SIGNIFICANCE FEE DESTROYS OPPERCENITY
Travelers were presented with a statement that it evaluated and paid for promptly. Faced with evidence of further damage, it paid more. Regardless of whether the insured assigned his additional claim to his roofer who retained a valuer who agreed to work on an unforeseen fee plus giving a 15% fee to the roofer. IN Travelers Casualty Insurance Company Of America v. Mudd’s Furniture Showrooms, Inc., CMS Roofing, Inc. and Jaron JaggersCivil Action No. 4: 19-CV-186-JHM, United States District Court, WD Kentucky, Owensboro Division (March 28, 2022) The USDC in Kentucky found it necessary to award the award for violating the requirement of an impartial valuation.
In a protracted insurance dispute due to roof damage to a Mudd’s Furniture Showrooms (“Mudd’s”) building caused by a strong wind and rainstorm (the “Loss”), the parties could not resolve the claim, and Mudd’s invoked the assessment process according to policy. The resulting assessment, which travelers consider invalid, prompted travelers to submit a declaratory judgment.
The initial loss and the investigation
Travelers adjusted the claim and made a payment that only reflects the replacement of the metal roofing, some exterior roofing sheets and limited interior water damage in the rooms located under the only section of the roof.
Mudd’s entered into an agreement with CMS Roofing, Inc., a roofing contractor, which approved CMS to assist Mudd’s in the insurance claim. In response to CMS’s discovery, travelers sent engineers and inspectors to the property to check it out for themselves. A subsequent engineering report confirmed CMS’s results and acknowledged additional areas of damage in addition to travelers’ initial assessment. Travelers re-evaluated the requirement in December 2017 and allowed more money to be paid to cover the exterior roof damage. Passenger’s readjustment increased compensation to $ 154,888.84, with an ACV of $ 114,910.64. Travelers therefore paid Mudds $ 64,154.85 (the difference between the initial ACV paid in June and the newly calculated ACV in December). [
Mudd’s authorized CMS to proceed with the roof replacement. CMS completed the roof replacement for the areas covered by the re-adjustment in June 2018.
Despite Travelers’ adjustments, Mudd’s and CMS’s Jaron Jaggers [“Jaggers”] maintained doubts as to whether the damage assessments were correct and sufficient to cover the full extent of the damage. Mudd’s transferred its rights in the insurance claim to Jaggers. Subsequently, Jagger had discussions with Mr. Denis Rowe, Vice President and Partner of The Howarth Group, a company that provides insurance claims consulting services to policyholders. Jaggers, Rowe and Chuck Howarth, chairman and founder of the Howarth Group, had a dinner meeting where they discussed the claim. Mudd’s and Jaggers then signed an appraisal employment contract appointing the Howarth Group as their valuer. The fee arrangement in the original employment agreement between Howarth and Mudd’s was for an hourly rate of $ 375, with the total fee not to exceed 30% of any additional amounts that Mudd’s recovered through the appraisal process (a “contingent fee cap” arrangement). : “If the process does not result in any further settlement, no fee will be paid.” Howarth agreed to pay Jaggers a 15% referral fee for the valuation work, to be paid from Howarth’s fee as a valuer.
Umpire Ward considered that submissions from both parties reflected their perceived amount of loss. The award included two separate estimates created by Ward, one for external roof damage and one for internal damage. The price determined that the cause of the loss was wind and water damage and set the loss amount at $ 784,754.64 ACV and $ 844,290.37 RCV. The external damage estimate was $ 283,827.42 RCV, and the internal estimate was $ 500,927.22 for ACV and $ 560,462.95 for RCV.
DISPUTE ABOUT THE PRICE AND TRAVELERS ‘COMPLAINTS
Travelers argued that the award should be given because Howarth was not impartial as Mudd’s appraiser, as required by the policy, due to his unforeseen fee-based arrangement with Jaggers. Travelers claim that Mr. Howarth collaborated with Jaggers to submit inflated ceilings for the assessment, rather than disclosing the amounts that Jaggers and CMS actually incurred to replace the ceilings, as he had a direct financial interest in the outcome of the assessment.
Travelers persistently claimed that Howarth was paid on an unforeseen fee and therefore could not be an impartial valuer. An arrangement for contingencies does not make an appraiser impartial because it would generate a “personal share of the appraisal results.” [Veranda Gardens, LLC v. Secura Ins., No. 3:18-cv-611-DJH-RSE, 2019 WL 2438788, at *4 (W.D. Ky. June 11, 2019).] When appraisers have an unforeseen fee arrangement in place but later withdraw it, as what Howarth did in this case, courts have still found that the agreement affects the appraiser’s ability to be impartial. [See Auto-Owners Ins. Co. v. Summit Park Townhome Association, No. 14-cv-03417-LTB, 2016 WL 1321507, at *5 (D. Colo. Apr. 7, 2016).]
A provision that says “if the process does not provide any further settlement, no fee will be paid” is clearly incorrect. Here, Howarth’s initial fee arrangement clearly encourages him to increase the extent of the loss in this case. Whether the fee arrangement was changed to remove such provisions is disputed, but the fact that it was there in the beginning is a sign of Howarth’s way of thinking regarding the assessment. Howarth initially proposed the contingent ceiling because he wanted Mudds to “benefit” from his assessment.
An appraiser may not show bias or favoritism towards any party or make one party’s party political bid.
Howarth is not one to act as a valuer in an insurance dispute. Acting as a valuer is now his main activity. His business is to help policyholders when his focus as a valuer should be to fairly and impartially value a loss.
In this case, Howarth was initially involved when he was told by Denis Rowe about an opportunity where his company could add “scope” to an insurance claim. Jaggers, Rowe and Howarth had meetings where they discussed the claim and the idea that Howarth’s fee would come from adding “scope” to the internal damage to the building. Even before the appraisal process was invoked, Rowe Howarth advised that “we could add another 100 to 150 [thousand dollars] on the claim. ”
Howarth initially linked his fee to the amount added over what the travelers had already offered in settlement. In addition, he tried to hide this from travelers and edited parts of both his compensation package and Jagger’s referral fee in correspondence with travelers. Howarth’s relationship with Jaggers, the roofer – who was insured through an assignment – was more than worrying. Cultivating a relationship with a roofing contractor like Jaggers is obviously important to Howarth’s business, so much so that Howarth was willing to pay Jaggers 15% of all compensation he received from working as a valuer for this claim.
The court concluded that the Howarth Group crossed the border. The word “impartial” means the requirement that the policy placed on persons who could act as valuers;
means impartial and disinterested – not favoring one side over the other. “Instead of being disinterested and agreeing to the task of making a fair and impartial judgment, whatever the outcome, Howarth concluded from the outset that it could provide the project.” scope “and went so far as to promise the insured that if it could not add value, it would not be charged anything for the effort.
Although added value is the understandable desire of the insured, an impartial valuer should not begin his work with this as the goal. Howarth might ask here, “why should we get involved if we do not think we can help the policyholder add value to the claim?” The answer is: engage as an adjuster, not as a valuer, if it is your desire to help the policyholder.
Howarth Group uses the assessment process as a tool to help policyholders, which according to the Court is not how the process should work. Finally, a roofer, who has been assigned the insurance claim, pays a referral fee for the ability to act as a valuer simply looks bad, smells bad and is bad.
Based on the foregoing, the court concluded that no reasonable jury could establish that Howarth acted as an impartial appraiser. Consequently, the court granted summary judgment to travelers on County I and granted the award.
Valuation is a tool for fairly and in good faith resolving disputes between an insurer and its insured to determine the size of the loss. To achieve a fair result, valuers and judges must be impartial and uninterested. When a person is arrested as a valuer, he or she promises to increase the extent of the loss and earn on an unforeseen fee basis, it is impossible for that person to be an impartial and uninterested examiner of the facts of the loss. The court should have forwarded the evidence presented in the claim for summary judgment to the American lawyer, as the verdict was obtained incorrectly and was an attempt to deceive travelers who were sued only because they did what the policy required and, when shown more damages, paid for them immediately .
(c) 2022 Barry Zalma & ClaimSchool, Inc.
Barry Zalma, Esq., CFE, now limits his internship to the position of insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as a lawyer for insurance coverage and claims management and more than 54 years in the insurance industry. He is available at http://www.zalma.com and email@example.com.
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