A) The Demand 332B) The Appraisal Agreement 336 1. The Agreement to Appraise 336 2. The Agreement to Select an Umpire 341C) Remedies if Appraisal is Wrongfully Refused 344D) Failure of Appraisal
Pursuant to the insurance contract, the appraisal demand must be in writing. The demand must be clear and unambiguous, such that a person of ordinary intelligence would fairly understand that an appraisal is being requested….Any ambiguity will be construed most strongly against the party in writing is to establish the date and substance of the demand. The demand for appraisal could nominate an appraiser. If it does it should include the appraiser’s address, phone number, fax number and email address.
A careful reading of the Standard Fire Policy discloses that both parties have 20 days from the date of demand to nominate their appraiser. The demanding party should weigh the strategic benefit of nominating the appraiser within the demand itself or consider waiting the 20 days in order to have the possible opportunity of learning the identity of the adverse party’s appraiser prior to nominating their own. The simultaneous exchange of appraiser information also prevents the other side from seeking some perceived advantage based upon the identity of the appraiser. This should be contrasted with the possible benefits that might be achieved by identifying the appraiser within the demand itself.
1.AGREEMENT TO APPRAISE In order to avoid misunderstanding and clarify terms and procedure, it is often advisable, particularly in complex appraisals, for the parties to enter into a written agreement. Through such an agreement, the parties may clarify the procedures to be utilized by the appraisers, the issues to be determined and the definition of pertinent terms. Such a written agreement should be signed by the parties as well as each of their respective appraisers in order to be enforceable, as the appraiser is not an agent of either the insured or the insurer with authority to sign on their behalf. They may design any reasonable method for selection of appraisers and umpire. Any method agreed to by the parties to the policy will often be followed and enforced as long as there is no overreaching or impropriety. The parties should agree to a format for the ultimate award that will be acceptable to both parties in order to avoid confusion or disagreement later on. This will assist the two appraisers in formulating their conclusions and it will assist the umpire in dealing with the differences that remain, as well. With respect to the process and procedure to be utilized during the appraisal and which should be subject to an appraisal agreement, these must be negotiated and agreed to between the parties. One party should not insist upon specific procedures to be utilized over the reasonable objection of his or her counterpart.
Although there are many, the following is an example of where a carefully drafted appraisal agreement could allow for things that normally would not be possible: •The existence of hidden damage is often first ascertained upon efforts at demolition and reconstruction. Often this occurs after the conclusion of the appraisal process. For this reason, the appraisal agreement may provide for an opportunity to reopen the appraisal process where such damage was not reasonably ascertainable.
Furthermore, the agreement could provide for the authorizing of appraisers to determine issues such as whether the loss is total, or the applicability and amount of coinsurance penalties, depreciation, length of time for reconstruction, or deductible. Be wary, however, as these issues may exceed the scope of the appraisal process in some states.
The Agreement to Select an Umpire: A separate written agreement could and should be entered into between the respective appraisers when selecting the umpire. This document can be executed by the appraisers alone as, pursuant to the policy, it is the appraisers that select the umpire. The agreement to select an Umpire is where Appraisers can include their own “appraisal protocol” which does not require the parties to sign, only the appraisers. If the parties agree, the document can set forth a proposed schedule and protocol for the balance of the appraisal process subject to the concurrence of the umpire, including dates for the filing of briefs and supporting documents as well as responsive briefs, visits to view the damaged property, meetings to discuss the evidence and arrive at conclusions. The parties may be as specific and detailed as they choose with the goal being issue avoidance and reduction of contentiousness once the process actually begins.
REMEDIES IF APPRAISAL IS WRONGFULLY REFUSED: An additional remedy either the insured or the insurer has upon their counterpart’s refusal to participate by the appointment of an appraiser is to proceed to court to have an umpire appointed. It has been held that upon the failure of a party to appoint an appraiser, that party has waived their right to participate and the appraisal may nevertheless proceed to a conclusion with an award being made by the remaining appraiser and the umpire. Furthermore, it has been held that where the insurance carrier’s appraiser did nothing to advance the settlement of the claim, in this case because of a fee dispute with the umpire, it was permissible for the appraiser for the insured and the umpire to resolve the issue of the amount of loss. This is so despite the “one-sided” nature of the process as the insurer brought this situation upon itself through its own derelict behavior in failing to insure that it’s appraiser went forward with the process as required. The Saba and Drescher approach which provided the option of the unilateral appointment of an umpire (Also known as “the empty chair appraisal) has been criticized in that although the contract language gives a court the power to appoint an umpire under these circumstances, a more appropriate approach might be to direct the appraisers’ inability to appoint an umpire that the court would again become involved. It is noteworthy that the court in Hala found the majority’s comments from Saba “convincing” but nevertheless settled on a somewhat less aggressive approach and did not allow for an empty chair appraisal.