When filing an insurance claim, one often hopes that they will be able to adequately recoup the losses sustained from property damage. Unfortunately, however, this doesn’t always happen and disputes between insurers and policyholders can quickly arise. When this happens, it might be in the best interests of the policyholder to pursue an appraisal. Understanding the advantages and disadvantages of the appraisal process is crucial for policyholders.
The Appraisal Clause and Insurance Disputes
In the event a business files an insurance claim and finds itself in a disagreement with its insurer regarding the amount of loss or scope of damages, the insured sometimes has the option to invoke the policy’s appraisal clause. This process involves getting the opinion of a professional on the value of the property and damages sustained. When insurers and policyholders are unable to agree on the value of a commercial property damage claim, invoking the policy’s appraisal clause can resolve this dispute.
The process of pursuing an appraisal is a binding contractual course of action to settle valuation disputes between insurers and policyholders. In the event a claims dispute arises, in most policies, either the policyholder or the insurance company can invoke an appraisal clause. Under most policies, both the insurer and the policyholder each appoint an appraiser. The appraisers selected must be competent and disinterested professionals who will evaluate the claim, and place a valuation on the amount of loss. Appraisers can be adjusters, contractors, engineers, or another party that can adequately and impartially determine the amount of loss sustained.
Once each party selects its appraiser, those appraisers then select an umpire to review both of their findings. The umpire will then agree with one of the appraiser’s dollar figure, and sign off on that amount. The umpire’s decision is binding on the parties as to the amount of the loss.
The Advantages of Appraisal
Going through the process of an appraisal offers several benefits to policyholders. For instance, the selection of an impartial and competent appraiser can help policyholders when they are familiar with the specific dispute at hand. For disputes over business interruption claims, for example, accountants that are familiar with preparing and analyzing time element claims can be particularly beneficial for policyholders.
Selecting the right appraiser is essential and can result in a higher award than if the dispute was left to litigation. Additionally, the cost of pursuing an appraisal is often far less than the cost of litigation and the appraisal process often resolves much faster than litigation.
The Disadvantages of Appraisal
While invoking an appraisal clause can be incredibly helpful in resolving insurance disputes, there are many situations where it is not appropriate or can be disadvantageous to the policyholder. But by far the greatest disadvantage of most appraisal provisions, from the policyholder’s perspective, is that the insurance company will almost always retain the right to deny the claim even after the appraisal award is entered. This scenario, unfortunately, unfolds all too often: the parties spend months or even more than a year going through appraisal, paying significant amounts of money to the appraisers and umpire, only for the insurance company to deny the claim on coverage grounds and refuse to pay the award. This gives the insurer two “bites at the apple”: if it does not like the appraisal award, it will simply deny the claim. This is immensely wasteful, and reflects the great imbalance of power between policyholder and insured.
On a more basic level, one disadvantage to appraisal is that the difference in the amount disputed is simply too insignificant to be worth it.
Once an appraisal award is signed off on, there are limited options when it comes to pursuing more money or altering it. Appraisals can also take a lengthy amount of time to complete, as there is typically a one to two month waiting period during the process of selecting the appraisers and waiting for them to agree on an umpire. Additionally, it can be difficult for policyholders to find an appraiser willing to work for them, as they are more likely to want to work with the insurer instead. In tandem to that, impartial umpires can also be difficult to find and then be approved by the insurance carrier’s appraiser.
Texas Complex Appraisal Attorneys
While going through the appraisal process can be of great benefit to policyholders, unfortunately, insurers are still likely to try to take advantage of their insured. If an insurer doesn’t pay the appraisal award in full or fails to pay interest on the award, they can be held liable. At Raizner Law, we are leading the way in establishing a positive and safe appraisal process for Texas consumers to counter the bad faith efforts of carriers. Our experienced insurance lawyers will guide you through a large or complex appraisal. Contact us for more information on how we can help.
