An appraisal clause is often found in commercial insurance policies as a method to resolve disagreements between carriers and policyholders on the amount of loss. For example, if you file a property damage claim after your business suffers a severe loss and the insurance company offers you a low amount, rather than immediately hiring a lawyer, you or the insurance company may invoke the appraisal clause to determine the amount of damage. While there are benefits to the appraisal process, it is mandatory once invoked by either party and often lengthens the duration of processing of an insurance claim. Because of this, it’s important to know just how long an insurance appraisal can take.
The Length of the Insurance Appraisal Process
While many commercial property owners would like the insurance claims process to be quick and easy, this unfortunately is often not the case. Property damage insurance claims are often complex and policyholders can be easily taken advantage of in attempt to get back in business. However, if the insurance provider and the insured cannot agree on the value of a claim, either party may choose to have an appraisal. An appraisal may be used to resolve the pricing dispute without having to file a lawsuit, which may be a faster, lower-cost option to settle a claim.
Though an appraisal may be faster than a lawsuit, it can and often does impact the overall length of the claims process. Once a party invokes the appraisal clause, the appraisal is binding on the parties for the amount of loss. Further, each party must retain a competent, independent appraiser to estimate the damage and determine the amount of loss. If the parties’ appraisers cannot agree on amount, an umpire will be appointed to come to a decision. Sometimes it can take months in order for each side to hire an appraiser before they separately assess. Most policies specify a time period for each party to hire an appraiser and some policies also may provide a time limit for an umpire to be chosen. However, there are not restrictions on how long the total process can take—some may take months, while others take years. Fortunately, there are Texas laws that may deter insurance companies from using the appraisal process to delay payment on valid claims.
The Appraisal Process and The TPPCA
The Texas Prompt Payment of Claims Act (TPPCA) provides for various time constraints that are triggered once a policyholder files a property damage claim. For example, insurance companies must begin investigating a claim once it receives all photos, videos, other items, statements, and forms requested of the claimant. Then the insurer has 15 days to notify the policyholder whether the claim has been accepted or rejected and provide reasoning in the event the claim has been denied. This time can be extended to an additional 45 days, if the insurer properly notifies the policyholder that more time is needed to make a claims determination. The insurer has 60 days to pay valid claims from the date the insurer receives all necessary items, forms, and statements from the policyholder to make a determination. While there are not uniform time periods by which the appraisal process must be complete, the process generally follows the same steps:
- Both the insurance company and the policyholder must select competent and impartial appraisers to investigate the claim and make initial findings after receiving a written request for an appraisal from the other.
- The two appraisers will then select an umpire in the event they cannot agree on the claims assessment. If the appraisers cannot agree on an umpire, they may request a judge or court of record make the decision.
- Once an umpire is selected and the appraisers have each investigated the claim, they will then separately determine the amount of loss and submit a written report of agreement, which will then be the final amount of loss.
- If the appraisers fail to agree on the amount of loss, they will then submit their different valuations to the umpire who will make the final determination.
Insurance Providers Can Take Advantage of the Appraisal Process
Despite the benefits that invoking an appraisal clause can bring to resolving insurance claim disputes, it can often be disadvantageous to the policyholder. One of the greatest disadvantages for insureds is that the insurance company can retain the right to deny the claim regardless, even after an appraisal award has been determined. This means that not only would policyholders have to wait months to go through an appraisal and pay for the appraisers and umpire, but then the insurer could still deny their claim anyways. This becomes an additional waste of time, money, and resources, ultimately creating an even greater imbalance of power between the policyholder and the insurance company.
In other instances, the amount in dispute may be too small to make an appraisal worthwhile, especially considering the policyholder must contribute to the cost of hiring both their own appraiser and an umpire. Additionally, it can also be difficult for policyholders to even find an appraiser willing to work in their best interests, as many property appraisers are more inclined to want to work with insurance companies. In tandem, impartial umpires can be difficult to find and it can also be hard to gain approval from the insurance carrier’s appraiser.
Complex Appraisal Attorneys
At Raizner Slania, we know just how frustrating the claims process can be. These feelings are only exacerbated in the event an appraisal is necessary. Our experienced complex appraisal attorneys are leading the way in establishing a more positive and safe appraisal process for Texas consumers to counter the bad faith efforts of insurance carriers. Contact us today to learn how our insurance attorneys can help guide you through a large and/or complex appraisal.