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The Use Of Hearings In Resolving Insurance Disputes

 

It is common knowledge that dispute valuations in insurance claims leads to “appraisal.” Appraisal is a somewhat of a buzz word for arbitration where arbitrators (appraisers) determine values. Simply put then, an appraiser is an arbitrator and appraisal is an arbitration. This isn’t totally a fair equation of words. After all, a brown trout is different from a rainbow trout. Arbitration is not an appraisal, but an appraisal can be an arbitration, especially when the courts have decided such a thing.

The appraisal provision in insurance policies was placed in these policies many years ago to prevent or foreclose upon litigation and provide both insureds and insurers a method in which to value a claim outside of a courtroom. A typical insurance policy will have an “appraisal” process which must be undertaken before an action can be brought on a policy.

The parties in the policy, the insured and the insurer, each appoint an appraiser who select a third appraiser as the umpire. The appraisal panel then works like a three judge appellate court where the parties will present their valuation positions before the panel and two of the three appraisers can sign an award that is binding upon all parties.

This week while serving as an appraiser, the insured wanted us to consider input from sources which the insured was vital to his case and subsequently requested a hearing. While the other appraiser was lukewarm over the idea due to his involvement in so many appraisals where there had not been a hearing, I agreed. However, the umpire we had selected would have nothing to do with a hearing. As a matter of fact, he insisted that no hearing could be held. Instead, he said the parties had to allow the appraisers to determine values without input from either. The umpire was wrong. I raised a complaint to that position and the umpire resigned.

In some respects, his resignation was a gift to the parties because by denying a hearing, any award could be challenged, but is a hearing really required?

Arizona revised statutes contemplate that a hearing take place where requested. Nothing in the insurance agreement says that the appraisal will be decided without a hearing. There is nothing in the policy contradicting the right to a hearing. However, we must first look at our Arizona case law. According to Hanson v. Commercial Union Ins. Co., 723 P.2d 101 (Ariz. Ct. App. 1986), arbitrations provisions in our Arizona Statutes apply where not contradicted by the language of the insurance agreement. Specifically, in view of the similarity between arbitration and appraisal enforcement proceedings (Jefferson Ins. Co. v. Superior Court (1970) 3 Cal.3d 398, 401, 90 Cal. Rptr. 608, 475 P.2d 880), the court applied the standard of arbitration set forth in A.R.S. 12-1505 and A.R.S 12-1512 to the appraisal proceeding and created the general standard of review applicable to arbitration. If appraisals are controlled by the arbitration statutes, hearings, if requested, are necessary.

A.R.S. §12-1505 provides various reasons for which an award might be opposed. A.R.S 12-1512, A, 4 stands tall where it clearly sets forth that an appraisal award can be challenged when, “the arbitrators refused to postpone the hearing upon sufficient cause being shown therefore or refused to hear evidence material to the controversy or otherwise so conducted the hearing, contrary to the provisions of section 12-1505…”

The court may order an appraisal rehearing before the arbitrators who made the award or their successors appointed in accordance with section 12-1503. The time within which the agreement requires the award to be made is applicable to the rehearing and commences from the date of the order.

Appraisal is a wonderful method to resolve valuation disputes. It is unfortunate that so many people, including the umpire we had selected as our third appraiser, lack knowledge of this simple procedure. The appraisal must commence in an appropriate manner, which includes offering a hearing to the parties. Following proper procedures will prevent the appraisal award from being challenged.

Letter to Kim (Suicide is not the Answer)

To my client as well and my friend, Kim Dieska,

I never criticized you Kim. And you know I could have. After your house fire, you signed that stupid contract with that restoration contractor that gave ALL of your insurance proceeds to him and left you nothing. Many people make that mistake signing agreements with contractors after their fire and when they are under duress. But you also got yourself in trouble with the I.R.S., violating your own rules as a certified financial planer with a good education. I never criticized that either.

When your insurance claim went down hill, you came to me. I went outside that awful contractor’s agreement to get you money from your insurer. Thank God that your contractor hadn’t duped you into signing a release which would prevent me from getting you more money. We found coverage for things in your policy that had fallen through the cracks or for what the contractor did not know existed.

It is outrageous that the contractor you retained would get you to pay a fee to prepare an inventory when Brown – O’Haver would do that as part of our services, for half the price. My wife, Rae Beth and my assistant, Kelly worked hard on your personal property claim and there are two checks in the office for you right now. I know these checks are not enough to pay off that credit card debt you accumulated trying to keep your life together after your fire and I lament what would have happened if only I could have been involved in your claim earlier. I could have helped so much.

Our relationship was much than one of public adjuster helping an insured with an insurance claim. When the contractor did not pay one of his sub contractors and they came after you, I wrote a dozen letters to the insurer with a theory as to why they should pay even after the contractor took your policy limits. Your insurance company eventually coughed up more money and I was joyful but you were not because there was still a balance the contractor wanted paid.

I lined up an attorney to sue your insurer because your insurance company had given the power of adjustment to your contractor. I lined up a second contractor to prepare a checklist of what your contractor did not finish so as to help your attorney make your case. Unfortunately your case won’t go forward now. It can’t.

I know, trauma from your fire never goes away completely. It aligns itself to other trauma in your life. I tried to help in those areas, too. While working on your claim, I helped you with someone to assist you with your taxes. I lined up a mechanic to fix your car and eventually offered you an older car that I own for you to drive.

You told me that I was the best friend you had. You praised me because, unlike others you said, I never tried to take advantage of you. We spent hours on the phone and you told me secrets that a person would only share with a trusted friend. We talked about my orchard. We talked about your ex-marriage. We talked about Christmas. We talked about your health and how you were losing weight and the reasons why. Some of the secrets you shared with me were very personal and touched my heart. I felt a kinship with you. But there were troubling things you told me as well like giving me the power to your liquidate your estate which prompted me to contact mental health authorities. Two of my daughters helped you with this. In all, I honored our friendship and respected you.

Its been three days since your brother’s widow called me to tell me that you had taken your own life. I am still upset. I have had difficulty sleeping. Its true I never criticized you and yet, maybe criticizing you now will make the pain go away. Instead of criticizing you I have been criticizing myself. Could I have been a better friend? Could I have done more? What does it feel like to want to die? I saw value in your life, why couldn’t I share that value with you? How am I going to finish your claim without you?

Your suicide made your pain go away but what about me? Why did you do this? I wish everyone who has made suicide an option would consider how devastated those left behind feel.

I miss you, Kim. May God be with you. May you find the peace that you were searching for. May you find people in heaven you can trust. May you be comforted. May you realize how you have touched others.

Dave Young,
Your Public Adjuster and Friend

Protection of the Arizona Insurance Consumer

American Family Insurance operating in Arizona has been under attack for using the title of “adjuster” when their employees are not actually licensed. It is appropriate for employees of insurance companies to adjust claims without a license but it is a violation of the law for anyone to claim the title of “adjuster” when they have not passed an examination for a license and met certain criteria to quality for the title.

No other major insurance company calls its employees “adjuster” but instead use such titles as “claim representative” or a similar title to designate employees who can adjust claims.

Several years ago it was alleged that American Family was committing consumer fraud by using “adjuster” titles and American Family was able to convince the ADOI (Arizona Department of Insurance) to change the definition of adjuster on the ADOI website to include the employees of insurance companies. The lawsuit that included this allegation was settled several years ago. Subsequently the Department of Insurance has been criticized for this action.

With the election of Governor Doug Ducey the ADOI has undertaken changes that include addressing nagging insurance consumer issues one of which is the fact that a major insurance company has been able to “call the shots” in telling the ADOI how to handle this issue.

A nurse can work in the medical field but when the nurse has not earned the title of “attorney” A paralegal can do legal work but has not earned the title of “attorney”. An employee of an insurer can adjust claims but has not earned the title of “adjuster”. In order to bring American Family into compliance with the law, American Family needs to cease calling its claim representatives “adjuster” or the law has to be changed.

A law has now been introduced into the Arizona Legislature to address this issue. However, the bill, Known as House Bill 2342 would remove the requirement of ANY insurance adjuster to be licensed and would alolw anyone except an adjuster who represents the insured (a “public” adjuster) to enter the insurance adjusting field with absolutely no experience or educational requirement having ever been met.

Introduced by Republicans Karen Fann and David Livingston, the bill will deeply impact insurance adjusters who are currently licensed and have earned their license through experience and education. It will, in fact, render that licensing meaningless.

While insurance agents must participate in continuing education in Arizona, there is no continuing education requirement for insurance adjusters. Arizona also has no experience requirement before someone can take an examination to become an insurance adjuster. To allow insurance adjusters to enter the field of adjusting without any educational requirements and with no evidence of passing an examination as is now required, goes against what we know is logical.

This law as proposed is anathema to a society concerned with protection of the public. Hair dressers and cosmetologists have to be licensed. Private investigators have to be licensed. Property managers have to be licensed. It goes against every ounce of consumer protection concern in our society to allow insurance adjusters to enter the field of adjusting with no experience or education.

Please join me and members of our association in protesting this proposed law.

American Family should work to get its claim representatives licensed or drop the practice of awarding them the title “adjuster”. The law does not need to be changed.