Disagree on the Amount of Your Loss? Invoke the Appraisal Clause
When you and your insurance provider can’t agree on the amount of a loss, there’s a straightforward solution: The Appraisal Clause.
What is the Appraisal Clause?
The Appraisal Clause is a provision found in most insurance policies that allows both the policyholder and the insurer to resolve disputes regarding the value of a loss without needing to go to court. Instead of litigation, the Appraisal Clause offers a formal process where both parties select independent appraisers to assess and determine the value of the damage or loss.
Typically, you’ll find the Appraisal Clause under the “Conditions” or “What to Do After a Loss” section of your policy. It may read something like this:
“If you and we fail to agree on the amount of loss, either party may demand that the amount be set by appraisal. If a written demand for appraisal is made, each party selects an independent, competent appraiser within 20 days. The appraisers then choose a neutral umpire. If the appraisers cannot agree on an umpire within 15 days, either party may request a court to select one. The appraisers then determine the amount of the loss, with any two of the three (the appraisers and umpire) making a binding decision.”
Why Use the Appraisal Clause?
The Appraisal Clause serves as an alternative dispute resolution method, designed to provide a faster and less costly way to settle disagreements over the value of a claim. This clause is particularly useful when the policyholder and the insurer disagree on the cost to repair or replace damaged property.
How Does the Appraisal Process Work?
Demand for Appraisal
Either the policyholder or the insurer may initiate the appraisal process by submitting a written demand.
Appraiser Selection
Appraisal Process
Umpire (If Necessary)
If the appraisers cannot agree on the value, they will jointly select a neutral umpire to make a final decision.
Binding Decision
The umpire’s decision, or the agreement reached between the appraisers, is typically binding on both the policyholder and the insurer.
Key Differences: Appraisers vs. Adjusters
Appraisers
Independent professionals hired by both parties to assess the value of the damage. Appraisers focus solely on determining the amount of loss or damage.
Adjusters
Insurance company employees who investigate claims, determine the company’s liability, and negotiate settlements with the policyholder. They are focused on interpreting policy terms and the extent of the claim.
Why Choose an Appraiser?
In cases where the policyholder and insurer cannot agree on the amount of loss, an appraiser can offer an unbiased, professional opinion. By hiring an independent appraiser, policyholders can ensure a fair and impartial evaluation of their claim—helping to resolve disputes efficiently and avoid the need for costly litigation.