The Process
What is An Appraisal Clause Provision?
The “appraisal clause” found in most property insurance policies is intended to be a simple and low cost form of insurance dispute settlement long before the need to pursue time-consuming litigation and cost-prohibitive legal fees. The provision allows disputed amounts to be resolved by a process involving disinterested parties. When coverage is determined but settlement amounts are in dispute, policyholders and company adjusters are often deadlocked and frustrated. This is the time for either party to consider resolving the differences by “invoking” the appraisal clause provision in the insurance policy, if one exists. A majority of policyholders are often unaware of this option in their coverage, therefore insurance companies invoke it most often.
Appraisal sample wording (varies by state, please check your own policy for actual provision):
If you and we fail to agree on the amount of loss, either one can demand that the amount of the loss be set by appraisal. If either makes a written demand for appraisal, each shall select a competent, independent appraiser. Each shall notify the other of the appraiser’s identity within 20 days of receipt of the written demand. The two appraisers shall then select a competent, impartial umpire. If the two appraisers are unable to agree upon an umpire within 15 days, you or we can ask a judge of a court of record in the state where the residence premises is located to select an umpire. The appraisers shall then set the amount of the loss. If the appraisers fail to agree within a reasonable time, they shall submit their differences to the umpire. Written agreement signed by any two of these three shall set the amount of the loss.
How the Process Unfolds
In the appraisal clause process, each side will select a competent appraiser to assess the loss. The two appraisers will mutually select and agree upon a third party Umpire appraiser who will review the positions and documentation of the two primary appraisers. The two appraisers and the umpire comprise the Appraisal Panel. You and your insurance company are responsible for paying its chosen appraiser and each side will pay half of the cost of the umpire.
Once the Appraisal Panel is set, the same set of facts, documents, estimates, and differences are reviewed by the panel in order to determine the Amount of Loss. An agreement between the two independent appraisers, or the umpire and either appraiser is binding. The final amount is known as the Appraisal Award and a formal Award Letter is signed by the individuals who agree on the Amount of Loss. The Appraisal Award is paid by the insurance company to the policyholder. You should select an appraiser who is knowledgeable in the specific area that is the subject of the dispute and who is familiar with the appraisal clause process. Your selected appraiser should be able to be objective and impartial. Your appraiser should not do any work for the insurance company with whom you are having the dispute.
The Appraisal Clause process minimizes settlement time, and the costs involved are significantly less than the cost of litigation, benefiting all parties.
