New Florida Case Alert: Retained Public Adjuster Was Not “Disinterested” Appraiser

James Chin and Jocelyn Demars | Zelle LLP | August 29, 2019

First-party property policies typically include appraisal provisions requiring each party to appoint a “disinterested” or “impartial” appraiser. A Florida appellate court recently addressed the question of what makes a potential appraiser “disinterested” in a case involving a Hurricane Irma claim.

Florida’s Third District Court of Appeals held that a fiduciary, like a public adjuster who is in a contractual agent-principal relationship with a policyholder, cannot serve as a “disinterested” appraiser, as a matter of law. State Farm Fla. Ins. Co. v. Sanders, No. 3D19-927, — So. 3d —-, 2019 WL 3309217, at *4 (Fla. 3d DCA July 24, 2019).

Underlying Facts and Procedural Background 

Sanders involved a Hurricane Irma claim under a State Farm homeowners policy. Id. at *1. Appraisal was invoked. Id. The policy’s appraisal provision stated, “Each party will select a qualified, disinterested appraiser.” Id.

The policyholders appointed Gian Debernardi of 911 Claims Corporation as appraiser. Id. A contract between the policyholders and 911 Claims Corporation stated that Debernardi would serve as an agent and representative of the policyholders “to adjust, appraise, advise and assist in the settlement of the loss.” Id. The contract assigned 10% of the amount recovered to 911 Claims Corporation.Id.

Pre-appraisal, Debernardi inspected the subject property, notified State Farm of the claim, and prepared a damage estimate. Id.

State Farm challenged Debernardi’s appointment, arguing he was not “disinterested” because of (1) the agent/principal relationship with the policyholders, (2) the continency fee arrangement, and (3) his earlier issued estimate. Id.

The trial court disagreed and ordered that the appointment was permitted. Id. The appellate court reversed. Id.

Appellate Court’s Legal Analysis

The appellate court held that allowing Debernardi to serve as appraiser would give rise to a harm that could not be remedied on appeal, due to the binding nature of appraisals. Id., at *2. (citing State Farm Fire & Cas. Co. v. Licea, 685 So. 2d 1285, 1287-88 (Fla. 1996)).

Next, the appellate court considered the issue of whether Debernardi could qualify as a “disinterested” appraiser. Id., at *2. Citing Fla. Ins. Guar. Ass’n v. Branco, 148 So. 3d 488, 491 (Fla. 5th DCA 2014), the appellate court explained that a “disinterested” appraiser requirement in an insurance policy conveys a “clear intention to restrict appraisers to people who are, in fact, disinterested.” Id., at *2. “Disinterested” has been defined as “[f]ree from bias, prejudice, or partiality; not having a pecuniary interest.” Id., at *2 (citations omitted). The Branco court held that attorneys cannot serve as their clients’ “disinterested” appraisers due to the fiduciary and confidential relationship between attorneys and clients. Id., at *3.
Likewise, the appellate court in Sanders determined Debernardi could not serve as the policyholders’ “disinterested appraiser” because he was their agent and public adjuster. Id.

Notably, the appellate court also held that, based upon his continency fee arrangement with the policyholders, Debernardi could not serve as a “disinterested” appraiser because he had a “financial interest in whether or not the [policyholders] recover from State Farm and how much they recover.” Id.

May an Appraiser Advocate for the Party that Appointed the Appraiser?

Lawrence Moon | Property Insurance Coverage Law Blog | July 18, 2018

A Missouri Court of Appeals recently held that an appraiser may advocate for the party that appointed the appraiser as long as the appraiser has no financial interest in the outcome of the appraisal.

In Allstate Indemnity Company v. Gaworski,1 Allstate petitioned the trial court to disqualify the insureds’ selected appraiser, contending that the appraiser was not “disinterested” because the appraiser:

  1. Had an ongoing relationship with the company hired by the insureds to make the subject repairs and to which the insureds had assigned their contractual interest in their claims against Allstate, and
  2. acted unprofessionally and aggressively in his communications directed to Allstate.

In denying Allstate’s petition to disqualify the insureds’ appraiser, the trial court reasoned:

[A]lthough there was evidence of [the appraiser’s] ‘unprofessional conduct, aggressive rhetoric, and ominous emails,’ there was insufficient evidence of a disqualifying financial interest on his part.2

On appeal, the court agreed with the trial court, but expanded upon its reasoning, stating:

Although there is evidence in the record that [the insureds’ assignee] hired [the appraiser] for previous jobs, this does not constitute sufficient evidence of frequent or habitual employment rising to the level of a disqualifying bias.3

The appellate court also found:

An appraiser is not required to be entirely impartial. Instead, they may act as advocates for their respective parties without violating their commitments. Here, while [the appraiser’s] communications are certainly ‘aggressive,’ as noted by the trial court, they do not evidence a disqualifying bias against Allstate. Instead, [the appraiser’s] emails evidence his advocacy on behalf of the [insureds]….

These rulings help clarify the line between acceptable advocacy by an appraiser and improper bias or prejudice.
1 Allstate Indem. Co. v. Gaworski, No. ED106079, 2018 WL 3028851 (June 19, 2018).
2 Id. at *1.
3 Id. at *2 (citations omitted).

An Appraiser Can Favor One Side More than the Other and Still Be Impartial

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.
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).