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Many appraisal provisions in property insurance policies allow either party to select their own appraiser, with those two appraisers then selecting a neutral umpire. Because the process depends on trust in the people performing it, it is common practice for an appraiser or umpire to provide some form of independence statement at the outset of an engagement, describing their relationship, or lack of one, to the parties and the claim at hand. Some appraisal clauses require this disclosure explicitly, while in other cases it has simply become a professional norm followed because it reduces the likelihood of a later challenge to the person’s neutrality.
A useful independence statement identifies whether the person has any prior business, financial, or personal relationship with either party, their counsel, or the public adjuster involved in the claim. This includes disclosing whether the appraiser has worked for the same insurance carrier, the same policyholder representative, or the same law firm on other matters, since repeated engagements with one side of the industry, even across unrelated claims, are relevant information for the other party to weigh when deciding whether to agree to that person as umpire. A statement that simply says the appraiser is independent, without describing the actual history behind that claim, offers the parties little to evaluate. Specific numbers and time periods, such as noting the appraiser has handled a certain number of claims for a given carrier over the past several years, are far more useful than a broad assurance with no supporting detail behind it.
The statement typically also addresses compensation, confirming that the appraiser or umpire is being paid a fixed hourly or flat fee for time spent rather than any amount tied to the outcome of the appraisal award. A percentage based or contingent fee arrangement would create a direct financial incentive tied to the size of the award, which runs counter to the neutral function an umpire is expected to serve, and most experienced practitioners avoid that structure entirely for this reason.
Licensing and credentialing information often appears as well, since some states require appraisers or umpires to hold a specific license, such as a public adjuster or appraiser license, while others do not regulate the role directly and instead leave selection to the discretion of the parties. Describing relevant credentials, professional designations, construction background, and years of experience in property claims gives the parties a factual basis for evaluating qualifications rather than relying on reputation alone or on secondhand accounts from other professionals. A background that includes hands on construction experience, for example, can be a useful thing to disclose since it speaks directly to the person’s ability to evaluate an estimate or a repair scope on its technical merits.
Finally, a sound independence statement describes the methodology the person intends to use, such as a line item comparison of estimates, physical inspection of the property, and reliance on accepted estimating software and regional pricing databases, so that both sides understand how the appraiser or umpire plans to approach the disputed items before the process begins in earnest. Sharing this methodology up front also gives either party an opportunity to raise a concern early, well before an inspection has occurred, rather than after work is already underway and harder to redirect.
This article is general education about how the appraisal process commonly works. It is not legal advice, and specific procedures can vary by state and policy.
Russ Lis is a working property insurance appraiser and umpire based in Minnesota, serving clients nationwide. Contact Appraisal Resolution.