Appraisals and their value in the handling of Household Good Claims
By Alan R. Jobe
“First published in the Journal of Advanced Appraisal Studies – 2008”
Alan Jobe is the Executive Director of the Claims Procedures and Prevention Council for the moving industry.
This was published in their January 2009 "Newsletter".
Appraisals can have a very important place in the handling of household good claims when appropriately applied. However, experience has found that too often incomplete information is presented, leaving the appraisal of less significance than what is expected. As an executive with a major moving company for many years, I was often dealing with high value claims, arbitrations or litigation claims or claims with numerous items that were lacking adequate documentation to support or dispute their value. It becomes very easy to see when an appraisal has been presented in part to lead a person down an unsupported track of value. These appraisals are either not supported, not done with sufficient information or typically incomplete in their entirety. All of these elements to the un-trained eye can falsify or mislead another to believe an incorrect value on an item.
Personally I find these acts to be unprofessional of any professional appraiser that would support the presentation of such information. We all realize there are industry standards by which appraisals are to be based upon, including association report writing standards and the Uniform Standards of Professional Appraisal Practice (USPAP). I think it would be best to first digress, and explain how a legitimate appraisal can be misused based upon how it is applied, who is requesting the appraisal and how it is ultimately handled by the various parties involved. Similar elements come in to play by vendors offering repair inspections and reports as well. It is important that claims adjusters can trust the information being presented, and the appraisal report is totally impartial while being presented with all elements of importance included. Claims adjusters can not rely on the face value of any report, substantiation must be the basis of the report.
Appraisals are requested by various people for many different reasons. An appraiser being contacted to perform the appraisal is ultimately responsible to the party that is hiring them, and only in the capacity into which they are being hired based upon scope of work. An appraiser typically will provide an appraisal for their customer using industry prescribed guidelines, typically USPAP or appraisal association report writing standards. However, appraisal reports and results can be misleading depending on what is being obtained and biases of the person obtaining it. Let me give examples of how 3 appraisals on the same item, obtained by 3 different people, can have three different results. The same could apply to a repair vendor report as well, using the same scenarios.
A customer has a damaged piece of art that was involved in a recent move. The customer hires an appraiser to appraise the damaged piece. The customer advises the appraiser that the piece was in pristine condition prior to the move, but provides no proof. The appraiser, using all their appropriate standards, could do one of two things, based on past history in dealing with such claims. The appraiser could accept the customer’s statement as pre-move condition, hopefully advising such in their report and then assessing a value for the item with and without damage to establish a loss of value on the piece.
Or the appraiser could advise the customer that they can not assess an appropriate value on the piece for two reasons. One, that they can not verify the value of the piece pre-move as they can not verify the true condition of the piece, and that without knowing if repairs to the item can be accomplished, they can not determine the value of the piece. Yes, a repaired item is believed to have a loss of value, but the extent of that loss of value can be affected by the nature of the repair, the quality of that repair and in direct relation if there was any pre-existing damage to the piece prior to this damage.
The customer is definitely not happy with the previous scenarios, so they decide to get another appraisal. This time, the customer does not even share that the item was even involved in a move and just requested an appraisal for insurance purposes. The appraiser, again using all their appropriate standards, provides an appraisal on the damage piece for the customer. For speculative purposes, the value on this piece of art was determined at $15,000.00, by the appraiser.
The customer has filed their claim with a moving company for damage claimed for a broken piece of art from their recent move. The moving company hires a repair vendor to inspect the item and is advised that an appraisal may be in line for the item. The moving company hires an appraiser to have an appraisal done on this item. Again the appraiser, using all appropriate standards, provides an appraisal on the damaged piece for the moving company and determines the value of this piece of art to be $2500.00 at best.
Now you might sit, scratching your head, wondering how these three appraisals could be so different. Experience narrows that down to a couple of possibilities. One, lack of full information on one or both parties; or two, a total different approach being requested by the party asking for the appraisal. You can see how easily the customer can affect the outcome of their appraisal. Counter to that, the moving company often takes the approach with the appraiser that they are seeking an appraisal to discredit any value to the piece. Moving companies often request that the appraiser specifically inspect for signs of pre-existing damage, check the condition of the piece prior to the move, and state how was the piece presented to the customer. Basically, they are looking for any loop holes that might be in their favor. Please understand there is truly nothing wrong with either of these approaches or the final appraisals presented. Yet the question remains, does either scenario effectively resolve the true value of this piece in the text in which it should be presented.
The result that should be the focus of those involved in settling the above referenced hypothetical claim is determining the real value of the piece of art, and that the valuation should be based on the moving industry accepted guidelines and procedures. The following procedures will also be what the moving company will be looking for in trying to determine claims resolution cases. With a complete appraisal that addresses the factors outlined, a successful presentation can be made, and which is defendable in court should litigation becomes necessary. This is where the three major appraisal societies (International Society of Appraisers, American Society of Appraisers and the Appraisers Association of America) and individual appraisers can truly benefit from education of the moving industry governing laws, such as the Carmack Amendment, in establishing values of items in these matters. In simple terms, the Carmack Amendment states that a common carrier is subject to the jurisdiction of the Interstate Commerce Commission and shall issue a receipt or a bill of lading for property it receives for transportation. That carrier and any other common carrier that delivers the property and is providing transportation or service subject to the jurisdiction of the Commission may be liable to the person entitled to recover under the receipt or bill of lading. The liability imposed under this paragraph is for actual loss or injury to the property caused by (1) the receiving carrier, (2) the delivering carrier, or (3) another carrier over whose lines or route the property is transported into the United States.
In turn, the customer has necessary elements they must establish and prove under the Carmack Amendment, which is the federal law applicable to claims for loss or damage to goods transported by a motor carrier in interstate commerce, is clear. Pursuant to long-standing authority of the United States Supreme Court, the shipper must show: (1) delivery to the carrier in good condition; (2) arrival in damaged condition; and (3) the amount of damages. Missouri Pacific Railroad Co. v. Elmore & Stahl, 377 U.S. 134, 84 S. Ct. 1142, 12 L. Ed. 2d 194, 1964 U.S. LEXIS 2162 (1964). With the proper application of moving guidelines, appraisers can find a significant purpose and place in the moving claims industry.
The following items are necessary when appraising property for a moving claim:
- The original condition of the item, prior to the move and the value of that item at that time, referencing the true condition of the piece.
(This burden of proof on the pre-move condition of any item is the responsibility of the customer.) Pre-move appraisals are of value, but depending on when it was performed, can limit its value; if the customer can not confirm the actual pre-move condition of the item at the time the move took place.
- The condition of the item at the time of delivery verses when the claim for the item was actually filed or when the subsequent appraisal is being performed.
(Again the customer has to provide proof the damage being sought occurred while in the possession of the carrier. It can become significant, if the damage later claimed is not documented at the time of delivery.)
- Review of the condition of the item and determination of any pre-move or previous damage to the item being appraised and have significant affect on the ultimate value of that item.
(Initial damage to an item is usually when the most significant loss of value occurs. However the extent of damage and becomes a factor as well. Subsequent damage and its affect on value can be significant in comparison to any previous damage and associated value loss.)
- Whether an item’s claimed damage can be repaired and if that repair has been completed also can have significant affect on the appraised value of an item.
The type of item plays a role in if potential repairs are even a possibility and if it will have an affect on the appraisal value. A comparison of such would be the difference of potential repairs to a high end wooden piece of antique furniture and a ceramic figurine. The wooden piece is believed to have a higher potential for repair over the ceramic piece. But still the nature of the item, the nature of the potential repair and then the quality of that repair or restoration will all could have an impact on the appraisal value.
- The item itself and what means of true identification of that item can have a significant affect on the appraised value.
This is where research and communication on the part of the appraiser can make a difference. Can the customer provide any pre-move documentation on authenticity? Does the item have an traceable markings? Can the item be traced through documented means such as printed or internet means. This is where an appraiser’s abilities can also play a significant part in the out come.
- Finally, the back up provided in support of the value is significant.
It is imperative that appropriate documentation is presented to reflect what basis the value has been obtained and that the item being appraised is supported to be what the back up is actually for. Often items of like kind and quality are used in support of items, but it is not truly documented that the items are supported to be of like kind and quality. Do the research and show how the comparison is significant. Document your findings appropriately.
I conclude with you in this text that it is understood that appraisals can be very subjective and that there are many avenues where appraisals can be utilized. Hopefully this article will give you some insight that there is a significant market in the moving industry for properly prepared and executed appraisals. If claims appraisers can establish a reputation as a qualified professional that understands the moving industry, the appropriate moving laws of claims, and outline those in the appraisal presentation, a significant niche for appraisal work will become available. I do support and recommend all damage claims appraisers seek the appropriate material that will explain the details of the Carmack Amendment and that you partake in any educational options in the industry that will expand your knowledge of claims and the claims industry. One in particular is the “Claims Certification and Arbitration” (CCA) course offered from the American Moving and Storage Association. My contact information is listed below; I remain available to talk with anyone further on this subject.
Copies of the “Journal of Advanced Appraisal Studies – 2008” are available at www.appraisaljournal.org
