Most Appraisers may assume, and probably practice, that there is a legal duty for the appraiser to advocate, to some degree, the appointing party’s interests. Furthermore, we can assume that there are many appraisers who may feel obligated to comply to their client’s wishes in the capacity of their presentation, valuation, strategy; to ensure that the client approves of any direction the appraiser plans to go in during the appraisal. This all sounds reasonable, as the appointing party nominates the appraiser and pays him/her to resolve the impasse with the best possible results to the appraisal award.

In my opinion, there is a certain degree of confusion, when it comes to the appraiser’s obligations as a party-appointed appraiser. Considering the lack of “policy procedure” written on the subject, and the unfortunate fact that many novice individuals are being appointed as appraiser of late, we can generally determine that there is indeed some confusion on the subject.

Now, this article is in no way an evaluation or determination of an appraiser’s legal rights and duties, and any professional appraiser should always consult an attorney if there is concern is of the law, however, I do advocate that all professional appraisers should keep them selves up to date with any and all legal issues pertaining to the appraisal process and responsibilities. It this small niche industry, there is a general lack of knowledge on the subject of appraisal; any phone call to an attorney will validate this statement, as most of the time, you need to explain to them what the appraisal clause is. This is not to say that there are no expert appraisal lawyers, because there are, and I happen to know many of them, but just like us, they are of a niche pedigree.

As this article may not directly answer the question posed in the title, it will reflect on the past and my own theories, which hopefully will stimulate thought, and result in some interesting opinions posted by readers of this article. Let’s start off by determining what is obviously a requirement of a party appointed appraiser, to do so, we will consult the insurance contract…

-each shall select a competent, independent appraiser- (In New York State)

A whole (7) words! No wonder there is so much confusion, there is one sentence on the requirements of an appraiser in the standard insurance policy, under the “appraisal clause”.

Definition of COMPETENT -Merriam Webster-

1: proper or rightly pertinent 2: having requisite or adequate ability or qualities 3: legally qualified or adequate

1) in general, able to act in the circumstances, including the ability to perform a job or occupation, or to reason or make decisions.

Definition of INDEPENDENT Merriam Webster

not dependent: as (1): not subject to control by others: self-governing (2): not affiliated with a larger controlling unit (3): not requiring or relying on something else: not contingent (4): not looking to others for one’s opinions or for guidance in conduct (5): not bound by or committed to a political party.

So, we can basically say, unless there is an express contractual provision, the only duty owed by the appraiser, according to the appraisal clause, is a duty to both parties to disclose any issues which may cause them not to be “competent” or “independent”.

Arbitration: Appraisal’s older cousin

Now, when there is a lack of information on the appraisal Process, I look to the American Arbitration Association for guidance, however, this is only guidance and may not reflect the actual procedure. In 1977, the American Bar Association ABA and the American Arbitration Association agreed on a Code of Ethics for Arbitrators in Commercial Disputes (the “Code”). After years and years of legal precedent, the “Code” determined that party-appointed arbitrators of tripartite panels can and will be non-neutral, and would some type of predisposition for the appointing party. This is of course, is very in line with the current representation of the Appraisal industry. HOWEVER, in 2004, the ABA commission revised the code! They actually got rid of the “non-neutral” identification, and states that the party-appointed arbitrator is neutral, unless the parties agree that they can be “non-neutral”.

Going back to pre-2004, there is a very interesting article written by the Harvard Law Review in 1954 by a two very well-respected scholars, Bernard Gold and Helmut Furth. 68 Harv. L. Rev. 293 (1954-1955).

This article summed up the expectation of a party-appointed arbitrator. Quoting their 1954 article “he can expound his party’s viewpoint, point out circumstances justifying his position, educe supporting evidence by interrogating the witnesses at the hearing – in short, see to it that the tribunal does not overlook the strong points of his party’s case.”

Although they probably had no idea what the “appraisal clause” was, although is has been in existence for over a 100 years, (check out 8 S.W. 630, 631 (Tex. 1888) http://www.digitorysolutions.net/.

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