requirement that an appraiser be “competent,” but the policy contained no language regarding the “impartiality” or “independence” of the appraiser. The insurer sought to oppose enforcement of an appraisal award based on bias involving the policyholder’s appraiser. The insured presented evidence indicating the appraiser had performed 1,800 appraisals and had published journal articles on appraisal-related issues. The insurer contended that rendering decisions based on objectivity and impartiality were components of competence. The court found that the appraiser was clearly “competent,” and the insurer had no reason to complain because the policy did not address any qualification criteria based on impartiality.
If you have questions about the appraisal process or filing a lawsuit against your insurance company, Miami insurance claims lawyer J.P. Gonzalez-Sirgo handles claims against insurance companies in Miami and throughout Florida. The Law Firm of J.P. Gonzalez-Sirgo, P.A. offers free consultations and case evaluations. No Recovery, No Lawyer Fees. Call 305-461-1095 or Toll Free 1-866-71-CLAIM.