This post is part three in a three-part series in which I have discussed the appraisal process. The appraisal process is a method written into your homeowners, commercial property, or other type of property policy for determining the amount of loss. These can be useful in large losses and may help avoid protracted legal disputes.
Choosing the Umpire
After the parties have each selected an umpire, the two appraisers choose an umpire to help resolve disputes and act as a tiebreaker between them. If the two appraisers cannot reach a decision on an umpire, then the parties can ask a court to appoint an umpire. This should be done by filing a formal motion or petition with a Court and providing notice to the other side. If the two appraisers cannot reach an agreement on the amount of the loss, then the umpire can resolve the dispute. Depending on the appraisal clause, an appraisal ward may need to be agreed to by at least one appraiser. Alternatively, some clauses allow an umpire to reach an independent decision.
What Does Competent and Disinterested Mean?
In determining the qualifications of the appraisers and umpire, it is important to review the words used in the policy. Many policies require that appraisers and an umpire be competent and disinterested. In this setting, competent means having ability and experience with the type of property to be appraised. More controversial is the term, disinterested. From the cases, disinterested clearly means that the appraiser may not have a financial interest in the outcome of the litigation. For instance, the appraiser may not be compensated by any type of contingency agreement that would tie compensation to the size of the award.
However, some decisions go further and state that an appraiser or umpire may not be biased or prejudiced and equate the role of the appraisers and umpire to that of an impartial judge or tribunal. Courts have held that significant contacts working for one party might create bias on the part of an appraiser. However, the recent trend seems to be to require proof that an appraiser or umpire is being directly influenced by one of the parties to the proceedings. For instance, courts have approved appraisers that have been designated by insurance companies in situations where the appraiser’s employer has done significant work for the insurance company and even where the appraiser was previously hired on the same claim by the insurer’s adjuster to give an engineering opinion on the same damage. It also may be that umpires are judged more strictly than appraisers, with more leeway being given to the selection of an appraiser.
Enforcing or Challenging an Appraisal Award
Once an award has been reached, it will be enforced except when it is “(1) not made in substantial compliance with the policy, (2) the result of fraud, accident, or mistake, or (3) made without authority.” General Star Ind. Co. v. Spring Creek Village Apartments, 152 S.W. 3d 733, 737 (Tx. App-Houston [14th Dist.] 2004). As a result, generally, appraisal awards are presumed to be correct. However, If a party presents sufficient evidence of grounds for setting an award aside, then the propriety of the award may be a jury question. As usual, if you have any questions or need any help navigating the appraisal process, please Contact Us.