AN APPRAISAL PRIMER What, When, Why and How? PAMIC Claims Summit Wyndham Gettysburg April 7, 2015

AN APPRAISAL PRIMERAN APPRAISAL PRIMER

What, When, Why and How?What, When, Why and How?

PAMIC Claims SummitPAMIC Claims Summit

Wyndham GettysburgWyndham Gettysburg

April 7, 2015April 7, 2015

PRESENTERSPRESENTERS

Michael H. Burgoyne, Esq.Michael H. Burgoyne, Esq.Thomas, Thomas & Hafer, LLPThomas, Thomas & Hafer, LLP

Baltimore, MarylandBaltimore, Maryland

Todd B. Narvol, Esq.Todd B. Narvol, Esq.Thomas, Thomas & Hafer, LLPThomas, Thomas & Hafer, LLP

Harrisburg, PennsylvaniaHarrisburg, Pennsylvania

James J. Kern, CPA, CVA, CFEJames J. Kern, CPA, CVA, CFEGross Mendelsohn & Associates, P.A.Gross Mendelsohn & Associates, P.A.


Mark W. Reynolds, CPA, CFE, CFFMark W. Reynolds, CPA, CFE, CFFGross Mendelsohn & Associates, P.A.Gross Mendelsohn & Associates, P.A.


LEARNING OBJECTIVESLEARNING OBJECTIVES

WhatWhat types of disputes can be appraised types of disputes can be appraised

WhenWhen during the claims process during the claims process

WhyWhy demand appraisal – pros and cons demand appraisal – pros and cons

HowHow does the appraisal work, start to finish does the appraisal work, start to finish

WHATWHAT

Loss Measurement Disputes - YES Loss Measurement Disputes - YES

Coverage Disputes – NOCoverage Disputes – NO

Liability Disputes – NOLiability Disputes – NO

Overview of appraisal process:Overview of appraisal process: Insurance policy provisionsInsurance policy provisions Written demand for appraisalWritten demand for appraisal Selecting appraisersSelecting appraisers Selecting an umpireSelecting an umpire Appraisers assess value of lossAppraisers assess value of loss Umpire evaluates appraisers’ assessments of value, considers evidenceUmpire evaluates appraisers’ assessments of value, considers evidence Amount of loss determined based upon agreement of two out of the threeAmount of loss determined based upon agreement of two out of the three

POLICY PROVISIONSPOLICY PROVISIONS

Written Demand Written Demand

Selecting AppraisersSelecting Appraisers

Appraisers Select UmpireAppraisers Select Umpire

Appraisers Value the LossAppraisers Value the Loss

Umpire Evaluates Value of LossUmpire Evaluates Value of Loss

Agreement by Any Two is BindingAgreement by Any Two is Binding

POLICY PROVISIONSPOLICY PROVISIONS

Each Party Pays Its AppraiserEach Party Pays Its Appraiser

Umpire Cost Shared EquallyUmpire Cost Shared Equally

Insurer Retains Right to Deny Insurer Retains Right to Deny ClaimClaim

PROS & CONS PROS & CONS

PROSPROS

Less Expensive Less Expensive

Take Far Less TimeTake Far Less Time

Informal Process Informal Process

Each Party Shares in Cost Each Party Shares in Cost

PROS & CONSPROS & CONS

CONSCONS

Award is Binding – Must Live with ResultAward is Binding – Must Live with Result

Does Not Resolve All DisputesDoes Not Resolve All Disputes

Umpire May Split the DifferenceUmpire May Split the Difference

TIMING OF APPRAISAL TIMING OF APPRAISAL

Generally, After:Generally, After:

Coverage AcknowledgedCoverage Acknowledged

Documents Obtained Documents Obtained

Settlement Attempts FailedSettlement Attempts Failed

WAIVER OF APPRAISAL WAIVER OF APPRAISAL RIGHTSRIGHTS

If Not Demanded Timely If Not Demanded Timely

Appraiser Not Selected TimelyAppraiser Not Selected Timely

Filing Suit Prior to Appraisal Filing Suit Prior to Appraisal DemandDemand

Insurance Company Denies Insurance Company Denies LiabilityLiability

SELECTING APPRAISERS & UMPIRESSELECTING APPRAISERS & UMPIRES

Competent and ImpartialCompetent and Impartial

Knowledge and ExperienceKnowledge and Experience

Communication skillsCommunication skills

Decision makerDecision maker

SELECTING APPRAISERS & SELECTING APPRAISERS & UMPIRESUMPIRES

ReputationReputation Prior AppraisalPrior Appraisal BiasBias Sound JudgmentSound Judgment

Do Your HomeworkDo Your Homework

MEMORANDUM OF APPRAISALMEMORANDUM OF APPRAISAL

Specify Disputes Specify Disputes Measure of Value (RCV, Measure of Value (RCV,

ACV)ACV)

Selection of AppraiserSelection of Appraiser

Appraisers’ Selection of Appraisers’ Selection of UmpireUmpire

Responsibility for FeesResponsibility for Fees

Signature of PartiesSignature of Parties

EDUCATION OF THE UMPIRE BY EDUCATION OF THE UMPIRE BY YOUR APPRAISERYOUR APPRAISER

Knowledge of the ProcessKnowledge of the Process

Policy ProvisionsPolicy Provisions

Valuation MeasurementValuation Measurement

Role of the UmpireRole of the Umpire

Are there any potential problems if the Are there any potential problems if the appraisers do not select the umpire first?appraisers do not select the umpire first?

The insured’s Perspective:The insured’s Perspective:

Thoughts of Public Adjusters on Appraisal Thoughts of Public Adjusters on Appraisal of Business Income Claimsof Business Income Claims

THOUGHTS OF PUBLIC ADJUSTERS ON THOUGHTS OF PUBLIC ADJUSTERS ON APPRAISAL OF BUSINESS INCOME CLAIMSAPPRAISAL OF BUSINESS INCOME CLAIMS

Yes . . . I will try to snooker the Yes . . . I will try to snooker the Umpire.Umpire.


I can stretch the envelope, you can’t.I can stretch the envelope, you can’t.

Your evaluation was wrong and you admit Your evaluation was wrong and you admit it.it.


Keep in mind your goal is to impress your Keep in mind your goal is to impress your client, not the Umpire.client, not the Umpire.


OK . . . .Sometimes my client is OK . . . .Sometimes my client is unreasonable.unreasonable.


If the Umpire can’t figure it out, he splits If the Umpire can’t figure it out, he splits the difference . . . . so . . . . the difference . . . . so . . . .


Be disdainful to me . . . please.Be disdainful to me . . . please.


Unfair from day one! Unfair from day one!


Never ever re-evaluate your position.Never ever re-evaluate your position.


I also want to close my file . . . let’s I also want to close my file . . . let’s settle!settle!


We both know I’m the heavy favorite.We both know I’m the heavy favorite.


Use more numbers . . . more schedules Use more numbers . . . more schedules too!too!
