Most insurance policies stipulate or require that if a claim
is filed with the insurance company, both the policy holder and the insurance
company will retain their own adjuster (appraiser) to render a value on the
amount of money that is appropriate to properly repair or
rebuild the building(s), replace or repair building contents, property,
consequential damages including loss or income, living expenses while repairs
are done, etc. Very often, there is a discrepancy between the amount of money
requested by the policy holder and the amount of money that the insurance
company offers to reimburse the policy holder. How to determine which amount is
appropriate has caused the Umpiring Process to be developed.
Many states have realized that it is virtually impossible for judges and/or juries, with little or no construction knowledge or experience, to make determinations of the correct amount that should be awarded to a Party on insurance claims where there is a disagreement between the Owner and the Insurance Company as to how much the policy holder should be paid for construction-related items. The Courts, Insurance Commissions, and other appropriate regulatory agencies and legislatures have come to realize that having a person with construction experience and cost estimating expertise is a must in order that a “fair and equitable” award is rendered.
Umpiring is basically an arbitration process whereby an Umpire (Arbitrator), with construction-related knowledge and expertise, is agreed to by the Parties to render a fair and equitable award. Although there are many small procedural differences from state to state, the standard Umpiring process requires the Parties to submit to the Umpire, their best estimate as to how much each claim item requires to properly repair or replace the covered items and their best estimate as to loss of income, cost of living expenses, etc until the residence or business can again be utilized.
Although the arbitration process typically issues one “Arbitration Award” to cover all items and issues. The Umpiring process requires two Umpire’s Awards. One Umpire’s Award will specify the amount submitted by the policy holder that is closest to the Umpire’s decisions to cover all items and issues and the second Umpire’s award will specify the amount submitted by the insurance company that is closest to the Umpire’s decisions to cover all items and issues. The Umpire can not select an amount in between the Parties numbers but must select either the exact amount submitted by the policy holder or the exact amount submitted by the insurance company. (As an example, assume that the item in question is the amount necessary to cover the cost of the sheetrock and labor. If the policy holder is requesting $10,000.00 and the insurance company is offering to pay $3,000.00, and the Umpire determines, with his/her experience and expertise, that the fair and equitable amount is $5,000.00, the Umpire will select the insurance company’s amount of $3,000.00, which is only $2,000.00 away from the Umpire’s estimate which is closer than the policy holder’s estimate which is $5,000.00 above the Umpire’s estimate.)
At the end of the Umpire’s Hearing, the Umpire will issue two awards; one listing the items and issues where he/she agreed with the policy holder and one listing the items and issues that he/she agreed with the insurance company. A typical arbitration award is signed only by the arbitrator and is final and binding according to the provisions of the Federal Arbitration Act. In the Umpiring process, the arbitrator will sign each of the two Umpire’s Awards and each Party will also sign the award indicating their acceptance of the amounts specified in their respective award.
This process is a wonderful process in that it requires the Parties to be as accurate as possible with their estimates. A policy holder trying to make “extra money” with a high estimate or an insurance company trying to keep costs down by underestimating their reimbursement amounts will either loose money or have to pay extra costs as determined by the Umpire.
Unlike a standard arbitration, there are typically more reasons that a Party can appeal the decision of the Umpire to the courts, insurance commissions, etc but it is a rare occasion when the appeal body overturns or make corrections to the Umpire’s Awards.
As in arbitration, the Umpire is precluded from any direct communication with either Party (commonly known as Ex-parte communications) and as such it is just as important as selecting a qualified Umpire to select an Umpire who is affiliated with a firm that specializes in administering the Umpire Process such as CDRS. As CDRS is the largest exclusive provider of construction-related ADR (Alternative Dispute Resolution) services in the USA with members of the “CDRS National Panel of Construction ADR Specialists” located in all 50 states and in Washington DC (and in many foreign countries on their International Panel), CDRS is experienced in providing a simple, expeditious and inexpensive but efficient Umpire process for policy holders and insurance companies to select to handle their Umpiring Process.
Please keep in mind that CDRS has developed standard processes and forms to be utilized in administering the Umpire process. CDRS can easily modify any process or form as agreed to by the Parties or as specified in specific insurance documents.