Insurance Appraisal Clause: Resolving an Impasse in Your Claim

What if, after all you’ve done, you and your adjuster/insurance
company are at an impasse on the value of your property? It’s now
time to invoke the Appraisal Clause in your insurance policy. The Appraisal Clause is found in all insurance policies, and was designed to establish a procedure to allow disputed amounts to be resolved by disinterested parties. The appraisal clause can be found in every homeowners policy, in every policy covering commercial buildings, in all business policies, as well as in every renters policy...even automobile policies.

The Appraisal Clause is usually found in the policy under the Heading “Conditions” and/or “What to do after a loss.”

Don’t confuse the Appraisal process with Arbitration. The Appraisal Clause does not bind either party to its findings. In arbitration, the findings of the arbitrator are usually binding on both parties.

The Appraisal Clause is meant to be the method for determining
disputed values. Appraisal cannot be used to determine what is
covered. That is for a court of law to decide. If you have dispute with
the company on whether or not something is covered, then you must
file a lawsuit against your insurer to get that determination.

HERE’S A REALLY IMPORTANT TIP!!! You don’t have to wait until you’re hopelessly deadlocked with the adjuster or insurance company to invoke the Appraisal Clause. The Appraisal procedure has been invoked more often by insurers, who have greater understanding of the terms and conditions of their policies. But you, the insured or policyholder, can do it any time.

I’m not suggesting that you become uncooperative. But occasionally, I
talk to people who are having real difficulties with their adjuster or
insurance company. Taking the claim to Appraisal sometimes stops
all the drama.

In my experience as both an appraiser and an umpire, I’ve found that disputes can be resolved more quickly by appraisal than the resolution you might get with litigation. The cost of the appraisal process is also significantly lower that the cost of litigation.

Here’s what the Appraisal Clause reads in my Homeowner
Insurance policy:

“If you and we fail to agree on the amount of loss, either may
demand an appraisal of the loss. In this event, each party will choose
a competent appraiser within 20 days after receiving a written request
from the other. The two appraisers will choose an umpire. If they
cannot agree upon an umpire within 15 days, you or we may request
that the choice be made by a judge of a court of record in the state
where the “residence premises” is located. The appraisers will
separately set the amount of loss. If the appraisers submit an
agreement to us, the amount agreed upon will be the amount of loss.
If they fail to agree, they will submit their differences to the umpire.
A decision agreed to by any two will set the amount of loss.

Each party will:
a. pay its own appraiser, and
b. Bear the other expenses of the appraisal and umpire equally.”

Each party appoints an independent, disinterested appraiser. In past experience, I’ve seen the insured or policyholder try to appoint his own Public Adjuster as the appraiser. This should never be done, as the PA is not a disinterested party.

The appraisers evaluate the loss independently. The appraisers can still negotiate and reach an agreed amount of the damages. But, if they cannot agree, they work together to choose a mutually acceptable umpire. If the two appraisers cannot agree on the selection of an umpire, either side may appeal to the local court for the appointment of someone to serve in that capacity.

An umpire must also be a disinterested party, and must be impartial, of good moral character and possessing a good reputation. He also must be willing to listen. No umpire should be chosen that has any financial interest in the outcome of the appraisal. Any other consideration other than the hourly rate of compensation for the umpire is not acceptable.

Once the umpire has been chosen, the appraisers each present their loss assessment. Often, this involves informal testimony from the parties involved in the claim. To help the umpire gain a more complete understanding of the details of the loss, the appraisers and the umpire sometimes meet at the loss location and review the loss details. The umpire will subsequently provide a written decision to both parties. If any two parties agree to the amount of the loss, that amount becomes the claim amount. However, if one of the parties does not agree, then the case can still be turned over to legal counsel for litigation.

Question: May the insured or insurer reject the other parties’ choice of appraiser?

Answer: In 2005, the New York Department of Insurance issued a ruling on this question as follows:

“Whether an appraiser appointed by either of the parties is competent and disinterested (or "independent") is a question of fact for a jury and is outside the determination of this Department.”

ANOTHER TIP!! Notice that there are very specific time limits in the Clause. You
MAKE SURE that you choose your appraiser and notify the adjuster
within the time limit in your policy. The time limit for both appraisers
to choose an umpire begins on the day that both sides choose their appraiser.

Watch very carefully to see if the insurance company and/or
adjuster chooses their appraiser within that time limit. If they do not,
they have violated the terms and conditions of their policy.

My recommendation, in the event of an appraisal, is to call a Claims Consultant. You might also consider contacting a public adjusting company in your area. The Claims Consultant or PA know insurance policies, know the Appraisal Clause, and know property values. The Claims Consultant or PA are the perfect choices for helping you prove the values of the property of your claim.