When a homeowner and an insurance company disagree over the cost of repairs, the method for resolving their dispute will typically be specified in the “boilerplate” provisions of the homeowner’s insurance policy. Under a typical policy, the first step will be to have the damaged inspected by one or more “impartial” appraisers.
But, what does it mean for an appraiser to be “impartial”? If an appraiser does work for an insurance company on a regular basis and relies on the insurance company’s business to pay the bills, can he or she really be considered impartial? Florida’s Third District Court of Appeal recently provided guidance on this issue in the case of Brickell Harbour Condominium Association, Inc. v. Hamilton Specialty Insurance Company (“Brickell Harbour”).
Appraiser Compensation and Impartiality
In Brickell Harbour, the Third District Court of Appeal was tasked with determining whether an appraiser was sufficiently “competent and impartial,” as required by the terms of the condominium association’s insurance policy. The condominium association filed a water loss claim and received payments totaling $450,000 from its insurance company. When the association claimed that this was insufficient to cover the total cost of repairing the damage, the insurance company invoked the appraisal clause under the condominium association’s policy.
Under the appraisal clause, each party (the condominium association and the insurance company) was to select its own “competent and impartial” appraiser, and then these appraisers would select a third appraiser who would “umpire” any discrepancies. For its appraiser, the insurance company chose an employee of a building consulting firm with which it already had a business relationship. The condominium association asserted that this relationship created an inherent bias that violated the insurance policy’s requirement for impartiality. When the insurance company refused to select an alternate appraiser, the association took its case to court.
The trial court ruled in the insurance company’s favor, and the Third District Court of Appeal affirmed. In the words of the appellate court:
“[A]n appraiser’s ‘direct or indirect financial interest in the outcome of [a dispute],’ including an arrangement for a contingent fee, requires disclosure rather than disqualification in the case of an appraiser. . . .[T] his remains a ‘workable approach to this issue’ . . . and [we] encourage such disclosures in the present case before the confirmation of the appraisal.”
Stated differently, the existence of a financial relationship between an insurance company and an appraiser does not necessarily establish impartiality.
What does this mean for homeowners who need to seek an appraisal in order to secure additional coverage from their insurer? While the theory behind the court’s ruling is that appraisers can make unbiased decisions even if their compensation is directly tied to the outcome of the claim for which they are providing an appraisal (and, to be sure, some appraisers will be able to maintain this impartiality), homeowners must approach the appraisal process with caution. Homeowners should take note of any appearances of impropriety, and they should seek legal advice if necessary.
Speak With a Broward County Insurance Claim Lawyer in Confidence
Our insurance claim lawyers provide experienced and aggressive legal representation for homeowners facing disputes with their insurance companies. If you need help with an appraisal or any other aspect of your homeowner’s insurance claim, we encourage you to call (954) 928-9568 or contact us online for a confidential initial consultation.