• Atlanta
• Boston
• Dallas
• Ft. Lauderdale
• London
• Minneapolis
• New York
• Oakland
• Philadelphia
• Washington, DC

by Adrienne Nelson

The Supreme Court of Texas does not often weigh in on what the meaning of impartial and nonbiased in the property insurance appraisal context. Therefore, insurance lawyers are often required to look “outside the box” to see how a court may analyze impartiality when considering whether an appraiser or umpire should be disqualified or an appraisal award should be vacated. Recently, in Burke, et al. v. Houston PT BAC Office Limited Partnership (Bank of America), No. 24-0135, 2025 WL 3683861, at *1-4 (Tex. Dec. 19, 2025), the Texas Supreme Court provided an opinion assessing impartiality of appraisers in a real estate dispute. While this case does not address insurance appraisal, the analysis will likely be applied in the future.

The parties in Burke agreed that Texas’ arbitration law and its impartiality principles should apply to the analysis. The Court noted that the opinion did not decide whether arbitration principles should apply but instead took the parties at their word and analyzed impartiality in that context. While the Court made that caveat, it is likely courts would apply those standards in the insurance appraisal context.

The Burke decision addresses the duty of neutrality and disclosure in appraisal processes, holding that undisclosed, substantive pre-appointment communications between a party and a proposed “neutral” appraiser can demonstrate partiality warranting vacatur of the appraisal determination under Texas arbitration principles.

Although this case arose in a commercial lease valuation dispute, the Court explicitly relied on impartiality principles from arbitration law at the parties’ behest and reaffirmed that appraisers—like arbitrators—owe duties of impartiality. The ruling has immediate implications for first-party property insurance appraisals in Texas, where appraisals are not arbitrations but remain subject to court intervention where bias or prejudice infects the process.

The dispute arose under a long-term lease for a downtown Houston property—home to the Bank of America Building—requiring periodic rent adjustments based on the property’s fair market value “as if free and clear of all improvements, encumbrances, and leases.” The lease provided for an appraisal process if the parties do not agree on the value. Thereunder, each party chooses an appraiser and if the two do not agree on the value, they will choose a third, “competent and impartial” appraiser. During the first adjustment period, the parties reached an impasse over whether to include value attributable to tunnel connectivity on adjacent land, prompting the contractually specified appraisal process. The landlords—Plaintiffs Burke, et al.—appointed Ronald Little as their appraiser; the tenant—Defendant BAC—interviewed Scott Rando as their potential appraiser on topics including downtown experience and improved vs. unimproved, partial vs. full block, and tunnel-connected vs. non-tunnel-connected properties, but ultimately selected a different appraiser, Curtis Podlewski. The tenant then advised Rando of Podlewski’s selection due to concerns over tight timelines, but that Rando would be “at the top of our list” for potential designation as the neutral.

The parties’ appraisers could not agree, and they selected Rando as the neutral. But BAC did not disclose its pre-appraisal communications with Rando to the landlord upon his appointment. The landlord’s appraiser, Little, valued the land at $14.4 million (including connectivity value), while Podlewski and Rando valued it at $8.2 million and $8.7 million, respectively, excluding value from adjacent tunnel connectivity. Podlewski and Rando settled on $8.475 million as the final value.

The landlords sued for declaratory relief and later added breach-of-contract and fraud claims after discovery revealed the tenant’s undisclosed pre-appointment communications with Rando. Little testified he would not have agreed to the use of Rando as the third neutral appraiser had he known the extent of communications between the tenant and Rando about the valuation dispute. The trial court granted summary judgment to the tenant and confirmed the appraisal; the court of appeals affirmed, deeming the communications “non-substantive.”

The Supreme Court reversed, holding that the nondisclosure of substantive, pre-appointment communications between the tenant and Rando as the proposed neutral appraiser evidenced “evident partiality” and required vacatur of the appraisal valuation, with remand for further proceedings. The Court accepted the parties’ invocation of the Texas Arbitration Act’s evident-partiality framework, reiterating that a prospective neutral’s failure to disclose facts that might create a reasonable impression of partiality to an objective observer constitutes evident partiality, and that nondisclosure itself—without proof of actual bias—can warrant vacatur. While recognizing that appraisals are not arbitrations and may be valid in circumstances where arbitration awards must be vacated, the Court emphasized that appraisers share an obligation of impartiality and that appraisals conducted with prejudice or bias do not bar judicial recourse.

Applying these principles, the Court concluded the landlords were entitled to relief because the undisclosed communications directly concerned the matter under appraisal and went beyond scheduling or availability, including discussion of the very valuation issues in dispute and an assurance that Rando would be “at the top of our list” for neutral appointment. Such pre-appointment, case-specific communications were material, should have been disclosed, and their nondisclosure reasonably created an impression of partiality to an objective observer.

The Lowdown: The Court’s holding reaffirms key legal principles implicated in first-party property insurance appraisals. First, appraisers owe duties of impartiality. Where prejudice or bias taints the process, parties may seek judicial intervention notwithstanding appraisal agreements. Second, under the evident-partiality rule, a prospective neutral must disclose facts that might reasonably create an impression of partiality; nondisclosure of material facts is itself a ground for vacatur. Third, communications are “substantive,” and thus material, when they concern the matter under appraisal rather than trivial logistics; here, undisclosed discussions about valuation-related topics and the promise of favorable consideration for neutral appointment were dispositive.

The Court’s reliance on the evident-partiality doctrine reshapes risk assessments in insurance appraisals where ex parte outreach to potential neutrals has sometimes been treated as routine. This decision underscores the need for parties to have access to all information which might reasonably affect a neutral’s partiality and signals elevated scrutiny of neutrality and disclosure for neutrals, particularly regarding undisclosed, case-specific communications with one side before appointment. After this decision, undisclosed discussions that delve into the merits—scope, causation factors, pricing methodologies, comparables, depreciation frameworks, or specific claim features—may be deemed material and therefore be required to be disclosed so to avoid the appearance of partiality. Conversely, the opinion preserves a carveout for trivial or immaterial matters, but the Court’s application suggests that the line is crossed once communications relate to the issues being valued or imply preferential consideration for neutral appointment.

_________________________________

The opinions expressed are those of the authors and do not necessarily reflect the views of the firm or its clients. This article is for general information purposes and is not intended to be and should not be taken as legal advice.