Last week’s post, Louisiana Bill proposes to codify all rules of assessment, generated many comments. I quickly read the bill, wrote my concerns that the rules might not be as good as the general law, and asked for a response. Some comments, private and public, contained very interesting analysis. A public comment was not so nice to me. So let me give some background and updates as who can be an appraiser and whether written rules will apply to this process is one of the biggest questions about insurance dispute resolution.
I have publicly stated that I believe adjudication without rules is unconstitutional because the process does not give participants due process and is in fact a kangaroo process. My opinion is not the accepted opinion and not the law. I have written that even the US Supreme Court has found the process constitutional in, The Supreme Court has ruled that the judgment clause in the standard fire policy is constitutional.
I once chaired an ABA Property Insurance Law Sub-Committee in the 1990s, looking for methods that would make fairer awards. Nothing came of it, but my concern at the time was that some policyholders were appointing licensed real estate appraisers who were the only “appraisers” you could find in the Yellow Pages directory. These appraisers were sheep to slaughter when it came time for an insurance appraisal.
The question of who can be an appraiser has come up frequently in many of my blogs and virtually every seminar I have attended or presented on appraisal. The cases discussing these vary from state to state as to who can be an appraiser, with many deeply analyzing the policy terms “impartial,” “impartial,” and “independent.”
The Florida Department of Financial Services recently charged an individual who claimed that a person must be a licensed public adjuster to be appointed as a policyholder’s appraiser. I disagree because it is not in the policyholder’s best interest to limit people to only authorized public adjusters – I try to look at these issues from the policyholder’s perspective. I will write more about this, but the National Association of General Insurance Adjusters agrees with me. Here is its position:
NAPIA has handled the assessment issue in many states for over 70 years. NAPIA has also written and published a white paper on the assessment process and has sponsored courses for CE points on assessment, both in ethics and on the process alone. It is NAPIA’s position that an appraiser appointed by either the insured or the insurer in a first party property claim under the relevant policy must be competent and disinterested, as required by most if not all first party property policies. There is no requirement in any state that an appraiser be specifically licensed. A public adjuster can act as an appraiser, but not on the same claim for which he or she has been contracted by the insured as a public adjuster for that particular claim. Other professionals who can serve as competent and disinterested appraisers may be contractors, attorneys, real estate agents or appraisers, independent adjusters, or others. An appraiser should never work on a contingent or percentage fee basis. NAPIA has never advocated, nor does NAPIA now advocate, a need for appraisers to be licensed by any state.
I applaud the leadership of NAPIA because they could have taken a self-interested view but didn’t and saw the issue as what is best for the client. I posted once Being on the side of the angels – public adjusters will lose if they fail to follow this philosophy:
Policyholders’ interests and needs are the reason why public adjusters can make a living adjusting benefits. The public adjuster’s financial interests are not decisive for the policyholder. The public interest takes precedence over the public adjustment industry. As long as public adjusters properly serve policyholders, serve the public interest, and strive to raise the bar for those who engage in their trade, they will be allowed to practice what was previously illegal in Florida, is restricted in some states, and remains illegal in some states.
So the Louisiana Bill came to my attention, and it seemed worthy of publication. I know nothing about who, how or why the bill was written. However, the topic is important to everyone in the non-life insurance industry and worthy of respectful discussion. I was on my way to David Young’s funeral while writing the blog, and my analysis was no deeper than questioning whether common law rules can be better than these written rules contained in the bill.
To me, the proposed Louisiana rules regarding who can be an appraiser seem to set out criteria for determining and preventing conflicts of interest that are more akin to the rules of arbitration, where there are rules about who can be selected as an arbitrator that are more defined. Some insurance companies have argued that the arbitration rules govern the valuation rules. Indeed, Florida case law, until expressly overruled, provided that the Florida Arbitration Code applied to judgments. So this concept is not foreign or brand new. However, the vast majority of courts have rejected that arbitration rules must be followed in assessments.
Louisiana is a code state, and having written rules defining a process seems like a Louisiana kind of thing to do. Still, in the 20 pages of rules and dos and don’ts, I’m sure there will be a lot of disagreement. There are a lot of rules, and my bet is that most readers of this blog didn’t read all 20 pages. For example, did you get to the part where the insurance commissioner selects an arbitrator if the parties cannot agree on a qualified arbitrator? Choosing the judge from a predetermined pool of candidates rather than having a court do the same is certainly a novel approach. Judges will also need to provide itemized adjudication awards, which inevitably increases costs, times and probably subsequent post-adjudication litigation.
So there are some good aspects of the proposed bill and many bad aspects of the bill we can argue about. One thing is for sure: where you have so many written rules, there will be questions of interpretation that inevitably lead to more lawsuits in larger award cases and keep Merlin Law Group Louisiana attorneys busy.
So why should I complain or disagree with this bill?
My practice is national in scope. I often say that laws in different states are not wrong or right. We may not agree with them, but they are just what they are and we have to deal with them. I will try to keep readers updated on what happens with this bill and if I learn more about the who, why and what of it as well. Thanks for all your comments on this important topic.
If you care about someone, and you have a little love in your heart, there’s nothing you can’t get through together.
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