Umpires and appraisers ought to all the time carry errors and omissions protection. This lesson is obvious from a current opinion in First Protecting Insurance coverage Firm v. O’Leary, 1 which affirmed the district courtroom’s denial of arbitral immunity for an appraisal umpire. This holding has broad implications for the scope of protections afforded to professionals who serve within the appraisal course of beneath property insurance coverage contracts, notably in North Carolina.
As readers of this weblog could recall, I beforehand mentioned whether or not umpires are immune from go well with and whether or not the appraisal course of in North Carolina qualifies as arbitration beneath the regulation in “Does an Umpire Have Immunity From Go well with? Is an Appraisal an Arbitration in North Carolina?” and “Are Umpires in an Insurance coverage Appraisal Immune from Being Sued?”
On the coronary heart of the appellate determination was whether or not Lewis O’Leary, who served because the umpire in a disputed residential water harm declare, was entitled to immunity beneath North Carolina’s Revised Uniform Arbitration Act. O’Leary had argued that the immunity usually prolonged to arbitrators ought to apply equally to umpires like himself, particularly the place their operate mirrors that of an arbitrator and resolving disputes between events and authoritatively figuring out rights. O’Leary maintained that by adjudicating the quantity of loss beneath the coverage, he was fulfilling the identical quasi-judicial operate as an arbitrator.
The courtroom was not persuaded. In an in depth opinion, the bulk concluded that North Carolina regulation attracts a transparent line between arbitration and appraisal. Appraisal, they defined, just isn’t an alternative choice to litigation and doesn’t contain binding determinations of authorized rights or protection. Moderately, it’s a contractual mechanism designed solely to find out the quantity of loss.
The courtroom emphasised that the coverage itself said the appraisal couldn’t be used to find out protection or causation, and that First Protecting retained the proper to disclaim the declare even after an appraisal award was issued. That essential distinction meant that O’Leary was not working throughout the scope of an arbitration settlement and, subsequently, was not entitled to statutory arbitral immunity.
The courtroom additionally addressed O’Leary’s reliance on the performance take a look at. It discovered that whereas prior case regulation could have provided help for such an argument in pre-NCRUAA instances, the legislature’s codification of arbitral immunity now controls, and that statute is expressly restricted to arbitrators performing pursuant to an settlement to arbitrate. The opinion rejected the concept O’Leary’s position as an umpire, though related in nature to an arbitrator’s, might qualify him for immunity. Notably, the courtroom additionally dominated that O’Leary had not sufficiently preserved his performance take a look at argument within the decrease courtroom, having solely cited the doctrine briefly and with out improvement.
Along with denying immunity, the courtroom upheld the district courtroom’s orders permitting discovery from O’Leary and denying his request for legal professional’s charges. It famous that the coverage’s appraisal clause didn’t remodel the continuing into a proper arbitration. The extra procedural protections within the arbitration statute, together with discovery restrictions and necessary fee-shifting, didn’t apply.
This determination is a lesson for anybody concerned in property insurance coverage value determinations in North Carolina and probably in different jurisdictions ruled by related arbitration acts. An appraisal just isn’t arbitration in most states. The labels and the construction of the coverage matter. The courtroom refused to blur the statutory line between these two dispute decision mechanisms, and by doing so, left appraisers and umpires with out the protecting defend of arbitral immunity.
For professionals serving in these roles as umpires and appraisers, this ruling raises the stakes. It opens the door for litigation in opposition to them within the occasion of perceived bias, conflicts of curiosity, or procedural considerations in the course of the appraisal course of. For this reason I urge these accepting such positions to hold errors and omissions insurance coverage protection.
Whereas the holding is particular to the info and regulation of North Carolina, it contributes to a rising nationwide dialog in regards to the authorized standing of insurance coverage value determinations and the legal responsibility publicity of those that take part in them. Those that function umpires or appraisers within the insurance coverage appraisal course of in North Carolina stay susceptible to go well with and discovery.
Thought For The Day
“In my thoughts, I’m gone to Carolina. Can’t you see the sunshine, can’t you simply really feel the moon shining?”
—James Taylor
1 First Protecting Ins. Co. v. O’Leary, No. 23-2160, 2025 WL 1936566 (4th Cir. July 15, 2025). (See additionally, O’Leary appellate transient, and First Protecting appellate transient).
