Appraisal Clause

You need to know about the quiet little Appraisal Clause…

…most likely lying inconspicuously buried somewhere in your insurance policy – usually in the Conditions section, or possibly under What to Do After a Loss.

If you have by chance come across this section of your policy, you may have wondered exactly what it provides. Or, if – like most policyholders – you have never noticed or read this section of your policy and may just now be learning about it, you need to read on and educate yourself as to its potential benefit to you.

  • Have you and your insurance company reached an impasse?
  • Does your company’s representative want to try to repair something that you believe needs instead to be completely replaced?
  • Do you feel as if the insurance company is pressuring you to accept a settlement for your claim which is less than what you feel you are entitled to?
  • Despite the fact that you have provided every bit of documentation requested by the insurance company, are you still unable to convince them that their figures are unrealistically too low for you to restore your property with the ‘like kind or quality’ materials promised by your insurance policy?

The Appraisal provision of your insurance policy can provide a valuable opportunity for you as the policyholder to have a ‘second go’ at addressing these sorts of issues and finally settling your insured property-loss claim.

Appraisal gives you the chance to have an objective and disinterested Appraiser of your choosing review the materials submitted in support of any disputed part of your claim. If you elect to do this, the insurance company will also select an Appraiser to review their estimates and yours. The two Appraisers – yours and theirs – will not only review but also compare and analyze all estimates, inventories, and other such documents in an effort to reach an agreement as to the correct dollar amount of any disputed portions of your claim.

If the two of them are able to agree on any figures, then you as the insured will be offered the agreed-on amount, in what is known as an Award.

Sound simple? Well, not really.

What if the two Appraisers are not able to agree on everything? What then?

No matter what, the most important aspect of this entire process involves knowing how to select the right kind of professional to serve as your Appraiser.

Is the Appraisal process the same as Arbitration?

No. Arbitration is a more formal legal means of resolving an issue that would otherwise need to go to trial. As such, arbitration is directly overseen by the court jurisdiction in which it occurs. The Appraisal Clause of your insurance policy, on the other hand, provides a procedure through which you and your insurance carrier can attempt to resolve your differences without court supervision, and in a less formal setting.

What should I look for in selecting a good Appraiser?

Since you have most likely reached the Appraisal process because you have not been able to convince your insurance company of the validity of what you have submitted in Proof of your Loss, you now need to be especially careful in selecting an Appraiser who can best represent you and your claim convincingly and expertly.

So, what does that mean?

  1. Above all, of you need someone who is an expert in insurance.At first, this may seem a little obvious, but the truth is many policyholders make the mistake of trying to get their building or roofing contractors or other non-insurance professionals to serve as their Appraiser at this point. These people usually know their industry inside and out, and are quite qualified as experts at what they do. But that is only one piece of the Appraisal puzzle.Appraisal also requires a great deal of in-depth experience in and knowledge of the intricate workings of the insurance industry – including such barely visible subtleties as corporate pressure on claims representatives, the specific track records of particular carriers with regard to your sort of property claim, and the intricasies of such policy concepts as depreciation, replacements costs, and actual cash values – to name but a few.
  2. Secondly, you need someone who is an expert in preparing and interpreting various insurance documents, most notably with regard to building estimates – including not only structural damage and the building process but also regional adjustments in materials costs and building codes. You also need someone who can analyze and assess contents damage – both in person and from contents inventories – as well as business interruption, loss of rents, additional living expenses, and much more.
  3. More importantly, you need someone who not only understands all of these aspects of your claim – both the concrete and the intangible – but who is also a skilled communicator who can convey all of this information cogently and assertively yet respectfully enough to be listened to. Otherwise, your claim may remain at an impasse.
  4. And finally, you need someone who has been in the business long enough to have amassed an army of reliable experts who can assist in the appraisal process, including architects, engineers, cleaning and restoration specialists, and highly skilled electrical, plumbing, and heating/air-conditioning professionals.

Who pays the Appraisers and the Umpire?

You pay for your Appraiser, the insurance company pays for its Appraiser, and the two of you – the policyholder and the insurance company – split the cost of hiring a third party, the Appraisal Umpire.

Is an unbiased, disinterested Insurance Appraiser the same as a Real Estate Appraiser?

No. Although Real Estate Appraisers do evaluate real property such as the one you are filing a claim on, their expertise lies in the field of marketing. They are well-versed in determining a realistic price for selling your property, as is, in the local real-estate market. However, Real Estate Appraisers are do not have the training to determine the costs of building, rebuilding, or repairing a structure, nor are they schooled in the intricasies of preparing, documenting, and negotiating an insurance claim. You need an insurance professional for this sort of Appraisal.

Is an Insurance Appraiser, under the terms of my policy’s Appraisal Clause the same as an Antiques Appraiser? an Art Appraiser? a Jewelry Appraiser?

No. Like the Real Estate Appraiser, these types of appraisers also have particular fields of expertise that deal with determining the value of an antique, or a work of art, or a piece of jewelry in its current condition. Such experts may occasionally be called upon during the insurance Appraisal process, in order to help fix the value of certain portions of your contents claim, but they are not trained in all the vast array of insurance-claim procedures or requirements, and therefore do not serve as Insurance Appraisers in the sense of the Appraisal Clause of your insurance policy.

Should I be worried if my insurance company has demanded Appraisal? Does that mean we are going to trial?

No. The Appraisal Clause in your property-insurance policy is intended to help you and your insurance carrier resolve disputed amounts of your claim specifically without having to go to court. The Appraisal process can save both time and money for both you and your insurance company.

What if the two Appraisers are not able to agree on everything?

If after reviewing, analyzing, and comparing documents and figures related to disputed elements of your claim, the two Appraisers are not able to agree on one or more aspects of it, they will then submit their documented, disputed findings to a third person, known as an Umpire. Selection of this person as Umpire will have been mutually agreed upon by both Appraisers, prior to beginning their review of documents.

After the two Appraisers have presented the Umpire with both sides of the disputed amounts, he will then review these items and attempt to come to an agreement with one or the other of the two Appraisers. If the Umpire is able to do so, then you as the insured policyholder will be awarded that agreed-upon amount.

This may sound all cut and dried, but it really is a much more complex process than it might seem. To enter into the Appraisal process and to come out whole, you need to arm and educate yourself ahead of time.

The most important aspect of this entire process involves knowing how to select the right kind of professional to serve as your Appraiser.

“It is devastating to see portions of your belongings in our century-old engineering and surveying firm completely burned — some partially charred and the rest singed and covered with smoke. After the insurance company’s adjuster asked us to give him a list of items damaged and lost within the building, as well as damages to the building itself, our 11-person staff floundered around for a week with no measurable results. It was such a relief when Baldwin showed up and said, ‘Put all your employees back to work on engineering problems, and let me handle the fire problems.”

C. P. Palmer, Sr.
Fire, Palmer & Mallard, Engineers/Surveyors
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