What is the appraisal clause and how does it work?
The appraisal clause is a provision embedded into virtually all homeowner policies. It is meant to resolve disputes concerning the “amount of the loss”. As one might imagine, it would be difficult and a poor use of time to present such issues to a jury, so the policy hopes to amicably resolve this type of dispute outside of the courtroom. Most attorneys will tell you the appraisal clause is required to be enacted before a lawsuit to hopefully resolve the dispute over the value of the damages. The appraisal clause is subject to interpretation as to whether something “is or is not damaged”, but always seeks to resolve the dollar dispute on an item which is the parties agree is damaged. The appraisal works by allowing each party (the insurer and the insured) to retain an independent (“disinterested” or “impartial” and “competent”) appraiser. Each party bears the expense of their respective appraiser, and the appraisers will then attempt to negotiate together and come to an agreement on the scope and dollar amount of the loss (damages). If they cannot agree, then they mutually select a third person who acts as the final umpire. This third individual must also be impartial. The two appraisers then submit their differences to the umpire. The umpire then decides which of the two appraisers is most correct, and the claim amount is then settled based on the umpires recommendation.
An ideal appraiser or umpire:
• Will render a timely and impartial decision.
• Is competent.
• Observes high standards of conduct.
• Has integrity.
• Has the ability to render an intelligent decision.
• Commands respect.
• Recognizes a responsibility to the public.
• Guards the integrity and fairness of the appraisal process.
• Can promote an efficient and just process.
• Is able to maintain the confidentiality of the process.
• Is trustworthy.
Reliable Property Adjusting, Inc. (RPA) provides these services and can act as either an independent appraiser or an umpire in fulfillment of the appraisal clause of any residential insurance policy. To learn more or to request our assistance, please see our Appraisal Services pages.
Here is the appraisal clause as it usually reads in a standard homeowner policy:
APPRAISAL – If you and we fail to agree on the amount of loss, either may demand that the amount of loss be set by Appraisal. If either makes a written demand for Appraisal, each shall select a competent, independent appraiser. Each shall notify the other of the appraiser’s identity within 20 days of receipt of the written demand. The two appraisers shall then select a competent, impartial Umpire. If the two appraisers are unable to agree upon an Umpire within 15 days, you or we can ask a judge of a court of record in the state where the residence premises is located to select an Umpire. The Appraisers shall then set the amount of the loss. If the Appraisers fail to agree within a reasonable time, they shall submit their differences to the Umpire. Written agreement signed by any two of these three shall set the amount of the loss.