Most of the leading law school textbooks explain arbitration by describing a case where a party suffers a loss and there is a dispute between the insurance company and the insured.  The insured typically places a high value on the subject of the loss, while the insurance company places a lower value.  A third party is called in to offer an opinion about the value of the loss and the parties agree to be bound by that third party’s opinion. Sometimes the parties each choose an appraiser and the two appraisers choose a third. While the contract binding the parties may refer to the process as appraisal, courts look past the name and treat the process as if it were arbitration.

For example, in the 1935 case of Fireman’s Insurance Company v. Blount, the Georgia Court of Appeal ruled that arbitration and appraisal could be thought of interchangeably. They wrote, “The purpose of an appraisal and arbitration being to fix the amount of the loss, and this having been done by agreement by the parties here…the award fixed the amount of the loss, and in this case the voluntary agreement fixed the amount of the loss. There is no substantial difference in the two propositions.”  The lesson is that you might call something an appraisal, but if the process has the characteristics of arbitration, a court will treat it as if it were arbitration.

But not always.

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