Digitory Solutions Inc.

Tripartite Insurance Appraisal: Panel Dynamics

Property and Casualty Insurance Policies call for a specific form of Appraisal, “tripartite appraisal”, in which each side names an appraiser of its choice, and then the two party-appointed appraisers select the neutral Umpire of the three-panel Appraisal. Typically, each party-appointed appraiser is aligned with the party that appointed her. While parties are free to develop rules to govern the party-appointed and neutral appraisers’ behavior, most tripartite appraisals anticipate both that the party-appointed appraiser will be biased in favor of the party who appointed her and that ex parte communications between the party and her arbitrator are sometimes permissible, only if the intention to make such contacts is disclosed to the other appraisers and the parties.

Parties contract for the tripartite appraisal for a variety of reasons. If the party-appointed arbitrator is permitted to have ex-parte communications with his party’s public adjuster, critical and evaluative discussions of approach and presentations may benefit the party in developing an effective case. Moreover, during the appraisal hearing, the party-appointed appraiser may be able to ask questions and elicit answers from the witness that a less knowledgeable or experienced appraiser may overlook.

The value of a party-appointed appraiser’s contributions to the deliberative process depends in large part on the neutral umpire’s interest in that appraiser’s input. In a complex case that requires specific expertise, a party-appointed appraiser may provide the umpire with useful analysis and commentary on the issues. A neutral umpire who is unsure of the outcome may consult extensively with the party-appointed appraiser in a confidential executive session. In this scenario, a party-appointed appraiser may be quite valuable because that appraiser may be able to offer significant input that affects the outcome. A neutral umpire confident of the outcome, by contrast, may be less interested in collaboration because the neutral umpire will be fairly certain to receive at least one-panel member’s vote. (See Rogers, 2001).

A slight technical problem may arise in the appraisal, as the partisan appraisers are named in advance, and sometimes Insurance Companies or lawyers/Public Adjusters may recommend an Appraiser who has some business connection to them, as this is likely the way the party knows of the Appraiser. As a result, the partisan appraiser may even at times, be a potential witness in an Appraisal she is sitting on.

The Courts have difficulty drawing the line between proper partisanship and dishonest behavior and have little legislative or policy guidance on which to draw. While an award may be challenged for “evident partiality,” it is more likely that the provision was intended to discourage partisan behavior by the neutral Umpire than partisanship by party-appointed appraisers.

Although the line between permissible partisanship and impropriety is not distinct in policy or practice, parties that select appraisal is typically represented by Attorneys or Public Adjusters, who are repeat players in insurance appraisal and are thus quite aware of the risks associated with the process.