Whoever wrote the proposed Iowa legal guidelines concerning insurance coverage appraisal has a really slender understanding of what appraisal is and the way it features. Whereas I admit that I’ve not studied this legislation in nice element, the small print as I learn the brand new legislation are very totally different than how appraisal operates in every other state. From my view, the brand new proposed Iowa appraisal legal guidelines will hurt policyholders, inject pointless paperwork right into a traditionally environment friendly course of, and fail to deal with the broad vary of points that value determinations usually resolve in real-world insurance coverage claims. If signed into legislation, SF 619 will remodel appraisal from a sensible dispute-resolution mechanism right into a regulatory quagmire.
The Iowa invoice, which has handed the Iowa legislature, begins by codifying statutory definitions of phrases like “appraiser,” “umpire,” “quantity of loss,” and “precise money worth.” Whereas definitions could seem innocent, embedding them in state legislation limits the pliability that courts, insurers and policyholders have lengthy relied upon to interpret these phrases in context. As soon as definitions are fastened in statute, they will override contract language and established judicial interpretation, doubtlessly narrowing the scope of appraisal and limiting policyholder rights in unanticipated methods.
A core pillar of the invoice is its necessary licensing requirement for all appraisers and umpires. Beneath SF 619, anybody serving in both position should receive a state-issued license, which requires passing a written examination, present process a background examine, and proving years of related expertise. Compensation based mostly on the result of a declare is explicitly prohibited, which eliminates contingency payment preparations. It additionally appears to outlaw umpires charging on a flat payment foundation. Many skilled professionals—like retired adjusters or contractors with deep business data—could also be excluded just because they lack formal licensure or academic credentials. The licensing mandate additionally disproportionately burdens rural areas and post-disaster zones, the place entry to certified professionals is already restricted.
What occurs if the events have a jewellery, boat, portray, or enterprise interruption case in dispute? I hope there are licensed appraisers or umpires in that enviornment. The individuals who made this legislation didn’t ponder all these disputes.
The invoice additionally imposes a inflexible procedural timeline that reshapes the standard appraisal course of. As soon as a written demand for appraisal is made, every celebration should choose a licensed appraiser inside twenty days. The appraisers then have fifteen days to agree on an umpire; in the event that they fail, the state will randomly appoint one from a pre-approved listing. There isn’t any indication of what the standards are for getting on the pre-approved listing. After appraisers submit their estimates, the umpire should challenge a written award inside forty-five days. This fastened timeline removes the pliability appraisal was initially designed to offer. Advanced claims, giant business losses, or instances arising throughout pure disasters will probably fall exterior these prescribed home windows, resulting in disputes and procedural failures.
One of the vital far-reaching adjustments in SF 619 is its requirement that every one property insurance coverage insurance policies issued or renewed in Iowa after January 1, 2026, should include an appraisal clause that complies with this new statutory scheme. This overrides the insurer’s customary coverage language and mandates a uniform course of, whatever the service’s nationwide varieties or the preferences of the insured. Such uniformity might create unintended authorized inconsistencies, particularly for policyholders with properties or protection throughout a number of states.
As soon as an appraisal has concluded, the legislation imposes strict guidelines for issuing and honoring awards. An umpire should produce a signed, itemized award detailing values and selections for every class of protection. Except each events agree in any other case, insurers should pay the award inside sixty days and supply an in depth rationalization of how the cost was calculated and any components denied. Motions to vacate the award should be filed inside thirty days. Whereas these necessities might streamline enforcement, they might additionally set off new disputes over kind, content material, or timing of award documentation.
The invoice additional complicates issues with intensive conflict-of-interest guidelines. Appraisers and umpires should disclose any potential conflicts inside 5 enterprise days of starting work and should withdraw from the case if a battle arises later. Disqualifying relationships embody household ties, prior litigation involvement, monetary curiosity, and even shut skilled associations. Communication between events and appraisers is closely restricted, requiring formal discover and alternatives to take part. Whereas well-intentioned, these restrictions might disqualify succesful professionals on technicalities, delay proceedings, and chill casual problem-solving that usually advantages all events.
The duties of umpires are equally expanded and formalized. Umpires should stay impartial, might not go to broken properties with out prior consent from each appraisers, and can’t delegate their decision-making. They have to totally evaluation all documentation, hear each appraisers, and challenge a reasoned award. These provisions reshape the umpire right into a quasi-judicial determine with obligations and expectations far past the standard position. A few of these guidelines appear honest and progressive, however they appear to vary the umpire to a choose slightly than a 3rd celebration to an appraisal panel.
Appraisers and umpires are additionally required to maintain data of all appraisal actions for at the very least three years after a declare is resolved. These data should be maintained on the appraiser’s or umpire’s place of job and made obtainable to the Iowa Insurance coverage Commissioner upon request. Whereas privileged authorized paperwork and litigation supplies are exempt, the remainder should be preserved and open for evaluation. This creates a big administrative requirement. Impartial adjusters and small-town contractors, who’ve lengthy served as appraisers in good religion, will now want documentation techniques extra akin to these of insurance coverage carriers or legislation corporations. Information that should be maintained, which mirror all appraisal actions, are going to be a game-changer for some appraisers and umpires.
Lastly, SF 619 offers the Insurance coverage Commissioner sweeping disciplinary powers. Over fifteen classes of misconduct can set off license denial, suspension, or revocation. These embody fraud, offering deceptive info, failing to report authorized points, and even being behind on scholar loans, taxes, or youngster assist. Civil penalties of as much as $10,000 per violation can be imposed. The disciplinary system is so broad that even unrelated monetary troubles or technical errors might jeopardize an individual’s proper to function an appraiser or umpire. In impact, it elevates the position to that of a extremely regulated occupation, with all of the dangers and liabilities that it entails.
Taken collectively, these provisions symbolize a monumental shift. Appraisal, traditionally a quick, casual, and low-cost methodology for resolving property insurance coverage disputes, will turn into a extremely regulated, procedurally inflexible, and compliance-heavy system. Whereas the invoice might scale back abuse in some instances, it should additionally improve prices, create delays, scale back entry, and push certified professionals out of the method. It might scale back cautious inspection and investigation of loss by the policyholder’s appraiser, who might should coordinate with the insurer’s appraiser to do such work. It might additionally invite extra litigation, not much less, as events dispute procedural missteps or contest statutory interpretations of those guidelines.
This invoice was launched as a part of a “catastrophe reduction” bundle, nevertheless it does extra to complicate restoration than streamline it. Appraisal is without doubt one of the few instruments policyholders should resolve disputes with out going to courtroom. SF 619 diminishes that instrument, replaces flexibility with purple tape, and locations pointless burdens on these attempting to assist resolve trustworthy disagreements. If left unchallenged, it might turn into a mannequin for related laws in different states.
The development is obvious. The insurance coverage business is selling these new appraisal guidelines in lots of state legislatures. Do you assume the insurance coverage business is doing this to assist policyholders obtain the total quantity owed beneath the insurance coverage coverage following a loss?
Former Insurance coverage Appraisal and Umpire Affiliation (IAUA) President and educator Bob Norton made the next LinkedIn put up about this invoice yesterday:
Iowa Governor Kim Reynolds has an over reaching invoice, S.F. 619, which she has pushed; this invoice consists of unprecedented licensing and a regulatory scheme for the centuries previous Appraisal, which exists because the insurance coverage coverage offers for it. The 91 web page Invoice, captioned as Catastrophe Reduction, has most of its pages addressing all the pieces however catastrophe reduction.
Appraisal is an off-the-cuff, alternate dispute decision instrument which, globally, doesn’t require licensing. Sarcastically, Gov. Reynolds issued her Govt Order 10, signed 10Jan2023, which required the evaluation and repeal of laws hindering residents freedoms to interact in particular person, household and enterprise pursuits.
Given her Line-Merchandise Veto powers, I name for her to strike out the unprecedented and burdensome language hijacking the Appraisal Course of. This language will add value, create delays and hinder Iowans capability to make use of the centuries previous casual, alternate dispute course of.
Iowa public adjuster Caeden Tinklenberg acknowledged the next:
The drafters of the invoice clearly don’t perceive the appraisal course of. We had been unable to persuade the Division or the Governor’s workplace to make any significant adjustments previous to this laws being launched. As soon as launched, there was no stopping it–the political stress behind ‘The Governor’s Catastrophe Reduction Invoice’ was far too robust and the problems far too complicated for the legislators to do something about it.
Insurance coverage business stalwart Jon Held provided a studied reflection concerning this proposed legislation and related legal guidelines in different states:
That is clearly changing into a development. There are few, if any proponents for appraiser licensing on the claims preparation and insurer sides of the enterprise. This challenge first got here up in Washington State, and finally a invoice was put forth within the state legislature to right the flawed interpretation of the present statute. At the moment, I testified earlier than the legislature, who shortly understood that the method of figuring out ‘quantity of loss’ requires experience, not a license. The invoice handed with 100% approval from Dems and Republicans and the governor signed the become legislation. States like Louisiana and now Iowa must receive a greater understanding of the method. Each side of the claims business additionally must work collectively to higher educate the legislators in these jurisdictions. That is merely a knee jerk response to a priority over unhealthy actors abusing the system. That is simply corrected by establishing tips and requiring protocols/agreements to appraise previous to continuing with the method.
I famous how Jon Held efficiently prevented a statutory change of appraisal in Washington state in Jonathon Held Argues That Appraisers Ought to Not Have To Be Licensed Adjusters.
Studying by this legislation was not straightforward. Assuming it turns into legislation, all people with any property insurance coverage declare in Iowa might want to research this totally. Swiftly handed legal guidelines like this are inherently flawed. Insurance coverage, an business cloaked with many particulars and processes, shouldn’t have such claims processes rewritten by statute with out in-depth research and dialogue.
Thought For The Day
“Unhealthy legal guidelines are the worst kind of tyranny.”
—Edmund Burke
