License & Registration Please: Can a contractor serve as an appraiser?

Originally published by Lauren Burgess.

Appraisal is a contractual method of extra-judicial resolution of a dispute over the amount of damages. Each insurance policy provides that either side may invoke appraisal and designate an appraiser of his, her, or its choosing. If the insured’s and insurer’s appraisers cannot agree, they or a court with jurisdiction can appoint an umpire to break the tie, so to speak. As David Plaut discussed last week, after the Texas Supreme Court’s opinion in Barbara Technologies, we expect to see more invocations of appraisal by policyholders. We may see more litigation about the conduct of the appraisal itself, including the qualifications of the parties’ designated appraisers.  Most policies are fairly silent as to the qualifications necessary for an individual to serve as an appraiser, requiring only that the appraiser be competent and disinterested, though the policies never define these terms. Oftentimes, a licensed adjuster or licensed engineer serves as a party’s designated appraiser. Sometimes, however, an individual appoints an unlicensed roofer or contractor to serve as his or her appraiser.

Should a non-licensed individual be permitted to serve as an appraiser? Texas Insurance Code Section 4102.001, et seq. regulates public adjusters in Texas and requires that anyone acting as a public insurance adjuster be licensed. See Tex. Ins. Code § 4102.051. The statute further defines a “public insurance adjuster” as “a person who, for direct, indirect, or any other compensation … acts on behalf of an insured in negotiating for or effecting the settlement of a claim or claims for loss or damage under any policy of insurance covering real or personal property.” According to the Texas Department of Insurance Commissioner’s Bulletin # B-0017-12, the goal of Chapter 4102 of the Texas Insurance Code was to put a stop to “unlicensed individuals [who] often prey on unknowing consumers by promising to ‘work’ insurance claims to achieve a higher settlement.”

Both public insurance adjusters and appraisers are retained to assist an insured with his or her claims by preparing estimates and working with the insurance company to ensure that the insured receives fair compensation for his or her insurance claim. An appraiser falls under the definition of “public insurance adjuster” promulgated by Chapter 4102 of the Texas Insurance Code, and it seems reasonable then that the Chapter 4102 would apply equally to adjusters and appraisers such that an appraiser should be a licensed adjuster with the State of Texas. Such a requirement would further promote the “competent, disinterested” requirement provided by the policy.

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