The Problem of the Non-Participating Appraiser Versus Withdrawal From an Appraisal

The recent post, What Happens If One Appraiser Refuses to Participate in the Appraisal?, resulted in numerous comments. One comment from attorney Tom Hamrick raised an issue between an appraiser refusing to participate and a party withdrawing from an appraisal:

I don’t draw a distinction between refusing to act and withdrawing. In Scalise, claiming that Allstate’s chosen appraiser was neither competent nor independent because his estimate ignored ‘obvious covered damages,’ Plaintiff attempted to withdraw from the appraisal process and filed suit against Allstate–leaving the remaining appraiser and umpire to issue an award. Holding: ‘If a plaintiff were allowed to invoke appraisal, await the estimates, and then determine whether to risk an unfavorable award or commence litigation, the entire purpose of an appraisal—to resolve the parties’ dispute over the amount of loss for a covered claim without incurring the time and expense of litigation— would be vitiated.’ (upholding the award). Scalise v. Allstate Texas Lloyds, 2013 WL 6835248, No. 7:13-CV-178 (S.D. Tex. Dec. 20, 2013)

These seem to be two different situations. If a party has not indicated that it is withdrawing from the appraisal, but its selected appraiser is not participating, that is a lot different than a party who agreed to the process and then stated that it was removing itself from the appraisal process.

The Scalise policyholder who withdrew from the appraisal process filed the following in opposition to the insurance company’s motion for summary judgment:        

5. Plaintiff invoked appraisal on July 30, 2012 and named James Ward as his competent and independent appraiser. On September 13, 2012 Defendant Allstate named Stephen Medeiros as its appraiser. Both appraiser James Ward and appraiser, Defendant Stephen Medeiros agreed on Paul Poncio to serve as the appraisal umpire. Thereafter, the appraisers inspected the property and exchanged their appraisal estimates. James Ward’s appraisal estimate for all the damages to Plaintiff’s home totaled approximately $56,881.88 and Defendant Stephen Medeiros’ appraisal estimate totaled approximately $423.76.

6. Plaintiff withdrew his request for appraisal on March 11, 2013, based upon the fact that Defendant Allstate breached the ‘Appraisal Provision’ in Plaintiff’s policy of insurance by naming Defendant Stephen Medeiros, who was neither competent, nor independent. In this respect, Defendant Stephen Medeiros was not independent, nor competent because his estimate for all the damages to Plaintiff’s home was nearly identical to Allstate’s adjuster in both scope and price. In addition, Defendant Medeiros was not competent because his estimate omitted obvious damages to Plaintiff’s home. Additionally, Medeiros knew the exact damages being appraised and claimed by Plaintiff. Said damages were delineated in James Ward’s May 28, 2012 estimate in the approximate amount of $56,881.88.  Furthermore, Defendant Medeiros misrepresented the qualifications and status of his company by representing that his company was a limited liability company registered and in good standing with the Texas Secretary of State, when in fact his company was non-active for ‘tax forfeiture’ matters.

7. Plaintiff filed his Original Petition on March 19, 2013 and served both Defendant Allstate and Defendant Stephen Medeiros. Despite the fact that Allstate had actual knowledge of the fact that Plaintiff had withdrawn his appraisal request and had filed suit, Defendant Allstate and Defendant Stephen Medeiros unilaterally chose to continue with the appraisal process.

In Scalise, the party policyholder stated an intention to withdraw from the appraisal. That is a lot different than the situation of a slow, delaying, and non-participating appraiser. It is different than the party making no affirmative action to stop participating in the appraisal process even though its appraiser is MIA. 

But there is more to the story. Here is what Allstate claimed was the factual background, as cited in its motion for summary judgment:

Plaintiff, Carl Scalise, invoked the appraisal clause of his insurance policy with Allstate on July 30, 2012. Plaintiff’s counsel, F. Blake Dietzman, sent correspondence dated July 30, 2012 to Allstate invoking the appraisal provision and appointing appraiser James Ward. Allstate in turn appointed its appraiser, Stephen Medeiros. The appraisers agreed on Paul Poncio as the umpire.

In total Ward and Medeiros worked on 6 cases involving Allstate insureds. On three of the cases, Rick Guerra Prats was agreed to as umpire on the other three, Paul Poncio. On this case, Paul Poncio was the agreed upon umpire. The Guerra Prats cases were finalized and paid in January. The Poncio cases took longer. As the process was about to conclude, attorney Dietzman withdrew from the appraisal process. By this point, the property had been inspected, each appraiser had submitted his information and estimate and the umpire was about to issue his award. Despite the eleventh hour attempt to withdraw from the appraisal process, the umpire still rendered his decision on April 10, 2013. The decision was agreed to by Stephen Medeiros.

Based on the policy language, two of the three had agreed, and the amount of the loss was set. The appraisal award was sent to Allstate. The umpire issued an award under the dwelling portion of the policy for $4,803.30 and under the other structures coverage for $4,992.00 for a total award of $9,795.30. The deductible and prior payments were subtracted to come up with the final award of $ 9,243.51. The award check was issued by Allstate and sent to defense counsel who forwarded it to Plaintiff’s counsel on April 30, 2013. In the meantime, Plaintiff had filed suit in State Court on March 19, 2013.

The two appraisers had differences and could not agree. Indeed, the differences were submitted to the umpire. Then, the policyholder withdrew from the process. With the facts cited above, many would think it was to escape a bad judgment from the appraisal panel.

Based on this, the court then understandably found:

Plaintiff’s pleading and response appear to contest the scope of Medeiros’ appraisal, but provide little that would enable the Court to draw the line in this case. Plaintiff alleges that Medeiros was not an ‘independent’ appraiser because his estimate mimicked that of the Allstate adjuster ‘in both scope and price,’ and that he was not ‘competent’ because his estimate failed to include obvious covered damages to the home despite his knowledge of ‘the exact damages being appraised and claimed by Plaintiff.’  Even assuming that Medeiros’ appraisal undervalued or failed to estimate covered damages, his ‘low-ball’ estimate did not determine the award under the policy or in fact—as permitted by the appraisal clause, Medeiros and the umpire agreed to set the amount of loss at a different (and higher) figure. Plaintiff has cited to no authority indicating that a party who contests one appraiser’s estimate may then opt to file suit to determine damages rather than complete the appraisal process. If a plaintiff were allowed to invoke appraisal, await the estimates, and then determine whether to risk an unfavorable award or commence litigation, the entire purpose of an appraisal—to resolve the parties’ dispute over the amount of loss for a covered claim without incurring the time and expense of litigation—would be vitiated.

Again, if an appraiser is faced with a non-participating appraiser and good faith efforts by the appraiser and umpire have been futile, Steve Badger and I are of the same opinion: The party whose appraiser is participating should retain competent legal counsel in determining the next course of action. This was the point of the previous blog.

Thought For The Day          

Every day is Judgement Day. Always has been. Always will be.

—Tom Robbins