Foran Glennon shareholder Matthew Ponzi successfully obtained a summary judgment from the U.S. District Court for the Western District of Kentucky vacating an appraisal award as the appraiser did not act impartially due to, among other things, a contingency fee arrangement and kick-back arrangement with the insured’s contractor (and assignee) that the appraiser attempted to conceal from the insurer.
The policyholder, Mudd’s Furniture Showrooms (Mudd’s) sustained roof damage from severe wind and a rainstorm in April 2017 that resulted in roof damage and interior water damage. Mudd’s engaged with CMS Roofing (CMS) to repair the roof and eventually assigned its claim to CMS’s owner, Jaron Jaggers, when the insurer disputed the claimed scope and cost of repairs.
Jaggers then hired Chuck Howarth of the Howarth Group who demanded appraisal and served as Jaggers’ appraiser. Howarth and Jaggers entered into various contingency fee agreements and attempted to conceal those from the insurer. Howarth then convinced the umpire to agree to an appraisal award that far exceeded what the insurer paid.
Matthew filed a complaint for declaratory judgment alleging his client was not liable for damages contained in the award and the panel made gross errors in the estimates. After discovery revealed the secret agreements between Jaggers and Howarth, Matthew amended the complaint to allege that the award should be vacated because Howarth was not impartial, owing to the contingency fee-based arrangements with Jaggers.
Both parties filed motions for summary judgment in which Mudd’s asked for deference to the award and Matthew’s client sought to set aside the entire award.
The court found that Howarth displayed general favoritism towards insureds, in general, and in this case “crossed the line” by having a direct financial interest in the outcome of the appraisal. The court concluded that no reasonable jury could determine that Howarth acted impartially, granting summary judgment to Matthew’s insurer client and vacating the award in its entirety.
This decision reinforces that “impartial” means unbiased and disinterested — not favoring either side over the other. An appraiser must not show bias or favoritism to any party or do the partisan bidding of one side.
This rare outcome was covered by Business Insurance. Read the article here.
Matthew concentrates his practice in insurance coverage and commercial litigation. As a founding shareholder of the firm, he has over 30 years experience in the analysis and litigation of commercial property, liability and reinsurance claims among related matters.