Insurance Defense Attorneys Trying To Be The New Appraisal Stars—And Pick Up More Business Doing So

First-party insurance defense lawyers are like beavers to a flowing river. If economic resolution of disputes is working well without litigation, they need to find anything to dam it up and slow it down. The extra work goes to them in the form of billable hours. Their actions increase their insurer clients’ economic profits and delayed float of money, which would otherwise go to policyholders.

Steve Badger has been at the forefront of insurance defense counsel regarding what he considers as evils of appraisal. We have debated and argued against each other on a national and international stage, as indicated in Steve Badger Was Rope-A-Doped By Chip Merlin!, and Lloyd’s Property Insurance Claims Group—Badger v. Merlin IV. He has new competitors.

The upcoming Property & Liability Research Bureau (PLRB) meeting features a session regarding insurance appraisals. Attorney Robert Horst and Claims Executive John Kirby from the Philadelphia Insurance Company will present a session on Appraisal: The New Normal. This session will explore the following:  

Prepare an effective appraisal demand & identify a legally insufficient appraisal demand Compare distinctions in the law on appraisal in different jurisdictions while understanding why the distinctions matter Structure the appraisal process to fully resolve claims & avoid legal challenges Effectively manage a claims organization and an individual claims handler during the appraisal process

I wonder how two people can legally share information about how claims organizations can manage their business affairs and conduct this seminar without violating PLRB’s antitrust warning:

“The Property & Liability Resource Bureau intends to prevent any violation of antitrust laws at all their meetings and conferences.

Presenters and attendees…must remember that their respective firms are competitors in the marketplace and that the McCarran-Ferguson Act and the laws of some states provide the insurance industry with only very limited immunity from federal and state antitrust scrutiny. Therefore, presenters and attendees must exercise care during all presentations and discussions, since even innocuous discussions of certain topics might later be misinterpreted as evidence of collusion.

…all educational, social, and business development events connected with this meeting, there should be no discussion or agreement, formal or informal, expressed or implied, as to any matters which might give rise to an allegation of violation of antitrust laws. Subjects to avoid include:

…

individual insurance company positions on coverage issues and other matters of insurance policy interpretation; agreements or understandings relating to claims practice, policies, or positions; standards by which the performance of any insurer could or should be judged; codes of ethics; advantages or disadvantages of doing business in particular states; … costs or profits of any aspect of any of the above.”

But I digress from the point of this post about insurance counsel trying to demonstrate their machismo and gain business in the growing field of insurance appraisal. So, I will let the insurance company claims executives and their general counsel wonder if I am encouraging DOJ antitrust lawyers to monitor their activities at these sharing of “how we do business” conferences and return to the point of this blog.

In white papers, Robert Horst’s law firm has made a point to note that at “Horst Krekstein & Runyon, we pride ourselves on being at the forefront of developing issues in the insurance industry.” With respect to first-party appraisals, they are certainly developing a new issue about whether attorneys can act as appraisers and umpires because they are advertising to their clients that their neutrals can act as “property insurance appraisals (appraiser/umpire).” Don’t get me wrong, Bob Horst is as good as it gets when it comes to defense counsel. But how neutral can they really be? Horst is a great rainmaker because of his considerable skillsets, and the fact that he emphasizes insurance appraisal is to be noted.      

In Monday’s post, Property Insurance Appraisal Law Is Dynamic, I noted how insurers pay more attention to larger awards and litigate those:

The trend has been that the larger the award or the amount in controversy, the more the insurance company analyzes the appraisal process, the award, or the people participating in the appraisal panels. This has also contributed to the additional litigation related to appraisals.

Butler, Weihmuller, Katz & Craig partners Pablo Casceres and Nick Goanos advertise and teach that they can help their insurer clients with these large awards:

The Insurance appraisal law and tactics on the Gulf Coast and S.E. U.S. states can, at times, mystify the experts who have worked on these claims. These large exposure property losses have been subjected to appraisal demands as a matter of standard practice by public adjusters and counsel for policyholders which have resulted in unexpectedly large awards. This course provided legal and tactical direction regarding demands for appraisal to achieve the fairest resolution of the claim.

I assure you that they are not teaching them how to pay the awards fast and take care of the policyholder.  

The new “wanna be Steve Badger” seems to be Louisiana insurance defense attorney Matthew Monson. Monson is very smart, and our firm has been studying his argument that “Appraisal Beats Bad Faith.” He states in part:

“Appraisal Beats Bad Faith

On disputed claims, Appraisal is the best way to beat bad faith.”

In the article, New Appraisal Clause Can Deflect Allegations of Bad Faith, Monson was noted as claiming that:

On disputed claims, Monson affirmed, appraisal is the best way to beat bad faith. The reason: An insurer does not act arbitrarily or capriciously when it withholds a payment based on a genuine good faith dispute about the loss or the applicability of coverage. Also, compliance with a contracted and self-involved appraisal process fails to provide evidence or factual proof of vexatious, arbitrary or capricious conduct or conduct without probable cause.

If an insurer timely pays all undisputed amounts, it is not bad faith to resolve the disputed portions of the claim via appraisal, Monson said. Appraisal demand is timely if it is made within 60 days of receipt of the insured’s estimate.

What Monson is really arguing is that if an insurer is acting wrongfully, invoking appraisal gives the bad acting insurer another legal argument to escape culpability for such actions by arguing that the insurer paid within the appraisal clause time limits. Raising various issues in the legal contest that follows appraisal may provide an excuse for slow evaluating, slow paying, and underpaying insurers to escape the Louisiana law promoting fast investigation and payment of property insurance losses. This is not a new concept, but he is advertising and teaching this technique to his insurance clients.

I would suggest that what insurance lawyers should be teaching insurers is that they must have a sufficient number of motivated, experienced, and trained adjusters with enough time to thoroughly investigate all the damages and provide those adjusters with authority to pay the insurance company customers’ claims promptly. 

Can some insurance defense counsel or insurance company claims executives tell me where your lawyers are teaching anything close to this? The sound of crickets will be the response. And that is a big part of the problem.

Rather than being leaders and explaining what the duty of good faith is and preaching that insurance clients should act in good faith, the civil insurance defense bar is coming up with legal techniques to avoid culpability for their clients’ wrongful behavior knowing that it is going to happen. This is akin to what some criminal attorneys might do for organized crime members. What has happened to the lesson of not breaking the law? No wonder appraisals and appraisal ligation are on the rise.

Thought For The Day        

Leadership – leadership is about taking responsibility, not making excuses.

—Mitt Romney