What Baseball Has Taught Me About The Insurance Appraisal Process

Ryan Hutson | Butler Weihmuller Katz Craig LLP | May 10, 2019

Anyone who has ever watched baseball knows that umpires sometimes make an incorrect call. In appraisal of a property insurance claim, sometimes the umpire can make a mistake as well. 

Just as in baseball, yelling and kicking dirt on the umpire’s proverbial home plate will never resolve or change the incorrect call during an appraisal process.  Only by following the proper procedure can a baseball team’s manager get a call reviewed by video replay and, potentially, have the bad call overturned. The same holds true in insurance appraisals.

A federal judge recently ruled that an incorrect appraisal award by a court-appointed umpire was binding on the parties, even where the umpire later attempted to issue a “corrected” award.  Guzman v. American Security Insurance Company, No. 18-cv-61195, 2019 WL 1383230 (S.D. Fla. March 27, 2019).  While the umpire later claimed his first award was not final, the court found that the umpire lacked the authority to unilaterally modify the award where: 1) the insurance policy expressly stated that a decision by any two of the three appraisers was binding, and; 2) the “wronged” party did not follow the statutory procedures to obtain a modification to the award.

In Guzman, the insured brought a claim against the insurance company for disputed damage claims arising from Hurricane Irma.  After the initial filing of the suit, the parties agreed to stay litigation and complete the appraisal process available under the policy.  Each party hired their own appraiser, but they were unable to reach agreement on the scope of loss. As they also could not agree on an umpire, one was appointed by the court, and together the three inspected the property.

Five days after the joint inspection, the umpire emailed his signed appraisal award in the amount of $121,800.30.  Importantly, the email stated, “See attached for review and comment.  If one or both of you find this agreeable, please sign, scan, and return to me.  I will then get out the originals.”   

Within 40 minutes of the appraisal award, the insurer’s appraiser sent an email objecting to the Appraisal Award and asking for an itemization of the award.  The insured’s appraiser, however, quickly signed the copy of the award previously signed by the umpire and submitted it. 

Seeing his mistake, the umpire emailed both appraisers the same day, requesting missing documents from the insured’s appraiser and indicating that he would “hold off” on the final appraisal award until after those documents were produced.  About 12 days later, the umpire issued a revised appraisal award for $90,704.27.  This lower award prompted the insured to file a Motion to Confirm the initial appraisal award.

In ruling that the initial appraisal award was binding on the parties, the court focused on the language of the appraisal provision of the policy at issue. Specifically, the provision allowed that if the appraisers disagree, they shall submit their difference to an umpire, and a “decision agreed to by any two will be binding”. While the umpire later indicated by email that the initial award was not final, there was nothing in the initial signed award that indicated it was not final.  Thus, the court found that once a second appraiser, in this case the insured’s, signed the award, the award became binding by the express and unambiguous terms of the insurance policy. 

For future attorneys about to step up to the proverbial plate, the court in Guzman hinted at a possible way the Defendant insurer could have handled the umpire’s incorrect award, even once it was signed by both the umpire and the opposing appraiser. 

While the appraisal process is not governed by the Florida Arbitration Code, Florida courts apply the procedures provided by the Arbitration Code to the confirmation process of an appraisal award.  Specifically, the court noted that Florida Statute §682.12 controls the confirmation of arbitration awards.  Under §682.12, a court shall confirm an arbitration award unless an insurer moves to vacate, modify or clarify an award pursuant to Florida Statutes 682.10, 682.14 or the award is vacated pursuant to 682.13. 

Florida Statute 682.10 states in part that an arbitrator may modify, clarify or correct an award where a party makes a motion to the arbitrator/umpire within 20 days of the award, allowing the opposing party 10 days to object to the motion.  The court may then submit the claim to the arbitrator to consider whether to modify or correct the award.

In this case, the insurer never filed a motion to modify, clarify or correct the award.  While the insurer’s attorney expressed his objections to the award via email, the court highlighted that the insurer never made a formal motion or request for modification or correction. 

All the emails in the world and all the back-tracking of the umpire couldn’t overturn the wrong call, but one proper motion by the insurance company “team manager” could have potentially reset the whole scenario.  It is a valuable lesson to future attorneys going to bat through the appraisal process.  If the umpire gets it wrong, file a timely motion with the court to start the review process; don’t just kick dirt at the umpire.

Leave a Reply