Christina Phillips | Property Insurance Coverage Law Blog | August 26, 2017
The typical appraisal provision in an insurance policy requires that each party select a competent and impartial appraiser. However, what impartial means is usually undefined in the policy. Does advocacy on behalf of your appointed party mean you are not impartial? That question was recently addressed by the Colorado Court of Appeals in Owners Ins. Co. v. Dakota Station II Condominium.1
Following entry of an appraisal award that favored the insured, Owners sought to vacate the appraisal award in part because the insured’s appraiser was not “impartial” under the policy. The appellate court affirmed the trial court’s determination that an appraiser need not be impartial in the same manner as a judge, umpire or arbitrator. Rather, appraisers must be impartial in the sense that experts need to be: rendering their opinions based on their experiences and not allowing themselves to be influenced by the litigants. In the context of appraisers this means that their valuation opinion applies appraisal principals with fairness, good faith and lack of bias.
The appellate court stated that while an impartial appraiser should be unbiased and unswayed by personal financial interests, that does not mean that the appraiser may not favor one side more than the other. The court concurred with the Iowa Supreme Court’s conclusion in Central Life Insurance Company v. Aetna Casualty & Surety Company,2 that so long as the selected appraiser acts fairly, without bias and in good faith, he or she meets the policy requirement of an impartial appraiser. The court also noted that the relevant policy provision distinguished appraisers from the umpire—who is ultimately left to resolve the differences between the appraisers—and the policy contemplated that the appraisers would put forth a value on behalf of the party that selected them. The policy did not hold an appraiser to the standard of “not favoring one side more than the other.” Therefore, an appraiser does not violate the impartiality requirement by acting as an advocate for their respective selecting parties. They must, however, act fairly, without bias and in good faith.
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1 Owners Ins. Co. v. Dakota Station II Condominium, No. 16CA0733, 2017 WL 3184568 (July 27, 2017).
2 Central Life Ins. Co. v. Aetna Cas. & Sur. Co., 466 N.W.2d 257, 261 (Iowa 1991).