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Sa El is the Co-Founder of Simply Insurance and a licensed Insurance Agent with over 16 years of experience in the industry. ...
HomeProperty InsurancePractical Lessons For Appraisal Consideration From Two Pending Cases

Practical Lessons For Appraisal Consideration From Two Pending Cases


In my preparation for a presentation at the P.L.A.N. Property Loss Appraiser & Umpire Certification Course next week in New Orleans, I came across two recent appraisal cases that provide different practical lessons for those involved with appraisals.

The first lesson is to make certain that the Umpire being selected is truly objective and not biased. I was thinking about this while reading an Order appointing an engineer as an Umpire. 1 The Order stated in part:

State Farm requests that I appoint Robert T. Merkel, a senior project engineer with Forensic Engineering Company (whose office is in Milwaukee, Wisconsin). Merkel has nearly twenty years of experience in forensic engineering and structural design, including designing structural systems for numerous commercial buildings and structural repairs and alterations to many existing properties. This experience includes seismic evaluations in Los Angeles. The Windsors do not take issue with Merkel’s competence or experience. Rather, they object to the involvement of another engineer, as several other engineers have inspected the home already and been unable to fully assess the loss. According to the Windsors, the time for theory and conjectural concepts has passed; what’s needed is someone who can assess the loss based on ‘actual estimates of actual costs by actual contractors who perform and warrant actual construction work in the vicinity of their home.’

After careful consideration of the parties’ submissions, I will appoint Merkel to serve as umpire in this appraisal dispute. All three candidates appear to have significant experience in their industry, and there’s no reason to question their objectivity. The slight edge, however, goes to Merkel given his engineering and structural design background. Although the parties’ dispute will undoubtedly involve questions about construction costs, an engineer⎯particularly one with seismic experience⎯will be equipped to adjudicate the entire amount of loss. And, although the actual repair likely would be performed by a contractor, he’d likely need to rely on an engineer to first design a sound protocol. Thus, considering the scope of the parties’ dispute, I believe that a structural engineer like Merkel is best positioned to assess the appraisers’ differences. 2

I have no idea who Robert T. Merkel is, and he might be the very best unbiased person on the planet to be appointed an umpire. But my experience is that engineers being suggested by State Farm usually belong to a firm that almost exclusively works for insurance companies. The new State Farm appraisal language only says engineers not working on the matter are excluded from the appraisal panel—not working on other matters or the firm.

When I went to Merkel’s firm website, it was hard to tell that they are a firm courting insurance company clients. When I looked at the firm’s personnel and noted that the Director of Business Development was attending various insurance claims association meetings, including the Loss Executives Association (LEA) and Southern Loss Association, it was obvious that his firm does a lot of work with insurance companies and is courting them for work.

The lesson is that having an Umpire that both sides investigate and believe will be extraordinarily fair, no matter the outcome, is important to a fair appraisal process. Given my experience with engineering firms that court work from insurers having a tendency to be biased toward insurers, I would have placed that concern with the court after doing a great deal of vetting. On the other hand, the attorneys for the policyholder may have a lot more knowledge and comfort with Merkel as a result of their own due diligence.

Another case still pending 3 involves a matter where, at first blush, based on what the insurance company has filed, I would tend to side with the insurer. The plaintiff is a restoration contractor who sought an appraisal and appointment of an umpire. After the court granted the motion and appointed an umpire, an appraisal award was made—but not nearly for the amount demanded or estimated by the restoration contractor. So, what happened after the appraisal award was paid? The restoration contractor made another demand for appraisal.

The lesson from this case is that parties to an appraisal should not expect a second bite of the apple. Absent fraud, clerical mistake or making a coverage determination, courts tend to go out of their way to uphold a prior appraisal and are not going to allow a second appraisal.

Nationwide responded to the request for the second appraisal with the following:

We received your written demand for appraisal on March 28, 2024. A previous request for appraisal was submitted on March 3, 2022. Your request for appraisal is being denied as the statute of limitations has past and the appraisal was previously completed. Nationwide Property & Casualty Insurance Company issued payment based on the appraisal award received November 29, 2022.

I will be waiting for a reply from the restoration contractor. Based on what I am reading now, this is going to be a tough showing to get another appraisal. Another lesson is to make certain that statutes of limitation do not run before filing a suit to compel appraisal.

I noted John Voepel’s new appraisal book in, “The Appraisal Process: Resolution of Disputed Insurance Claims” by John A. Voelpel III. Relevant to today’s post, Voepel states in Chapter 19:

It is of utmost importance that any Appraisal be conducted on the highest plane of integrity and honesty. The panel then needs to go one step further. The Appraisal must be conducted without the appearance of any fraud or collusion. I will not insult the reader by discussing the practice of offering or receiving bribes or accepting kickbacks. That is wrong at any level in our society. Most appraisers and umpires have vowed to conform to some level of moral and ethical behavior. To violate those promises is reprehensible. However, the Appraisal panel needs to go to the next level and avoid any appearance that this Appraisal was conducted in a less than honest manner.

I agree with that statement. I also agree that I am biased toward policyholders and hope they are fully and quickly paid for their losses. It is not easy to do when many insurers seem to be more concerned about paying as little as they can rather than taking care of policyholder customers. Still, the resolution process must be fair because it is binding on both parties.

Umpires play a very important role in ensuring that appraisal is viewed as a legitimate resolution process that provides a fair and final resolution for all involved.

Thought For The Day

Truth never damages a cause that is just.
—Mahatma Gandhi


1 Windsor v. State Farm Fire & Cas. Co., No 22-CV-734 (E.D. Wis. Apr. 10, 2024).
2 Id. at 4.
3 New England Prop. Services Group v. Nationwide Prop. & Cas. Ins. Co., No 1:24-cv-235 (D. R.I.).