When policyholders and insurance companies have a disagreement regarding the cost of repairing or replacing damaged property, it can be quite frustrating, especially for the policyholder, who often feels they have no choice but to settle for the amount offered by the insurance company. Rarely
do insurance companies notify policyholders of their right to participate in various mechanisms to resolve property damage and price disagreements.As a result most policyholders never realize that they have a right to dispute an insurance settlement amount.
One way for policyholders to dispute their insurance company’s settlement offer is to invoke the appraisal clause, which is the dispute mechanism contained within the insurance policy. When conducted properly, appraisal can be a very effective alternative dispute resolution method. However, not all insurance policies contain an appraisal clause, additionally some states do not allow appraisal. It is important to understand the appraisal requirements and allowances for this process within the policy.
The Appraisal Clause may include the following language and is a good general explanation of how appraisal works:
1. If you fail to agree with us on the amount of a loss, either party may demand that the disputed amount be submitted for appraisal. A demand for appraisal will be made in writing within sixty (60) days after our receipt of proof of loss. Each party will then choose a competent and disinterested appraiser. Each party will notify the other of the identity of its appraiser within thirty (30) days of the written demand for appraisal.
2. The two (2) appraisers will choose a competent and disinterested umpire. If the appraisers are unable to agree on an umpire within fifteen (15) days, you or we may petition a judge of a court of record in the state where the covered loss happened, to select an umpire.
3. The appraisers will then set the amount of the loss or damage. If the appraisers submit a written report of an agreement to you and us, the amount they agree on will be the amount of our payment for the loss or damage. If the appraisers fail to agree within a reasonable time, they will submit their differences to the umpire. Written agreement signed by any two (2) of these three (3) will set the amount of loss or damage.
4. Each appraiser will be paid by the party that selects him or her. Other expenses of the appraisal and compensation of the umpire will be paid equally by you and us.
The appraisal Clause is commonly regarded among Public Adjusters as the most empowering tool to a policyholder in arriving at the accurate and fair settlement price of their property loss. When executed properly the appraisal process shuts down the insurance company tactics commonly used to settle claims below fair market pricing.