Does an Umpire Have Immunity From Suit? Is an Appraisal an Arbitration in North Carolina?
The greater the appraisal award is, the greater frequency that the insurance company will flip out and blame somebody or something for causing a large appraisal award. This is the situation in a North Carolina case where the insurance company has sued the umpire.
In response, the umpire has claimed he cannot be sued because he has immunity as an arbitrator. The umpire, Lewis O’Leary, is very experienced in appraisals. He was noted in “How Late Can Late Notice of Loss Be of Roof Damage in South Carolina?” He once wrote a guest blog post, “Why Major Hail Storms Commonly Turn Out to be More Wind Than Hail.”
His argument was as follows:
The claims of the Plaintiff, First Protective Insurance Co. (‘FP’ after this), against Defendant O’Leary, and his company, ProBuilders of the Carolinas, Inc. (collectively ‘O’Leary’ after this) arise out of, and are predicated on, FP’s allegations that O’Leary failed to disclose claimed ‘prior relationships’ with Defendants Rike, Hicks, and Heidelberg, before being appointed as the ‘umpire’ in the dispute appraisal process established by the FP insurance policy with Defendant Rike, which policy is the subject of this dispute.
O’Leary, as a mutually appointed umpire, was equivalent to an arbitrator. O’Leary is therefore immune from the alleged claims of FP, pursuant to § 1-569.14 of the North Carolina Revised Uniform Arbitration Act (‘NCRUAA’).
The court disagreed1 and has let discovery commence, finding:
In this instance, the O’Leary defendants’ argument is foreclosed because the North Carolina Court of Appeals has decided that the provisions of the arbitration act do not apply to an insurance appraisal, and there is no persuasive data that the North Carolina Supreme Court would decide differently….
…
Whether plaintiff can prevail ultimately on its claims based upon defendant O’Leary’s alleged failure to make adequate disclosures is an issue the court leaves for another day upon a more complete record.
When engaging with appraisals, there are two key practical considerations to keep in mind. Firstly, it’s advisable to make comprehensive disclosures, erring on the side of offering more information than might appear necessary. This approach helps to mitigate any claims that a panelist withheld information, thus reducing the risk of fraud, negligence, or impropriety allegations. Secondly, it is highly recommended for all appraisers and umpires to secure errors and omission insurance. While most legal actions against panel members do not result in a victory for the plaintiff, the financial burden of legal fees incurred in defending against such allegations can be substantial.
Thought For The Day
An ounce of prevention is worth a pound of cure.
—Benjamin Franklin
1 First Protective Ins. Co. v. Rike, No. 4:22-cv-42, — F.Supp.3d —, 2023 WL 6690701 (E.D. N.C. Oct 12, 2023).
