This is Part Four in a series of four posts discussing Homeowners insurance policies, including terms and conditions in such policies that homeowner insureds should keep in mind, whether in obtaining insurance or in the event of claim or potential claim.
Most homeowners policies include “appraisal” provisions that can be triggered by either the insured or insurer where these parties are unable to agree on the amount of a loss. Generally, an insurance appraisal is considered a type of “alternative dispute resolution” insofar as it can help the parties avoid litigation, but it can be costly and risky for an insured.
Here is a typical appraisal provision found in Connecticut homeowners’ policies per Connecticut statutory law (Conn. Gen. Stat. § 38a-307):
[i]f [the insured] and [insurer] do not agree on the amount of the loss, including the amount of actual cash value or replacement cost, then, on the written demand of either, each shall select a competent and disinterested appraiser and notify the other of the appraiser selected within 20 days of such demand. The appraisers shall first select a competent and disinterested umpire; and failing for 15 days to agree upon such umpire, then, on request of you or the company, such umpire shall be selected by a judge of a court of record in the state in which the property covered is located. The appraisers shall then appraise the loss, stating separately the actual cash value or replacement cost of each item, and failing to agree, shall submit their differences, only, to the umpire. An award in writing, so itemized, of any two of these three, when filed with the company shall determine the amount of loss. Each party will: a. pay its own appraiser; and b. bear the other expenses of the appraisal and umpire equally. In no event will an appraisal be used for the purpose of interpreting any policy provision, determining causation or determining whether any item or loss is covered under this policy. If there is an appraisal, we still retain the right to deny the claim.
The appraisal process can be daunting for any insured and very stressful given the stakes. Further, some insurers aggressively posture in a way that can be intimidating, especially where outside counsel is involved for the insurer as is often the case. The appraisal process is in some respects relatively straightforward, and in general it takes the adjustment and valuation process out of the hands of the insurer.
Both the insurer and insured hire an independent appraiser (at their own cost), who will meet to negotiation and, hopefully, reach agreement about the amount of loss. In the event these two appraisers are unable to reach agreement, a neutral or “umpire” will be retained to resolve the disagreement in an informal setting. Umpires are appraisers themselves but when retained as an umpire are retained to neutrally assess the insurer and insured positions.
Typically, an umpire will schedule an appraisal – which is effectively just a meeting, and not a very formal affair – at which both the insured and insurer will present their positions, often through counsel, to the appraisers and umpire, following which an appraisal award will be issued. During this process, it is important for insured to have effective advocacy so that the umpire can understand the insured’s view of the situation. For instance, loss documentation and other documentation should generally be provided to the appraisal panel.
Appraisal work involves detailed, painstaking work that necessarily requires the appraiser to be familiar with loss adjustment, insurer technology including loss adjustment software, while also being effective negotiators. It is important for insureds to find the right appraiser and know his or her rights. Insurers routinely hire counsel to participate in the appraisal process, and insureds should likewise consider retaining counsel to ensure their rights are protected.
This content is provided as background and does not constitute legal advice. The attorneys at our firm have many years of experience with insurance and appraisal issues. For more information or to schedule a free consultation, contact us at info@lalorattorneys.com / 646.818.9870.
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