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Assessment White Paper by the National Association of Public Insurance Adjusters | Real estate insurance coverage law blog



Appraisal is a dominant form of dispute resolution for property insurance in property insurance throughout the United States. During the annual meeting of the National Association of Public Insurance Adjusters (NAPIA), I received a white paper 1 that the association produced in 2019, which I suggest that everyone in the valuation industry read. Some views, especially the view on conditional contracts for valuers, are not in agreement with all public adjusters across the country. Still, philosophy and opinions are important because they are expressed by the oldest long-standing association of public adjusters in the United States. The purpose of the White Paper is an attempt by NAPIA "to safeguard the integrity of the valuation process, which plays an important role in resolving first-party claims."

Many are unaware of the history and long-standing commitment that NAPIA has made to the public adjuster. Consequently, I think it is only appropriate to quote:

NAPIA was founded in 1

951 to professionalize the then small but growing profession of public adaptation. At that time, the association adopted a constitution and laws and, more importantly, a strict code of ethics that serves as a model for public adaptation today.1 For over 60 years since NAPIA was founded, NAPIA has worked closely with the insurance industry, say the insurance department, state governors and legislators, Advocates General and others to ensure that public adjusters, the only professionals specifically licensed and regulated to prepare first-party claims for a consumer or commercial insured, practice in an ethical and responsible manner. We have members in almost every state from Maine to Hawaii, and we have been called to testify and work with state governments to obtain licenses and ensure that public adjusters practice their craft properly. Following Hurricane Katrina, NAPIA was most active in Louisiana and Mississippi in assisting its legislative and insurance departments in drafting and implementing comprehensive public adjustment licensing statutes, as these states did not previously have any. NAPIA has operated in many other states and 45 of the 50 states, plus the District of Columbia, now have extensive licensing bills governing public adjusters.

There is a warning for anyone reading the White Paper. It is general law and not specific to any case or state. Laws have changed in recent years in some states. If you are not sure about a proceeding or legality about something in any state or situation, ask a lawyer who is aware of first party law.

One view is that “The main advantage of assessment is that it is cheaper and faster than disputes. “I think the goal of keeping the valuation in this way is important. My view is states that allow an assessment and then have the issue of "causation" go to disputes make the process much more complex and expensive. This creates a mess in some Texas cases by dragging out the cases in two procedures and often gives the insurer two bites to avoid paying or delaying as long as the policyholder gives up.

I found this view interesting: [19659003] The main disadvantage of valuation from the insured's perspective is that insurance companies and their valuers are recurring participants in the evaluation process. A valuer may feel loyalty to an insurer due to a long-term business relationship or may even feel dependent on the insurer for a significant portion of its income.

The first sentence was very true more than 25 years ago when most policyholders chose appraisers from the yellow pages and ended up with real estate or art / antique appraisers. Those were the days when policyholders get-to-slaughter for the insurance industry. Today this is very rare. As the newspaper later notes, there are even full-time valuers for policyholders and insurance companies. My view is that virtually all insurance company valuers have a bias and loyalty to the insurance companies because otherwise they will be cleared. The taxpayers of the insurance companies are demarcated from further work if they are perceived as thinking to ensure that the policyholder receives full and fair benefits, which is what I suggest should be the goal of the valuation. The obligation to "good faith" towards the policyholder seems to dictate this conclusion.

NAPIA has taken the view that appraisers should be advocates within borders and cited Iowa law as how taxpayers should be viewed:

The purpose of the appraisal procedure is not to provide appraisers who have the total impartiality required in a court of law. The valuers do not violate their commitment by acting as advocates for their respective selected parties. However, assessors should be able to act fairly and be free from suspicion or unknown interest.

This used to be my position. But since I have considered the duty of "good faith," I now believe that valuers should be advocates of their views on value and harm. I'm not sure if this is a huge difference, but valuers should be advocates, like lawyers. My view makes the process fairer and more honest because it also applies to the more serious problem that allows insurance companies to hire lawyers with a mindset to get the valuation award as low as possible rather than getting the valuation price fair, just and right. [19659005] Impartiality is closely linked to the concept of whether valuers can be advocates. NAPIA seems to be of the opinion that although valuers may be advocates, the problem of impartiality can be solved by "meeting appropriate disclosure requirements, ensuring that valuers do not have a financial interest in the outcome of the evaluation and avoiding overly" repeat players "& # 39; valuers and public adjusters or law firms, all of which support NAPIA.

I understand that many public adjusters and policyholders support allowing conditional fees in valuations so that the policyholder does not face a huge bill for services on a small claim. But only with the golden rule, can you imagine a situation where the insurance company provided financial incentives to get paid less on a claim? I agree with NAPIA's view that justice is best served by having unconditional charges of impartiality.

How many times can a person act as a valuer and then be considered an "excessively repetitive player" incapable of being "impartial?" The White Paper does not answer that question even if it raises the question. This is a serious issue in many jurisdictions. In most cases, the insurance industry employs the same or similar valuers and with a much higher frequency than any individual policyholder, public adjustment company or law firm. Some insurance companies have lists of acceptable valuers that are saved all the time. But what is the test? What is an extensive relationship and previous business that makes the assessment process unfair?

NAPIA seems at one point to propose that these cases be brought before a judge instead of a court:

It must be clarified that valuers, by any policy or statutory definition, may not be biased. This means ensuring that valuers do not have a financial interest in the result of a certain loss. In particular, conditional fee arrangements incorrectly give the valuations incentives to increase the loss calculations so that their percentage is also higher. Using an hourly rate that is limited to a percentage of the award, apparently to limit the fee that an appraiser can earn, can have the paradoxical effect of increasing the appraisal estimate so that the ceiling does not deny any of the appraiser's invoiced hours. [19659005] Valuers should also not have a financial interest by virtue of an extensive relationship with a particular customer. The industry should ensure that the "repeat players" do not repeat so often that they really advocate for the client who continues to hire them, rather than the customer's position on that particular loss. Transparency about such relationships is crucial for a fair process. To the extent that any previous transactions may depend on the valuer's estimate, the neutral judge should be able to assess the award in the light of all relevant facts.

Then NAPIA's revealing question seems to be one that the judge can decide. or a court, and reiterates the need for full disclosure to all parties:

It is NAPIA's position for a valuer to present himself as independent, uninterested or impartial (depending on the statutory or policy language in force), when the valuer actually has a significant previous relationship with a party to an insurance contract, is not consistent with the purpose and intent of the assessment. Such conduct is incorrect, whether by the assessor or the judge, as well as by the party engaging that person. In the same way, failure to disclose a fee arrangement that in any form depends on the valuation dividend should be considered incorrect.

Only complete disclosure can mitigate this problem – so that the other party can question the appraiser's impartiality, so that the neutral judge can consider the previous relationship or interest for any fee, and if necessary, a court can evaluate an estimate of a appraiser or judge.

The reporting requirements are consistent with the need for such disclosure. Basically, if a valuer makes a living from assessing losses for a particular customer, or a particular side of the insurer / insurance relationship, the others involved in adjusting and evaluating the loss have the right to know.

The conclusion is that I applaud NAPIA for taking a stand and trying to make the evaluation process fairer for all parties. The insurance industry seems to have crutches for an answer except from case to case. This is an important read for anyone involved in evaluation and policy for how it will be implemented in the future.

Thought For The Day

Live so that your children think of justice, caring and integrity, they think of you.
—H. Jackson Brown, Jr.
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1 Evaluation [white paper]. National Association of Public Insurance Adjusters. April 4, 2019.


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