Insurer Waives Objection to Appraiser’s Partiality by Waiting Until Appraisal Issued
The Eleventh Circuit affirmed the district court's denial of the insurer's objections on partiality grounds to the insured's appraiser. Biscayne Beach Club Condominium Association, Inc. v. Westchester Surpus Lines Ins. Co., 2024 U.S. App. LEXIS 19663 (11th Cir. Aug. 6. 2024).
Storms damaged buildings at Biscayne Beach Club Condominium. Biscayne Beach filed claims with its insurer, Westchester. Unsatisfied with Westchester's payments, Biscayne Beach sued. Westchester then invoked the appraisal provision in the policy. The district court abated the action so the parties could pursue appraisal.
Biscayne Beach appointed Lester Martin, its public adjuster, as its appraiser on a 10 percent contingency fee. Westchester objected because Martinez's retainer created a conflict of interest that would hinder his impartiality. Biscayne Beach then retained Blake Pyka as its appraiser. Westchester appointed its appraiser and and umpire was selected by the parties' two appraisers.
On February 3, 2020, the appraisal panel met for final negotiations. That morning, Pyka wrote the panel stating he "had a very small percentage representing this file," i.e., he was working for Biscayne Beach on a contingency fee. Westchester's appraiser immediately replied to confirm that Pyka's "representation was based on a percentage of the appraisal outcome. Westcheseer did not object to Pyka's participation in the proceedings.
On March 12, 2020, the panel appraised the loss at about $14 million. On April 10, 2020 – more than two months after Pyka's disclosure to the panel and about one month after the award issued – Westchester moved to reopen the action and to conduct discovery to probe Pyka's disclosure and partiality. After discovery, Westchester moved to vacate the award on the ground that Pyka had been partial.
The district court denied the motion and granted Biscayne Beach's motion to confirm the award. The district court found that Westchester had waived its objections to Pykas partiality by failing to make them sooner. Westhester appealed.
The Eleventh Circuit cited its own precedent holding that when a party discovers an arbitrator's conflict, it must contest the partiality at that time or else waive the right to object in the future. Here, Westchester waived its objections by not raising it sooner. On February 3, 2020, the day the panel began final negotiations, Pyka disclosed to the panel his contingency agreement with Biscayne Beach. Westchester's appraiser acknowledged the disclosure. The panel signed the final award on March 12, 2020. On April 10, 2020 – more than two months after Pyka's disclosure and nearly a month after the award issued – Westchester moved to reopen this action on the ground that Pyka had been partial. This motion was the first sign that Westchester object to Pyka's partiality. Westchester failed to object at the time that Pyka disclosed what he thought was a financial conflict.
Therefore, the court affirmed the denial of Westchester's motion to vacate and the confirmation of Biscayne Beach's award.
