Appraisal Umpire Liability in North Carolina

Umpires and appraisers should always carry errors and omissions coverage. This lesson is evident from a recent opinion in First Protective Insurance Company v. O’Leary, ¹ which affirmed the district court’s denial of arbitral immunity for an appraisal umpire. This holding has broad implications for the scope of protections afforded to professionals who serve in the appraisal process under property insurance contracts, particularly in North Carolina.

As readers of this blog may recall, I previously discussed whether umpires are immune from suit and whether the appraisal process in North Carolina qualifies as arbitration under the law in “Does an Umpire Have Immunity From Suit? Is an Appraisal an Arbitration in North Carolina?” and “Are Umpires in an Insurance Appraisal Immune from Being Sued?”

At the heart of the appellate decision was whether Lewis O’Leary, who served as the umpire in a disputed residential water damage claim, was entitled to immunity under North Carolina’s Revised Uniform Arbitration Act. O’Leary had argued that the immunity typically extended to arbitrators should apply equally to umpires like himself, especially where their function mirrors that of an arbitrator and resolving disputes between parties and authoritatively determining rights. O’Leary maintained that by adjudicating the amount of loss under the policy, he was fulfilling the same quasi-judicial function as an arbitrator.

The court was not persuaded. In a detailed opinion, the majority concluded that North Carolina law draws a clear line between arbitration and appraisal. Appraisal, they explained, is not a substitute for litigation and does not involve binding determinations of legal rights or coverage. Rather, it is a contractual mechanism designed solely to determine the amount of loss.

The court emphasized that the policy itself stated the appraisal could not be used to determine coverage or causation, and that First Protective retained the right to deny the claim even after an appraisal award was issued. That critical distinction meant that O’Leary was not operating within the scope of an arbitration agreement and, therefore, was not entitled to statutory arbitral immunity.

The court also addressed O’Leary’s reliance on the functionality test. It found that while prior case law may have offered support for such an argument in pre-NCRUAA cases, the legislature’s codification of arbitral immunity now controls, and that statute is expressly limited to arbitrators acting pursuant to an agreement to arbitrate. The opinion rejected the idea that O’Leary’s role as an umpire, although similar in nature to an arbitrator’s, could qualify him for immunity. Notably, the court also ruled that O’Leary had not sufficiently preserved his functionality test argument in the lower court, having only cited the doctrine briefly and without development.

In addition to denying immunity, the court upheld the district court’s orders allowing discovery from O’Leary and denying his request for attorney’s fees. It noted that the policy’s appraisal clause did not transform the proceeding into a formal arbitration. The additional procedural protections in the arbitration statute, including discovery restrictions and mandatory fee-shifting, did not apply.

This decision is a lesson for anyone involved in property insurance appraisals in North Carolina and possibly in other jurisdictions governed by similar arbitration acts. An appraisal is not arbitration in most states. The labels and the structure of the policy matter. The court refused to blur the statutory line between these two dispute resolution mechanisms, and by doing so, left appraisers and umpires without the protective shield of arbitral immunity.

For professionals serving in these roles as umpires and appraisers, this ruling raises the stakes. It opens the door for litigation against them in the event of perceived bias, conflicts of interest, or procedural concerns during the appraisal process. This is why I urge those accepting such positions to carry errors and omissions insurance coverage.

While the holding is specific to the facts and law of North Carolina, it contributes to a growing national conversation about the legal status of insurance appraisals and the liability exposure of those who participate in them. Those who serve as umpires or appraisers in the insurance appraisal process in North Carolina remain vulnerable to suit and discovery.

Thought For The Day 

“In my mind, I’m gone to Carolina. Can’t you see the sunshine, can’t you just feel the moon shining?”
—James Taylor

¹ First Protective Ins. Co. v. O’Leary, No. 23-2160, 2025 WL 1936566 (4^th Cir. July 15, 2025). (See also, O’Leary appellate brief, and First Protective appellate brief).