One of the more successful professional organizations that I have been involved with over the past decade is the Windstorm Network. Insurance defense attorney, Janet Brown, conceived the idea. It has an Umpire Program that provides classes for certification for the appraisal of property insurance disputes, an Umpire Directory, and a Code of Ethics, which has been approved by the general membership of the Windstorm Network.
Following my post, Umpires Following Unfavorable Appraisal Awards May be Subject to Suit, I wrote one of the most active umpires in property insurance appraisals and a teacher in the Umpire Program, John Voelpel. Voelpel is one of the busiest property insurance umpires in Florida. He was part of a roundtable discussion on “Umpires and Umpiring” at the Florida Association of Public Insurance Adjusters 2009 Annual Convention. I asked John if there were any written procedures regarding the appraisal process. He indicated no, but directed me to the Wind Umpire Directory.
The Wind Umpire Directory has been widely distributed to judges in the coastal areas of the United States and to the members of the Windstorm Network. It lists certified umpires and is a far better source for a policyholder find an umpire than a list provided by an insurance company. The appraisal procedures explained in the Wind Umpire Directory are rather basic and barely more than what is written in standard insurance policies:
What is the appraisal process?
The appraisal process is a contractual process for resolving valuation issues. Appraisal provisions have been included in insurance contracts for over 100 years. Most appraisal clauses in insurance contracts provide that if the insurer and the insured cannot agree on the value of the property or the amount of the loss, either party may make a written demand for an appraisal. Each party then selects their own appraiser and the appraisers perform their own independent evaluation. Prior to the evaluation, the umpire is selected by the appraisers or the Court is petitioned to appoint an umpire. If the two appraisers can agree on the value of the property or the amount of the loss, that amount is established and the process is concluded. If they cannot agree on the value of the property or the amount of the loss, then the matter is submitted to the Umpire for resolution. The Umpire’s decision becomes binding only by a majority agreement (2 of 3).
The most admirable work other than the teaching Voepel and others have done with the Windstorm Network has been to develop an Umpire Code of Ethics. More than anything else, this Code of Ethics provides some semblance of fairness to the individual required to be the “judge” of this very informal and important process. While not truly a judge, an umpire’s powers in the appraisal process cannot be overstated. The individuals that painstakingly worked on the Code should be proud–as should the Windstorm Network. I should point out that this Code is copyrighted.
The Code of Ethics for Umpires in Insurance Appraisals© was prepared in 2004 by the Umpire Directory Committee of Windstorm Insurance Network, Inc. The Officers and Board of Directors approved the Code on August 3, 2004. Pursuant to the Bylaws of the organization, the Code was adopted by the members at the Annual Business Meeting in February 2005, at the annual Windstorm Insurance Conference. The Code was revised in September 2007.
I encourage all to read the Code in its entirety. I think the most important provisions of the Code are:
The use of appraisal to resolve insurance disputes has grown extensively. Persons who act as Umpires therefore undertake serious responsibilities to the public, as well as to the parties. Those responsibilities include important ethical obligations.
Although most proceedings are Appraised pursuant to an insurance contract and voluntary agreement of the parties, certain disputes are submitted to Appraisal by the Court. In all such cases, the persons who have the power to decide should observe fundamental standards of ethical conduct… Umpires, like judges, have the power to decide cases. However, unlike full-time judges, Umpires are usually engaged in other occupations before, during, and after the time that they serve as Umpires. Often, Umpires are purposely chosen from the same trade or industry as the parties in order to bring special knowledge to the task of deciding the pending issues. This Code recognizes these fundamental differences between Umpires and judges.
CANON I. AN UMPIRE SHOULD UPHOLD THE INTEGRITY AND FAIRNESS OF THE APPRAISAL PROCESS.
A. An Umpire has a responsibility not only to the parties but also to the process of appraisal itself, and must observe high standards of conduct so that the integrity and fairness of the process will be preserved. Accordingly, an Umpire should recognize a responsibility to the public, to the parties whose rights will be
decided, and to all other participants in the proceeding.
B. One should accept appointment as an umpire only if fully satisfied:
(1) that he or she can serve impartially;
(2) that he or she can serve independently from the parties, potential witnesses, and the appraisers;
(3) that he or she is competent to serve; and
(4) that he or she can be available to commence the appraisal in accordance with the requirements of the proceeding and thereafter to devote the time and attention to its completion that the parties are reasonably entitled to expect.
C. After accepting an appointment and while serving as an Umpire, a person should avoid entering into any business, professional, or personal relationship, or acquiring any financial or personal interest, which is likely to affect impartiality or which might reasonably create the appearance of partiality. For a reasonable
period of time after the decision of a case, persons who have served as Umpires should avoid entering into any such relationship, or acquiring any such interest, in circumstances which might reasonably create the appearance that they had been influenced in the appraisal by the anticipation or expectation of
the relationship or interest. Existence of any of the matters or circumstances described in this paragraph C does not render it unethical for one to serve as an Umpire where the parties have consented to the Umpire’s appointment or continued services following full disclosure of the relevant facts in accordance
with Canon II.
D. Umpires should conduct themselves in a way that is fair to all parties and should not be swayed by outside pressure, public clamor, and fear of criticism or self-interest. They should avoid conduct and statements that give the appearance of partiality toward or against any party.
F. An Umpire should conduct the appraisal process so as to advance the fair and efficient resolution of the matters submitted for decision. An Umpire should make all reasonable efforts to prevent delaying tactics, harassment of parties or other participants, or other abuse or disruption of the appraisal process.
H. Once an Umpire has accepted an appointment, the umpire should not withdraw or abandon the appointment unless compelled to do so by unanticipated circumstances that would render it impossible or
impracticable to continue. When an Umpire is to be compensated for his or her services, the Umpire may withdraw if the parties fail or refuse to provide for payment of the compensation as agreed.
Umpires do not contravene this Canon if, by virtue of such experience or expertise, they have views on certain general issues likely to arise in the Appraisal, but an Umpire may not have prejudged any of the specific factual determinations to be addressed during the Appraisal.
During an appraisal, the Umpire may engage in discourse with the parties or their counsel, draw out arguments or contentions, comment on the law or evidence, make interim rulings, and otherwise control or direct the appraisal. These activities are integral parts of an Appraisal…
CANON II. AN UMPIRE SHOULD DISCLOSE ANY INTEREST OR RELATIONSHIP LIKELY TO AFFECT IMPARTIALITY
OR WHICH MIGHT CREATE AN APPEARANCE OF PARTIALITY.
A. Persons who are requested to serve as Umpires should, before accepting, disclose:
(1) any known direct or indirect financial or personal interest in the outcome of the appraisal;
(4) any other matters, relationships, or interests which they are obligated to disclose by the agreement of the parties, the rules or practices of an institution, or applicable law regulating umpire disclosures.
B. Persons who are requested to accept appointment as Umpire should make a reasonable effort to inform themselves of any interests or relationships described in paragraph A.
C. The obligation to disclose interests or relationships described in paragraph A is a continuing duty which requires a person who accepts appointment as an arbitrator to disclose, as soon as practicable, at any stage of the appraisal, any such interests or relationships which may arise, or which are recalled or discovered.
E. Disclosure should be made to all parties unless other procedures for disclosure are provided in the agreement of the parties, applicable rules or practices of an institution or by law.
CANON III. AN UMPIRE SHOULD AVOID IMPROPRIETY OR THE APPEARANCE OF IMPROPRIETY IN COMMUNICATING WITH PARTIES.
B. An Umpire or prospective Umpire should not discuss a proceeding with any party in the absence of any other party, except in any of the following circumstances:
(1) When the appointment of a prospective Umpire is being considered, the prospective Umpire:
(a) may ask about the identities of the parties, counsel, or witnesses and the general nature of the case;
(b) may respond to inquiries from a party or its counsel designed to determine his or her suitability and availability for the appointment. In any such dialogue, the prospective Umpire may receive information from a party or its counsel disclosing the general nature of the dispute, but should not permit them to discuss the merits of the case.
C. Unless otherwise provided in this Canon, in applicable arbitration rules or in an agreement of the parties, whenever an Umpire communicates in writing with one Appraiser, the Umpire should at the same time send a copy of the communication to other Appraisers.
CANON IV. AN UMPIRE SHOULD CONDUCT THE PROCEEDINGS FAIRLY AND DILIGENTLY.
A. An Umpire should conduct the proceedings in an even-handed manner. The Umpire should be patient and courteous to the parties, their representatives, and the witnesses; and, he or she should always encourage similar conduct by all participants.
B. The Umpire should allow each Appraiser a fair opportunity to present its evidence and arguments.
C. When the Umpire determines that more information than has been presented by the parties is required to decide the case, it is not improper for the Umpire to ask questions, call witnesses, and request documents or other evidence, including expert testimony.
D. Upon the request of either or both Appraisers the Umpire should personally inspect any available damaged property.
CANON V. AN UMPIRE SHOULD MAKE DECISIONS IN A JUST, INDEPENDENT AND DELIBERATE MANNER.
A. The Umpire should, after careful deliberation, decide all issues submitted…
B. An Umpire should decide all matters justly, exercising independent judgment, and should not permit outside pressure to affect the decision.
C. An Umpire should not delegate the duty to decide to any other person.
D. In the event that both appraisers agree upon a settlement of issues in dispute and request the umpire to embody that agreement in an award, the umpire may do so.
CANON VI. AN UMPIRE SHOULD BE FAITHFUL TO THE RELATIONSHIP OF TRUST AND CONFIDENTIALITY INHERENT IN THAT OFFICE.
A. An Umpire is in a relationship of trust to the parties and should not, at any time, use confidential information acquired during the Appraisal process to gain personal advantage or advantage for others, or to affect adversely the interest of another.
B. The Umpire should keep confidential all matters relating to the Appraisal process and decision. An Umpire may obtain help from an associate, a research assistant or other persons in connection with reaching his or her decision.
C. It is not proper at any time for an Umpire to inform anyone of any decision in advance of the time it is given to all parties. It is not proper for the Umpire to inform anyone about the substance of the deliberations of the Appraisers. After an appraisal award has been made, it is not proper for an umpire to assist
in proceedings to enforce or challenge the award.
CANON VII. AN UMPIRE SHOULD ADHERE TO STANDARDS OF INTEGRITY AND FAIRNESS WHEN MAKING ARRANGEMENTS FOR COMPENSATION AND REIMBURSEMENT OF EXPENSES.
B. Certain practices relating to payments are generally recognized as tending to preserve the integrity and fairness of the arbitration process. These practices include:
(1) Before the Umpire finally accepts appointment, the basis of payment, including any cancellation fee, compensation in the event of withdrawal and compensation for study and preparation time, and all other
charges, should be established.
(2) Umpires should not, absent extraordinary circumstances, request increases in the basis of their compensation during the course of a proceeding.
(3) Umpires should not withhold any decision or award pending payment by any or either party for the services of the umpire.
I urge any person interested in becoming an Umpire to take the certification course and then get listed in the Wind Umpire Directory. The classes will be offered at the Windstorm Insurance Conference January 25-28, 2010, in Jacksonville, Florida.