The Georgia Court of Appeals has held an appraisal award in a commercial property insurance dispute must be vacated where the umpire began working for an independent adjusting company for the insurer during the appraisal proceedings. Zurich Am. Ins. Co. v. Omni Health Solutions, LLC (31 July 2015).
The insured sustained hail damage to its commercial building and submitted a property insurance claim to its insurer. When they could not agree on the amount of the loss, the insured invoked the appraisal provision of the policy. Under that provision, each party appoints an independent appraiser, and the two appraisers appoint a neutral umpire. Agreement by any two of the three determines the amount of the loss.
The parties submitted the amount of the structure loss and business interruption loss to appraisal. Both appraisers and the umpire agreed on the amount of the structure damage as $800,000. However, with respect to the claim for business interruption, only the insurer’s appraiser and the umpire agreed on the amount of the loss, at $322,445.61. Shortly after the award was made, the insured learned that during the appraisal process, the umpire had gone to work as an independent adjuster for a company that did work for the insurer. The trial court held the entire appraisal award must be vacated because the umpire was not impartial.
The Court of Appeals, however, held that only the business interruption award had to be vacated. The court reasoned that since both party appraisers had agreed on the amount of structure damage, and because agreement by any two of the three determines the amount of the loss, the award for the $800,000 structure loss was binding. However, because the award for the business interruption claim was only agreed between the insurer’s appraiser and the umpire, and the umpire was not impartial due to his employment for a company doing work for the insurer, that portion of the appraisal award had to be vacated.
The Court of Appeals held the standard of review for overturning the award was whether the trial court abused its discretion in determining the umpire was not impartial. Given the umpire’s change in employment during the appraisal, the Court of Appeals held the trial court’s determination on the umpire’s impartiality was not an abuse of discretion.