Appraisal Process

Whenever an insured and insurance company disagree on the payment amount (amount of loss), either can use Appraisal to resolve the difference. To start the process, one side needs to make a formal demand for Appraisal to the other. We provide forms that meet the requirements to do this.

The demanding side has fulfilled its requirements at this point, and the respondent side has 20 days to provide the identity of and contact information for its appraiser. If the respondent does not comply, the demanding side now has grounds to compel the other to comply, which we also provide resources when needed.

Appraisal Provision/Clause

Since prior to the civil war, appraisal has been the standard alternative dispute resolution and a mandatory provision contained in all property insurance policies. Appraisal allows the insured and insurance company the ability to hire an independent expert (appraiser) to determine the amount of the loss. The two appraisers select an Umpire to serve as the “tie-breaker” when disagreements between appraisers can’t be resolved.

Standard Insurance Policy Appraisal Clause

In case the insured and this company shall fail to agree as to the actual cash value or the amount of loss, then, on the written demand of either, each shall select a competent and disinterested appraiser and notify the other of the appraiser selected within twenty days of such demand. 

The appraisers shall first select a competent and disinterested umpire; and failing for fifteen days to agree upon such umpire, then on request of the insured or this company, such umpire shall be selected by a judge of a court of record in the state in which the property covered is located.

The appraisers shall then appraise the loss, stating separately actual cash value and loss to each item; and, failing to agree, shall submit their differences, only, to the umpire.  An award in writing, so itemized, of any two when filed with this company shall determine the amount of actual cash value and loss.  Each appraiser shall be paid by the party selecting him and the expenses of appraisal and umpire shall be paid by the parties equally.

Summary

The appraisers each independently assess the damage and costs to repair and/or replace to restore to the preloss condition in order to make the insured whole again (aka indemnification.) When appraisers reach an impasse, they engage their Umpire.

The appraisers submit their scopes and reasoning to their Umpire, who is sometimes court appointed. These three (known as the “Appraisal Panel”) then discuss these issues and reach an agreed-upon “Amount of Loss.” This amount is known as the “Appraisal Award.” Essentially, it’s a 2-to-1 vote*. The amount of loss the Umpire sides with is awarded. An Appraisal Award is equivalent to a court order/judgement in most states.

*If the appraisers agree between the two of them, no Umpire is needed. This spares the insured and the carrier from sharing the addtiional cost of splitting the Umpire’s fees 50/50. This is a 2-0 vote. (In our experience, over 85% of appraisals are decided without needing to engage the services of an Umpire.)