Insurance appraisals determine the amount of loss, or scope of loss, with finality. In Minnesota that includes the cause of loss. In Wisconsin and Illinois, where I am also licensed, the case law is less certain as there is authority to suggest an insurer must first admit a loss occurred before there is a right to appraisal.
The law is certain that not all disputes between property owners and their insurance companies are resolved in appraisal with finality. The most common dispute not resolved in appraisal involves the terms of an insurance policy and application of law. When property owners and insurance companies dispute whether an exclusion in the policy applies, or policy limits, the forum to resolve such disputes are in court.
Interpretation of the policy and state statute are legal issues. Legal issues are resolved in a court of law by judges who apply the law. Appraisal panels are authorized to make these determinations. The appraisal panels’ “wheelhouse” is what happened on-site during the loss and the cost to repair it. Think of appraisal as a forum that makes findings of fact, like a jury would make, while courts then apply the law to those findings. The following is a list of common disputes between property owners and their insurance companies that are not determined in appraisal:
- When an exclusion in the insurance policy applies;
- Whether the policy includes ordinance and law coverage;
- Whether state law requires coverage of building code repair requirements notwithstanding what the policy states;
- Whether a broker or agent properly bound insurance coverage;
- Any allegation of a lack of cooperation by the property owner;
- Any allegation of fraud by the property owner;
- Interest on a claim;
- Bad faith;
- Insurer delays;
- Policy deadlines; and
- Statute deadlines.
The line between appraisal issues and legal issues (non-appraisal issues) becomes difficult to discern when there are disputed facts that implicate policy exclusions. Water claims are a good example.
The scope of repair needed after a water claim should be decided in appraisal. Yet many policies exclude certain water events, like a flood or leakage and seepage over time. To maximize the effectiveness and enforceability of an appraisal award, it is wise for both the property owner and the insurance company to craft questions on the appraisal award form that are relevant to what is covered. An appraisal panel can be asked whether the water event happened suddenly or over a long period of time. The answer to this question – a finding of fact – will then allow the parties to apply or not apply the policy exclusion of leakage or seepage over time.
Hail claim appraisals routinely decide whether the hail damage is recent or longstanding. If it is recent, there is coverage, but if the hail damage predates the statute limitations there is no coverage. While some insurance companies in some jurisdictions want such a question to be decided in court, and there is authority for that outcome, everyone benefits from the efficiency handling the question in appraisal.
In this scenario, the appraisal panel should be sophisticated people well-versed in spotting hail damage on shingles, its age, and cost of repair. That is a level of expertise not found in typical juries. I routinely encourage clients to appraise such disputes so long as at least two of the three members of the appraisal panel will fairly decide the evidence. The property owner can control the quality of his or her appraiser. The property owner cannot completely control the quality of the umpire. For this reason, property owner will go to court to ask a judge to nominate a true neutral umpire.
Should you have any questions about the appraisal process, continued to read my various blog post on the topic or feel free to send me an email at: ed@beckmannlawfirm.com.