The Insurance Appraisal Process: Understanding the Basics
- Charles Washkalavitch
- Dec 16, 2024
- 3 min read
Updated: Mar 11
The Appraisal Clause is a provision in a homeowners insurance policy and found in the Loss Settlement section of a homeowners policy. This provision provides a mechanism to resolve disputes that arise between the insurance company and the policyholder regarding the value of the loss. This forum of alternative dispute resolution is akin to an informal arbitration intended to offer both parties an efficient and expeditious means of resolving disputes pertaining to the value of loss.
How the appraisal process works:
1. Invoking Appraisal: More often than not the invocation of appraisal is initiated by the policyholder. This is usually done by submitting a written request to the insurance carrier expressing the desire to engage in the appraisal process.
Whereas it's less common for insurance carriers to invoke the appraisal clause, they retain the right to do so under certain circumstances to address disputes, ensure fair assessment of claims, and expedite the resolution process.
2. Selection of Appraisers: Once the Appraisal Clause is invoked, both the insurance company and the policyholder select a qualified and impartial appraiser to represent their interests. These appraisers are responsible for assessing the damage independently and determining the value of the loss.
3. Appraisal Process: The selected appraisers inspect the property, review relevant documentation, and may consult with experts if necessary to assess the extent of the damage. They then individually prepare itemized estimates and submit their position to each other for review. The two appraisers then try and work together to reach an agreement on the value of the loss.
4. Umpire Selection: In cases where the appraisers are unable to reach a consensus on the value of the loss, they may appoint an umpire to resolve the dispute. The umpire acts as a neutral third party and helps facilitate the resolution process.
5. Cost Sharing: In most cases, each party is responsible for covering the costs associated with their chosen appraiser and in the event an umpire is appointed, the costs are split between the insurance company and the policyholder.
6. Appraisal Award: Once the appraisers (or the umpire, if involved) reach a consensus on the value of the loss, their decision is binding on both the insurance company and the policyholder. This means that the agreed-upon value serves as the basis for the insurance settlement, and both parties are obligated to abide by the appraisal award.
However, the application of policy provisions to the appraisal award depends on various factors, including the language of the insurance policy, coverage limits, state laws, and the specifics of the appraisal process.
In summary, the Appraisal Clause provides a fair and efficient means of resolving disputes related to property damage claims in homeowners insurance policies. It ensures that both parties have the opportunity to present their case and obtain an independent assessment of the loss, ultimately leading to a more equitable resolution.
While insurance appraisal can be an effective tool for resolving disputes over the value of a covered loss, it has limitations in terms of what it can address. All parties should be aware of these limitations and understand that certain aspects of their claim may need to be addressed through other means or processes.
Prepared By:
Charles Washkalavitch
EVP & Principal Building Consultant
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