Florida Insurance Appraisers and Umpires Cannot Miss the Chance to Attend the IAUA Conference in Ft. Lauderdale Next Week – Are Florida Appraisals Governed Under Arbitration Rules? Can An Insured Appraiser Charge 1%? What Does Florida Require About Detailed Awards?

The IAUA kicked out Steve Badger from debating me next week in Florida. After leaving Badger lost wandering in Utah’s Badgerland after our debate, the IAUA now knows it has to raise the bar in my home state of Florida. The IAUA has me debating against two preeminent Florida insurance company defense attorneys, Melissa Sims and Illon Kantro. Just like the great fighter for the people, Muhammad Ali, once said,

I’m sore all over. My arms, my face, my sides all ache. I’m so, so tired. There is a great possibility that I will retire.

I know that policyholders everywhere are rooting for me to crush anybody against truth, justice, and The American Way. Illon and Melissa—you are in the fight for your lives! For insurance carriers everywhere, I am not about to retire.

If you are in the business of insurance appraisal and umpire work in Florida, do you want to know the current issues and what the best in your business are doing? This is what this Florida IAUA conference is about. You will quickly hear the current Florida rules and issues facing appraisal.

If you are serious about your work as an umpire or appraiser, obtaining IAUA certification is important. While I also endorse Windstorm and PLAN certification, the IAUA allows a number of issues to be addressed in a debate. Just like Steve Badger, I have the utmost respect for Sims and Kantro regarding these issues and what you will learn from us if you will just show up.

Any attorney can quote me for the following: Judges should not appoint Umpires to insurance appraisals unless they have either a Windstorm, PLAN or IAUA certification. Whether a policyholder or insurer, both parties want a neutral who intimately understands property insurance appraisals and why they are a different breed of alternative dispute resolution. If you want to be involved in these alternative dispute processes, you should show your passion by getting at least one, if not all, of these certifications.

Are Florida Appraisals Governed Under Arbitration Rules? Can An Insured Appraiser Charge 1%? What Does Florida Require About Detailed Awards? Those issues are at play in a current case pending in a federal appellate court deciding Florida law. We will be debating cases such as those noted in Law360, which noted the appellate hearing of this case:

A Chubb unit asked the Eleventh Circuit on Friday to reverse the approval of a Florida condominium association’s $13.8 million appraisal award for hurricane damage sustained in 2017, arguing that a lower court erred in finding that one of the appraisers was partial to the association.

In oral arguments in Atlanta, Jonathan Hacker, who represents Chubb unit Westchester Surplus Lines Insurance Co., said the district court judge wrongly concluded that the appraiser, one of three on the arbitration panel, was impartial because there was no contingency agreement between the appraiser and Biscayne Beach Condominium Association Inc.

But Hacker said whether an agreement existed or not is irrelevant, because the appraiser, Blake Pyka, who had been chosen by the condo association, said he believed he was going to be paid a percentage of the panel’s ultimate award and acted under that belief.

‘He’s operating under a misimpression of the contract,’ Hacker said. ‘There’s no finding from the court that he didn’t believe it. All the court said was that there wasn’t actually an agreement.’

Paul Huck, representing the condo association, told the appeals court that Pyka was ‘asked repeatedly if he believed he was on contingency’ and said no.

‘I’m not going to tell you the record is black and white on this issue, but there’s a variety of things in this issue that he understood what his role was to be,’ Huck said. ‘It’s certainly plausible for the trial court to conclude that there was not evident partiality here.’

Huck added that the appraisal award can be decided by a two-thirds vote, and in this case, the decision was unanimous, so booting one appraiser would not have made a difference.

Westchester is appealing a March 2022 decision by U.S. District Judge Marcia G. Cooke that denied the insurer’s motions to vacate and dismiss the $13.8 million appraisal award.

Researching the matter, I found this as the insurer’s introductory appellate argument in its brief:

Arbitration is supposed to be an adjudication process less formal than civil litigation. But arbitration is not supposed be an unbounded free-for-all. To the contrary, arbitration is considered an acceptable alternative to civil litigation only because—and to the extent that—certain minimum elements of due process are honored. And perhaps the single most important element of any fair dispute resolution process is adjudication by a decisionmaker who has no personal monetary stake in the outcome of the dispute.

Remarkably enough, one of the arbitrators here flouted that principle and deliberated on the case expecting to receive a percentage of the resulting award. Much more remarkably, the district court confirmed the award despite the obvious corrupting influence of that expectation. If due process means anything in arbitration, the award and decision confirming it must be vacated, and the case remanded for arbitration before decisionmakers with no expectation that they will benefit personally from any monetary award.

… According to the Policy, the appraisal was to be conducted by a three-member panel of “competent and impartial” appraisers (“the Panel”). But the appraiser selected by Biscayne Beach, Blake Pyka, was not impartial. Far from it. At the very end of the process, he disclosed to his fellow

Panel members his understanding that he was going to be paid a percentage of the Panel’s ultimate award. The greater the award, in other words, the greater Pyka’s payoff.

The outcome is hardly surprising. With a personal incentive to maximize Biscayne Beach’s recovery, Pyka proposed to his colleagues that Biscayne Beach’s loss was three times the total replacement value of the entire property. Pyka did not get everything he initially sought, but he did help drive the Panel to a final award exceeding the cost of replacing the entire Biscayne Beach property in the event of a total loss.

Pyka’s perceived financial interest in the outcome conclusively negates the award and requires its vacatur under the Federal Arbitration Act (“FAA”), the Florida Arbitration Code, and the plain Policy terms. The district court’s contrary conclusion rests on a legal non sequitur. According to the court, Westchester did not prove that Pyka, in fact, was to receive a percentage of the final award as payoff. That conclusion misses the point: what matters—and what the undisputed facts establish without ambiguity—is that Pyka thought he was going to personally benefit from the award when he participated in the decision-making process and pushed to maximize the outcome. Pyka explicitly disclosed the financial incentive to his colleagues and re-confirmed it on follow up. It is utterly irrelevant whether Pyka’s expectation was accurate or not—the expectation itself is what created an inherently corrupt incentive to inflate the award.

An arbitrator who believes his own pay depends on the size of his award is not impartial, as the law and the Policy require. And an appraisal process subject to such inherently corrupting influence is not a fair or reasonable process by any measure. This Court should reverse and remand with instructions for the district court to vacate the award.

We will discuss and analyze this case next week. I encourage insurance law claim practitioners to subscribe to at least the insurance version of Law360 to keep up with these issues and cases.

Here is the registration for the IAUA conference.

Thought For The Day  

One hour per day of study in your chosen field is all it takes. One hour per day of study will put you at the top of your field within three years. Within five years you’ll be a national authority. In seven years, you can be one of the best people in the world at what you do.
—Earl Nightingale