The Use Of Hearings In Resolving Insurance Disputes.

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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 isnt
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
2
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.