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Many homeowners and business owners find themselves disagreeing with their insurance company’s analysis of their insurance claim. However, most are unaware that they can dispute the insurance company’s findings via the insurance appraisal process! Even though the policyholder (you) submits a contractor’s estimate, receipts for repairs or materials, or even photos showing damages that the insurance company did not include for repairs… they still won’t budge.

For many, the only available option to resolve a dispute with the insurance company may be a clause buried deep within the policy. It’s called The Appraisal Clause – also know as The Appraisal Provision. Now, don’t let this scare you. It may seem like a fancy clause that would take a law degree to understand. However, the simple way to understand it is that it’s the insurance industry’s version of arbitration. (Insurance Appraisal & Arbitration are two separate things. We’ll provide differences later in the article.

Can I Use An Insurance Attorney To Dispute My Claim?

The Appraisal Clause was developed to curb the number of lawsuits filed against insurance companies where the amount of damages is in dispute. Assuming you acquired an estimate of repair to your property for $100,000, from a contractor or insurance claims expert. Your insurance company has created an estimate for $30,000. This would be a clear dispute between the amounts of damage. This type of dispute is exactly what the Appraisal Clause was developed to resolve.

State regulators have provided parties on both sides of an insurance policy with a less costly mechanism to resolve disputes with the Appraisal Clause. Let’s face it; the courts are filled with lawsuits. The Insurance Appraisal Process allows for the dispute to be settled out of court. It was originally created to help insurance companies; however, it’s actually best for both parties. Using Insurance Attorneys and law suits can get tied up in court for years. The Appraisal Provision was designed to keep these disputes out of court for a more timely resolution. In most, if not all states, you will find this rarely triggered clause in policies.

Insurance Claim Attorneys will usually represent policyholders for bad faith practices. Bad Faith is a whole other issue and sometimes happens after the Appraisal Process has been completed. Bad Faith claims are for much larger suites against insurance companies when it is alleged that they did not act with good faith of the policy they sold to the policyholder. In summary; disputes between the amount of damages and repairs will follow the Appraisal Process before entering into the legal system. Many Insurance Attorneys will also advise the policyholder to engage in the Appraisal Process before any law suites will begin.

OK, But How Does It Work?

The Appraisal Provision allows the policyholder (you) to hire an independent appraiser to determine the value of their damages. In turn, the insurance company will also hire their own independent appraiser. The two appraisers will then get together and select an umpire. The umpire is basically the arbitrator, or what you might call the judge. If there is a disagreement between the two appraisers, they can present their differences to the umpire for a ruling.

OK; so far so good, the basics of the insurance appraisal process are beginning to come together. We have an independent appraiser for the policyholder. We have an independent appraiser for the insurance company. Finally, there is an Umpire. These three individuals are known as The Appraisal Panel. The object of the Appraisal Panel is to set or determine The Amount of Loss. The Amount of Loss is the total dollar amount needed to return the damaged property back to its original condition, either by repair or replacement.

Once the Appraisal Panel is set, the policyholder’s chosen appraiser and the insurance company’s chosen appraiser will review the documents, estimates, and differences between them. The two independent appraisers will try to discuss and resolve the differences in damage and in cost. For example; the insurance company may determine that brick on a home does not need to be replaced. Where as, the contractor or appraiser for the policyholder says that it does have to be replaced. The two appraisers will discuss their reasons for their position and try to come to an agreement, first if it should be repaired or replaced, and secondly the cost to return the brick back to it’s original condition prior to the loss.

One benefit of the Insurance Appraisal Process is that the two independent appraisers have not been subject to the bickering and anger between the policyholder and the insurance company. Basically, it’s the hope that cooler heads will prevail. All the appraisers really have is the amount of the damage and the difference between the two estimate numbers. They do not have the previous baggage or anger that led up to the Appraisal. The process was designed so that these two individuals, who have no interest in the outcome, could discuss a settlement based on the facts presented to them.

Sometimes issues arrive where the two independent appraisers can’t agree on certain items. In this event, the two appraisers will submit their differences to the chosen umpire. The three will discuss the issues and try to reach an agreed settlement of the differences. As stated above; the settlement or final number is called The Amount of Loss. The final amount is known as the Appraisal Award. The Award is signed by the individuals who agree on The Amount of Loss. However, only TWO of the three individuals need to agree. (An agreement between the two independent appraisers, or the umpire and either appraiser) Once any TWO of the three individuals on the Appraisal Panel sign the award… the dispute is over! The amount on the Award binding and is paid by the insurance company, to the policyholder.

Below, you will find a sample of a typical Insurance Appraisal Clause included in most policies. Keep in mind that policies are different in each state. Therefore, you should refer to your own policy to see if this exists.

“APPRAISAL – If you and we fail to agree on the amount of loss, either one can demand that the amount of the 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.”

Is The Insurance Appraisal Process an Option?

Appraisal is always an option. However, it’s wise to point out that Appraisal is usually an option when there is a substantial difference in the amount between the two estimate totals. For example; let’s say a fire completely destroys a house and its contents. The differences between what the insurance company wants to pay and what you wish to receive is $5,000. In this situation, the Appraisal Process is not the best idea. After paying the fees involved for the appraisal, you may not end up with much of the $5,000 being disputed.

Now, if we take the same fire that destroys the property and the dispute between you and your insurance company is $40,000, appraisal may be your only option. You now have a chance to recover substantially more money than originally offered.

Also, Appraisals are only applicable when the insurance company has not challenged coverage. In other words, the insurance company has not denied the claim. The policy may exclude the damages to the property, such as with a flood. If there is no coverage for the damages then the Appraisal Process is not an option. Nor can the Insurance Appraisal Process be used to interpret coverage. The process is to determine The Amount of Loss only. Appraisal is also limited to property damage (structures and/or contents), additional living expenses should they become necessary and/or an interruption in business (if commercial) causing monetary damages. There is also no legal “evidence,” heard in most Appraisals (i.e. if the policyholder is challenging the validity of policy limits because (a) there are multiple claims that caused damage or (b) the agent or insurer set or recommended a specific amount of coverage, evidence as to such limits will not be heard and policy limits may not be at issue.) Appraisal cannot address areas of bad faith and personal injury, either. Invoking the process does not eliminate the need to comply with the other policy provisions. This means that the deductible and/or any policy limits will still apply.

Appraisal is only applicable if there is a good faith dispute between the policyholder and the insurance company as to the amount necessary to repair or replace property. As with our example earlier, if the insurance company is only willing to pay $10,000 for damage and the policyholder has obtained legitimate bids in excess of $15,000, Appraisal is probably not worth demanding because the cost of the Appraisal Process is probably greater than the amount in dispute. Usually, however, the discrepancies are far more alarming; where the insurance company estimates the Amount of Loss for $75,000 vs. legitimate bids provided to the policyholder by several contractors of $200,000 or more.

Beginning The Appraisal Process.

Either the insurance company or the policyholder can demand Appraisal. However, such a demand must be made in writing and usually within specific time limits set forth in the policy. Once the demand for Appraisal is made, as explained earlier, each party, the insurance company and policyholder, appoints an independent and competent party to serve as their Appraiser. (If you wish to invoke the appraisal clause in your policy you need to submit a letter to your insurance company. Find more information here )

Choosing An Independent Appraiser.

It’s important to understand that a good Appraiser is someone who understands insurance issues and who has firsthand knowledge of construction and replacement costs. A good Appraiser is someone who can secure binding bids from reputable sources to repair and replace the damaged property, knows building codes, and can articulate unforeseen costs of repairs. Usually this entails an enormous amount of research, such as costs of thoroughly repairing a structure to its pre-claim condition, cost of replacing the structure with items of like kind and quality, cost of safely clearing the land or bulldozing the property (in cases of fire and/or major contamination), cost of repairing and replacing contents with items of like kind and quality, and in some cases, the additional living expenses incurred if the home is uninhabitable.

Now, please do not get confused! An Insurance Appraiser is not a real estate appraiser. He or she is an Insurance Claims Expert on costs and bids to repair and replace. It’s recommended to appoint an Independent Appraiser who is a specialist when it comes to the Insurance Appraisal Process and also Insurance Claims Handling. People requesting assistance in the past have asked if the following experts with the following backgrounds are good choices:

Structural Engineers: This person may be a structural expert and could probably provide a good estimate to replace a building, but what about the contents (furniture, food, etc.) damage? Do they know anything about the insurance policy, the claims process, the software used by insurance companies, the Appraisal Process?

General Contractor or Construction Superintendent: Again, excellent choice for generating a structural estimate, but is most likely not familiar with insurance claims… and even more importantly, the Insurance Appraisal Process.

Construction Attorney: A Construction Attorney most likely has knowledge of construction contracts and issues that building contractors have. Do they know anything about the insurance policy, the claims process, the software used by insurance companies, the Appraisal Process, the contents damaged? (NOTE: If you retain an attorney as Appraiser, remember, there is NO attorney/client privilege because the attorney is being hired as an Appraiser, not as an attorney.)

Insurance Claim Attorney / Lawyer: Keep in mind that the process was designed to keep these types of disputes out of court. You can surely use an attorney as your appraiser; however, the fees can exhaust your reward. Attorney’s fees range between 30% and 40% of the amount collected. This will dig deep into the net amount you receive. An Insurance Attorney will also have expert knowledge of the policy. However, the Appraisal Provision clearly notes that no policy provisions will apply. Has the attorney represented their clients in many appraisals or mostly in court cases? How familiar are they with the Appraisal Process, building costs, construction practices, the contents damaged? Does the attorney know anything about the software used by insurance companies? (NOTE: If you retain an attorney as Appraiser, remember, there is NO attorney/client privilege because the attorney is being hired as an Appraiser, not as an attorney.)

Independent Insurance Appraiser: Doesn’t it make sense to hire an individual who is an expert of the process in which you are about to engage? You’ve heard the expression, “Would you go to your auto mechanic if you needed brain surgery?” It is highly recommended to use a qualified, professional, Insurance Appraiser. This professional will already know the Insurance Appraisal Process. They will also have qualified professionals (engineers, contractors, inspectors, etc.) at there disposal to back up their analysis.

Regardless of background, the person appointed as Appraiser needs to be a skilled communicator and advocate. He or she should not be unreasonable. They should know about the insurance policy, the claims process, the software used by insurance companies, the Appraisal Process, contents damage, structural damages, building costs and processes, as well as materials and building codes. Makes sense, right?

What if We Disagree With The Result?

After the ruling is made, you may be able to set it aside if the opposing Appraiser is not independent. This holds true for either side; policyholder or insurance company. That is why it is suggested that the Appraiser be independent.

If fraud, accident and/or mistake did not take place during the appraisal process, and if the opposing Appraiser was independent and competent, you are stuck with the order made by the Umpire. It is binding on both parties with few exceptions (NOTE: an exception does exist in certain states like Oklahoma, where the award is only binding on the submitting party; an exception may also exist if the policy language allows the insurance company the right to reject the claim even after Appraisal). While in most states the final signed award document is binding, it is not a judicial act and the instrument cannot be entered at the courthouse as a legal judgment.

Advantages to the Appraisal Process.

Once a ruling is made, the insurance company usually has a set period of time (30 to 60-days depending on state) to make payment. Usually the final payment excludes any payment(s) made previously to the policyholder (make sure this is an issue taken into consideration in advance).

Sometimes, the Insurance Appraisal Process can actually help prove bad faith, should that have occurred. For example, if the insurer offers $5,000 to repair a problem but the Appraisal results in a signed award of $30,000, arguments that bad faith (low-balling as an example) occurred may be bolstered.

Remember that the Insurance Appraisal Process can work if it is not abused. Moreover, it is a way to recover for property damage without having to resort to the legal system, which is more costly and time consuming.

Appraisal is NOT Arbitration!

To provide a simple understanding of this process I stated “…the simple way to understand it is that it’s the insurance industry’s version of arbitration.” Technically, the process is NOT an arbitration or mediation and the umpire is not an arbitrator, mediator, or judge. Insurance Appraisal, Mediation, and Arbitration are separate things. Visit for more detailed information.

Should I Demand Appraisal?

Because of its binding nature you should CAREFULLY weigh this option. If you go through this process and come out with a disappointing result, you are stuck with it unless fraud, accident or mistake took place or if the opposing Appraiser was neither independent nor competent. This most likely would not happen and if any such thing did, it would be very difficult to prove.

Nothing is risk free. No one can provide you a guarantee in this process but then again, no one can guarantee the outcome of any other option either. Be mindful of the time restrictions provided in your policy governing the Appraisal Process and carefully select an Independent Appraiser. Be even more careful when it comes to the Umpire. Work closely with your Appraiser in order that he or she represents your interests properly. The key to the entire Insurance Appraisal Process is to…

Level The Playing Field So The Process Works Fairly For Both Sides… Not Just The Insurance Company!

About The Author

Copyright of Insurance Claims Group, Inc. & Joseph P. Brennan: Joe Brennan is President and owner/operator of Insurance Claims Group, Inc., a national independent adjusting, appraisal, and umpiring firm. Joe has been in the property loss business for more than 24-years. His loss experience began as a contractor / builder, which included water and fire damage restoration repair services. After 20-years of insurance restoration estimating and repair experience, Mr. Brennan became a licensed independent insurance claims adjuster. Joe has maintained his IICRC Certification in both Fire and Water Restoration and also maintains active adjuster licenses in 10-states. Throughout his career, he has handled many multi-million dollar losses, both commercial and residential. The amount of combined experience and knowledge of new construction, damage repairs, and insurance claims handling has advanced his ability to act as a Dispute Appraiser and Appraisal Umpire. Mr. Brennan is highly educated with the appraisal process and has acted as an appraiser and umpire on dozens of claims. Mr. Brennan can be reached at;

Insurance Claims Group, Inc.

2054 Kildaire Farm Rd., Suite # 426

Cary, NC 27518

Ph: 919-669-9111

Fx: 919-573-9595

website: &

Copyright of Insurance Claims Group, Inc. & Joseph P. Brennan: You may freely republish this article, provided the text, author credit, the active links and this copyright notice remain intact.

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