Virginia Lawyers Weekly

When an insulation plant squared off against its insurance carrier on a claim for business interruption loss after a fire, an Alexandria U.S. District Court let each side keep its “disinterested” loss appraiser.

Litigation often gets down to a battle of the experts, with each side seeing bias in the other side’s expert, especially if the expert in question draws most of his paychecks from one side.

In the Aug. 15 decision in Tiger Fibers LLC v. Aspen Specialty Ins. Co., (VLW 008-3-316), the parties’ dueling bias claims cancelled each other out. The judge refused to disqualify the plant’s expert because he worked for the accountant that did the plant’s first loss appraisal, and he refused to disqualify the carrier’s expert because of his history of work for insurance companies.

The plaintiffs, Tiger Fibers LLC and Atlantic Recycling Technologies Inc., operate a plant in Lawrenceville that manufactures bags and prepares cellulose products such as insulation. After a 2005 fire damaged portions of the Lawrenceville plant, the defendant, Aspen Specialty Insurance Company, covered the property damage, but not all the claimed loss for business interruption.

After Tiger sued Aspen, the carrier sought arbitration under Virginia Code § 38.2-2105, which allows each side to nominate “competent and disinterested” appraisers to prepare independent appraisals of the loss suffered, with any differences between the two appraisals to be submitted to a neutral umpire.

Aspen nominated Les Robson as its appraiser, while Tiger named appraiser Hayes Walker. Both experts were Virginia-licensed certified public accountants.

Each side objected to the other side’s guy. Walker worked for the accounting firm that did a 2007 estimate of Tiger’s business interruption loss, and Aspen argued that Walker had an indirect financial interest in the outcome of the appraisal.

Tiger objected to Robson because, although he had not previously worked for Aspen, Robson had been retained as an independent contractor by insurance companies more than 200 times in the past 18 months.

Judge T.S. Ellis III denied the cross-motions to disqualify the expert appraisers.

Finding “scant authority” on Virginia’s statutory appraisal procedure, Ellis said “disinterested” means “not influenced by regard to personal advantage,” and “free from selfish motive.” Virginia authority suggested an expert had to be on a party’s permanent payroll to forfeit “disinterested” status, according to Ellis.

Ellis said the record did not show that the carrier’s expert Robson consistently favored an insurer over an insured, and his “regular retention by insurance companies does not make him biased toward a favorable or specific outcome for either party in this dispute, particularly Aspen.”

Because the test for “disinterested” status targeted the relationship between the appraiser and the parties, policyholder expert Walker likewise was safe, as any bias Walker may have had in favor of his employer’s 2007 damage report were “irrelevant,” Ellis said.

Tiger’s expert Walker had not previously worked for Tiger and did not work on the 2007 loss estimate, and Walker’s fees would be paid by the carrier who sought arbitration, as required by statute.

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