Insurance Appraisal: What’s that?

When an insurance company and a policyholder disagree on the amount of damages owed under an insurance policy, both parties generally have the option of demanding that the dispute be resolved through the “appraisal process”. “Appraisal” is a method of resolving disputes that is provided for in most insurance policies. It is an alternative to litigation and can be a faster and less expensive way to resolve a claim.

In the context of insurance appraisal, an “appraiser” is a person hired by either the policyholder or the insurance company to evaluate the damages and determine the value of the claim. The “umpire” is a neutral third party who is selected to resolve disputes between the appraisers. The umpire’s decision is binding and the parties are bound to accept it. The appraisal process involves each party selecting an appraiser, who will evaluate the damages and determine the value of the claim. If the appraisers are able to agree on the value of the claim, a binding appraisal award will be entered for the agreed amount and an umpire will be unnecessary. If the appraisers are unable to agree on the value of the claim, they will select an impartial umpire to make a final determination. The umpire’s decision is binding and the parties are bound to accept the decision.

The benefits of the appraisal process are that it can be faster and less expensive than litigation. It can also be less confrontational, as the appraisers are hired to evaluate the damages and not to advocate for one side or the other. Additionally, the appraisal process can be beneficial for policyholders who may not have the financial resources to engage in a lengthy legal battle with their insurance company.

However, there are also risks associated with the appraisal process. Pursuant to the terms of the insurance policy, the policyholder will be bound to pay the cost of it’s own appraiser and also half of the cost of the umpire (with the insurer paying the other half). The costs of appraisal are generally not recoverable from the insurance company. That means, even if you win a favorable appraisal award, you’ll be incurring an additional expense that may, depending on the circumstances, be substantial. Another risk is that the appraisers may not accurately evaluate the damages or may not have the necessary expertise to properly assess the value of the claim. Additionally, the appraisers (or even the umpire) may be biased towards one party or another, which can lead to an unfair outcome. Finally, the appraisal process is notorious for producing results that amount to the proverbial “splitting of the baby”. Rather than fighting for the correct amount, the appraisers (or the umpire) may negotiate concessions that reduce the value of your claim and leave you with out of pocket repair expenses. 

At Parrish Law, we can help clients navigate the appraisal process (or potentially avoid it altogether) and ensure that their rights are protected. Our experienced attorneys can help clients select an appraiser who is knowledgeable and unbiased. We can also work to ensure that the umpire is impartial and has the necessary expertise to evaluate the damages and determine the value of the claim. If you are involved in an insurance claim and are considering the appraisal process (or have been forced into appraisal by your insurer), contact Parrish Law for a consultation. We can review your policy and help you determine whether appraisal is the best option for resolving your dispute with your insurance company.