1. AN APPRAISAL PRIMER What, When, Why and How? PAMIC Claims Summit Wyndham Gettysburg April 7, 2015

2. PRESENTERS Michael H. Burgoyne, Esq. Thomas, Thomas & Hafer, LLP Baltimore, Maryland Todd B. Narvol, Esq. Thomas, Thomas & Hafer, LLP Harrisburg, Pennsylvania James J. Kern, CPA, CVA, CFE Gross Mendelsohn & Associates, P.A. Baltimore, Maryland Mark W. Reynolds, CPA, CFE, CFF Gross Mendelsohn & Associates, P.A. Baltimore, Maryland

3. LEARNING OBJECTIVES What types of disputes can be appraised When during the claims process Why demand appraisal – pros and cons How does the appraisal work, start to finish

4. WHAT  Loss Measurement Disputes - YES  Coverage Disputes – NO  Liability Disputes – NO  Overview of appraisal process:  Insurance policy provisions  Written demand for appraisal  Selecting appraisers  Selecting an umpire  Appraisers assess value of loss  Umpire evaluates appraisers’ assessments of value, considers evidence  Amount of loss determined based upon agreement of two out of the three

5. POLICY PROVISIONS  Written Demand  Selecting Appraisers  Appraisers Select Umpire  Appraisers Value the Loss  Umpire Evaluates Value of Loss  Agreement by Any Two is Binding

6. POLICY PROVISIONS Each Party Pays Its Appraiser Each Party Pays Its Appraiser Umpire Cost Shared Equally Umpire Cost Shared Equally Insurer Retains Right to Deny Claim Insurer Retains Right to Deny Claim

7. PROS & CONS PROS Less Expensive Less Expensive Take Far Less Time Take Far Less Time Informal Process Informal Process Each Party Shares in Cost Each Party Shares in Cost

8. PROS & CONS CONS Award is Binding – Must Live with Result Award is Binding – Must Live with Result Does Not Resolve All Disputes Does Not Resolve All Disputes Umpire May Split the Difference Umpire May Split the Difference

9. TIMING OF APPRAISAL Generally, After: Coverage Acknowledged Coverage Acknowledged Documents Obtained Documents Obtained Settlement Attempts Failed Settlement Attempts Failed

10. WAIVER OF APPRAISAL RIGHTS If Not Demanded Timely If Not Demanded Timely Appraiser Not Selected Timely Appraiser Not Selected Timely Filing Suit Prior to Appraisal Demand Filing Suit Prior to Appraisal Demand Insurance Company Denies Liability Insurance Company Denies Liability

11. SELECTING APPRAISERS & UMPIRES Competent and Impartial Competent and Impartial Knowledge and Experience Knowledge and Experience Communication skills Communication skills Decision maker Decision maker

12. SELECTING APPRAISERS & UMPIRES Reputation Prior Appraisal Prior Appraisal Bias Bias Sound Judgment Sound Judgment Do Your Homework

13. MEMORANDUM OF APPRAISAL Specify Disputes Specify Disputes Measure of Value (RCV, ACV) Measure of Value (RCV, ACV) Selection of Appraiser Selection of Appraiser Appraisers’ Selection of Umpire Appraisers’ Selection of Umpire Responsibility for Fees Responsibility for Fees Signature of Parties Signature of Parties

14. EDUCATION OF THE UMPIRE BY YOUR APPRAISER Knowledge of the Process Knowledge of the Process Policy Provisions Policy Provisions Valuation Measurement Valuation Measurement Role of the Umpire Role of the Umpire

15. Are there any potential problems if the appraisers do not select the umpire first?

16. The insured’s Perspective: Thoughts of Public Adjusters on Appraisal of Business Income Claims

17. THOUGHTS OF PUBLIC ADJUSTERS ON APPRAISAL OF BUSINESS INCOME CLAIMS Yes... I will try to snooker the Umpire.

18. THOUGHTS OF PUBLIC ADJUSTERS ON APPRAISAL OF BUSINESS INCOME CLAIMS I can stretch the envelope, you can’t.

19. Your evaluation was wrong and you admit it. THOUGHTS OF PUBLIC ADJUSTERS ON APPRAISAL OF BUSINESS INCOME CLAIMS

20. Keep in mind your goal is to impress your client, not the Umpire. THOUGHTS OF PUBLIC ADJUSTERS ON APPRAISAL OF BUSINESS INCOME CLAIMS

21. OK....Sometimes my client is unreasonable. THOUGHTS OF PUBLIC ADJUSTERS ON APPRAISAL OF BUSINESS INCOME CLAIMS

22. If the Umpire can’t figure it out, he splits the difference.... so.... THOUGHTS OF PUBLIC ADJUSTERS ON APPRAISAL OF BUSINESS INCOME CLAIMS

23. Be disdainful to me... please. THOUGHTS OF PUBLIC ADJUSTERS ON APPRAISAL OF BUSINESS INCOME CLAIMS

24. Unfair from day one! THOUGHTS OF PUBLIC ADJUSTERS ON APPRAISAL OF BUSINESS INCOME CLAIMS

25. Never ever re-evaluate your position. THOUGHTS OF PUBLIC ADJUSTERS ON APPRAISAL OF BUSINESS INCOME CLAIMS

26. I also want to close my file... let’s settle! THOUGHTS OF PUBLIC ADJUSTERS ON APPRAISAL OF BUSINESS INCOME CLAIMS

27. We both know I’m the heavy favorite. THOUGHTS OF PUBLIC ADJUSTERS ON APPRAISAL OF BUSINESS INCOME CLAIMS

28. Use more numbers... more schedules too! THOUGHTS OF PUBLIC ADJUSTERS ON APPRAISAL OF BUSINESS INCOME CLAIMS