GENERAL HISTORY ON APPRAISAL

New York legislature, in an effort to overturn a disastrous decision by the New York Court of Appeals in the case of Happy Hank Auction Co. v. American Eagle Fire Insurance Co., (1956) which stood for the proposition that insureds could not obtain specific performance of this provision.

As insurance companies rarely had a motivation to utilize this generally consumer-friendly provision, appraisal was substantially unheard of for many years in New York.

Once the provision was brought to life by the change in law, appraisal became commonplace in the New York insurance market. Disputes developed in the interpretation and the practical use of the provision. There was very little precedent to rely on for guidance as to the process and procedure to be utilized.

The subject of appraisal is in flux in a number of states and courts are reconsidering its scope and the rules of engagement on a regular basis as appraisal becomes a more common approach to the settlement of contested property losses. jurisdiction

These courses, in addition to the course Textbook, has been carefully designed to be a valuable resource in making a determination as to whether appraisal is an appropriate remedy in a particular claim and in guiding you throughout the appraisal process as to the applicable laws and procedures that may apply to your particular claim in your particular.

Students are cautioned that the law and practice of insurance appraisal varies from state to state and from time to time and it is always wise and appropriate to seek local counsel in the jurisdiction in which the claim is pending should any issues arise.

1. One of the most important and balanced provisions found in the Standard Fire Insurance Policy and most other property insurance policies today is the Appraisal Clause.
2. One of the great challenges in the relationship between insured and insurer has long been finding an efficient and timely method of resolving the differences between the parties with respect to quantifying value and loss covered by the policy.
3. In the absence of a binding appraisal provision, the consumer must either accept the insurance company’s figures or retain counsel and proceed to litigation.
4. From the insurer’s perspective, an insurance carrier might benefit from the ability to bring a difficult, expensive and contentious adjustment to a satisfactory conclusion, without incurring extensive legal fees and accusations of bad faith.

Benefits of the Appraisal Clause

1. Among the primary benefits favoring the appraisal process is the savings of time and money for the parties to the insurance contract as well as the courts.
2. recognized that litigation avoidance results in many efficiencies and monetary savings for the parties involved as well as for an overburdened judicial system.
3. The clear intent of the appraisal provision is to avoid undue formalities, delays, expense and the vexation of litigation.

State Dependent

1. The usefulness of the appraisal provision depends upon whether the law of the state where the property is located permits either the insured or the insurer to compel the other to submit to appraisal and whether the award is binding. It will also depend on the scope of the issues subject to appraisal in the particular state where the property is located.
2. Some states have a longer history of enforcing the appraisal process than others, and a larger body of interpretive case law has resulted.
3. Generally, appraisal is widely supported and encouraged by the judiciary as an informal, efficient, fair and equitable process to resolve the issue of “how much” in first-party insurance claims.

History

The New York Standard Fire Policy

1. Lines 123 through 140 of the New York Standard Fire Policy state the following:
   1. “Appraisal. In case the insured and this Company shall fail to agree as to the actual cash value or the amount of loss, then, on the written demand of either, each shall select a competent and disinterested appraiser and notify the other of the appraiser selected within twenty days of such demand. The appraisers shall first select a competent and disinterested umpire; and failing for fifteen days to agree upon such umpire, then, on request of the insured or this Company, such umpire shall be selected by a judge of a court of record in the state in which the property covered is located. The appraisers shall then appraise the loss, stating separately actual cash value and loss to each item; and failing to agree, shall submit their differences, only, to the umpire. An award in writing, so itemized, of any two when filed with this Company shall determine the amount of actual cash value and loss. Each appraiser shall be paid by the party selecting him and the expenses of appraisal and umpire shall be paid by the parties equally.”
2. In the many states that have adopted the Standard Fire Policy (also known as the New York Standard Fire Policy and less formally as the “ 165 Lines”), this language sets forth the minimum standards enjoyed by the policyholder. In these states, the carrier may amend the statutory language but may not diminish the rights of the insured as granted by the Standard Fire Policy.
3. For example, the Standard Fire Policy has been mandated by statute in New York for many years. It was originally enacted in 1853, and its present form has been in use since 1943.

Historical Cases

1. In 1949 the Appellate Division, Third Department held that an appraisal under a fire insurance policy was in the same nature of any arbitration agreement and could be enforced by the courts. [See: Fitzgerald Bottling Works of Amsterdam v. Continental Ins. Co. (3d Dept. 1949), overruled in part by, Inre Delmar Box Co ., (1955), (appraisal clause in an insurance policy does not constitute enforceable agreement to arbitrate.
2. However, in 1954, in a decidedly anti-consumer decision, the New York Court of Appeals in Happy Hank Auction Co. v. American Eagle Fire Ins. Co.,  held that despite the mandatory language of the Standard Fire Policy, the New York courts had no power to require an insurer to take part in an appraisal demanded by an insured.
3. In 1990, the New York legislature appeared to have restored to the insured the power to compel compliance with the appraisal clause, originally taken away by the Court of Appeals in the Happy Hank  decision. This was accomplished by the legislature’s enactment of an amendment to §3404 of the New York State Insurance Law. The amendment provided that the appraisal provision shall be binding on all parties.
   1. It states: § 3404(g). “Notwithstanding any other provision of law to the contrary, the provisions of the appraisal clause set out on the second page of the standard fire policy and the provisions of section three thousand four hundred eight of this chapter, including determination as to the amount of loss or damage rendered thereunder, shall be binding on all parties to the contract of fire insurance evidenced by the policy.” [See N.Y. Ins. §3404(g).]
4. The great majority of states reject the Happy Hank line of cases.

States Vary

1. Some states currently have reduced the importance and effectiveness of the appraisal provision by making it voluntary, thus precluding any successful attempt at enforcement by litigation. These states, have left their insureds substantially unprotected by requiring the insured to retain counsel and litigate the issues of actual cash value and the amount of loss.
2. In Louisiana it has been held that the policy language which states in pertinent part that “either party may make written demand for an appraisal of the loss” utilizes permissive language that permits but does not require that the parties engage in the appraisal process.
3. In the state of Massachusetts, a statutory reference procedure is utilized whereby both the insurer and insured submit three names to the other side, whereupon the other party selects one of those three to serve as an appraiser. The process is compulsory upon demand.
4. In Oklahoma, the party who demands the benefit is bound by the appraisal while the non-requesting party is not bound.

1. Even in states that recognize the appraisal provision as a condition precedent to suit, this will only be so where there has been an actual demand for appraisal. [See Duane Reade, Inc. v. St. Paul Fire and Marine Ins,]

Understanding Appraisal – A Historical Perspective

A Glimpse Into Appraisal’s Past

The journey of insurance appraisal begins with a look back to pivotal moments, such as the shift in New York’s legislative landscape post-1956. This change, spurred by a critical court ruling, transformed the rarity of appraisal into a common practice within the insurance market of New York.

Initially, appraisal provisions largely favored consumers, and insurers seldom invoked them. Yet, as the law evolved, the use of appraisal surged. This evolution came with its own set of challenges, as legal precedents were sparse, leaving little guidance on procedural norms.

As states continually reassess the bounds of appraisal, it is more vital than ever to stay informed. The landscape is dynamic, with courts frequently updating the ‘rules of engagement’. Staying ahead means understanding both the historical context and current trends.

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Harness Historical Insights for Modern Mastery

On AppraisalCourse.Online, we not only provide the backstory but also equip you with the expertise to navigate today’s appraisal intricacies. Our courses are a synthesis of historical knowledge and modern practice, ensuring that you’re well-prepared for any appraisal challenge.

Why Knowledge is Power in Appraisal:
– Informed Decisions: Understanding the roots of appraisal allows for a nuanced approach to current practices.
– Strategic Advantage: Knowing the evolution of the law gives you an edge in negotiations and dispute resolution.
– Compliance and Credibility: Stay abreast of legal changes to maintain compliance and establish your credibility.

Our Master Program offers a deep dive into these facets, ensuring you’re not just following the steps but leading the way in appraisal. Become an informed professional who’s not just part of the history but a shaper of its future.

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