Some disputes between property owners and insurers are litigated (court hearings and trials), while others are sent to an alternative forum. That alternative is appraisal, a process that I outline here. Years ago, the Wisconsin Legislature endorsed appraisal as an alternative forum for parties to resolve disputes about the scope of the loss. If an insurance policy includes an appraisal provision, that language must conform to form policy language from the Wisconsin Department of Insurance.
The following is the appraisal language from the Department of Insurance:(L) Appraisal. In case the insured and this Company shall fail to agree as to the actual cash value or the amount of loss, then, on the written demand of either, each shall select a competent and disinterested appraiser and notify the other of the appraiser selected within twenty days of such demand. The appraisers shall first select a competent and disinterested umpire; and failing for fifteen days to agree upon such umpire, then, or request of the insured or this 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 actual cash value and loss to each item; and, failing to agree, shall submit their differences, only, to the umpire. An award in writing, so itemized, of any two when filed with this Company shall determine the amount of actual cash value and loss. Each appraiser shall be paid by the party selecting him or her and the expenses of appraisal and umpire shall be paid by the parties equally.
Insurance policies are expected to have form policy language that matches this clause.
What disputes are appraised and not litigated? Disputes about the amount of loss for what an insurer admits is a covered event are appraised. If an insurance company admits the hailstorm, fire, or other loss event occurred (usually by paying something), the amount they must pay should be appraised. That is the outcome of several federal Wisconsin court cases, including a case in which I recently represented the property owner.
When an insurance company denies the loss event ever occurred the dispute is litigated. Insurers may argue a property owner lied about the loss event and committed fraud. Fraudulent claims are not appraised. A court of law is the place to determine the elements of fraud, like intent or prejudice. Appraisal is not geared to handle issues like that. Appraisal is limited to understanding the scope of loss, or amount of loss, not larger, more difficult issues handled in court.
In addition, how the policy operates is litigated and not appraised. How an exclusion reads and applies is handled in court. Think of appraisal as the forum to handle a limited dispute: the extent of damage and the cost to address it. Nealy every other dispute between insurer and insured is litigated.
If you would like to read the recent case I referred to above that was decided in Madison, Wisconsin, send an e-mail to me. You may e-mail me any of your questions about appraisal in Wisconsin at ed@beckmannlawfirm.com.