THE INSURANCE APPRASIAL
Appraisal is an out-of-court dispute resolution process that resolves the amount of loss with finality. You can think of an appraisal as being like arbitration. In fact, in two of the three states where I am licensed the rules that govern the fairness of arbitration also apply to appraisal. There are rules, such as the right to cross-examine insurance company witnesses, the right to advocate, and the right to present evidence. It’s not a process run by the insurance company.
In many states appraisal also resolves the cause of loss with finality. It’s been around since before the Twentieth Century. It is meant to be a quick, speedy, fair and inexpensive way to resolve a dispute. With the right people it is indeed a fair process that leads to a good outcome.
In appraisal, the property owner nominates a person to serve as an appraiser, the insurance company does the same thing, and the two appraisers nominate a neutral umpire. These three people constitute an appraisal panel. They inspect the property and decide the amount of the loss. There is usually testimony, a review of documents, arguments by the property owner and insurer, all of which lead to a written decision. The written decision, called an appraisal award, should be paid within a deadline found in the insurer’s policy if there is full coverage of the loss.
If there is full coverage of the appraisal award the insurer pays. If the cause of the loss is not covered by the policy, the insurer does not pay. For example, if an appraisal panel decides the visible damage is due to wear and tear of material, that finding triggers a policy exclusion. Insurance policies almost always exclude wear and tear. In that scenario, the insurer does not pay the appraisal award.
Many people can help a property owner before and during an appraisal. A good builder should be there to explain the scope of repair. The more credible the builder, the better the result. When the scope of repair calls for multiple trades – such as roofers, window installers, or HVAC companies – a property owner ought to have an experienced general contractor knowledgeable in multiple trades and applicable building codes. That kind of expertise will be helpful for the appraisal panel to understand the scope of loss.
The insurance company often brings an engineer to appraisal. The engineer will explain the insurance company’s position on the cause of the damage, the impact of observed damage, and the scope of repair. An insurance company’s engineer might say hail damage was caused by a storm long ago, and as a result, there is no covered damage. An engineer might minimize the impact of wind damage, and say there is truly no problem with shingles. An insurance company engineer might say certain repairs your contract wants are not needed. A property owner has to be prepared for this.
There are three possible ways to prepare to counter such an engineer: find an engineer to counter the insurer’s engineer, ask a general contractor to do so, or be ready to cross-examine the engineer on his/her facts and opinions. Cross-examination is a guaranteed right in most states where I practice. The right way to prepare depends on all possible causes of loss and methods of repairing the damage.
A property owner can, and often should, have an advocate at appraisal. A public adjuster or attorney can serve this role. If the disputed issues are limited to the scope of the repair job an experienced general contractor may be all you need. Yet more complex disputes regarding the cause of loss can require a more seasoned advocate.
While appraisal happens out of the courtroom, property owners need to understand that it is an adversarial process. It’s almost always civil and polite, but it arises from a property owner and insurance company disagreement. In this arena it is highly unlikely the insurer will concede it is wrong. The property owner and insurance company are arguing and advocating for their opposite positions. In this arena the property owner will do best with a seasoned advocate.
Contact us if you need help with your appraisal.