Appraisal clauses in commercial property insurance policies are often utilized to resolve potential disagreements between carriers and policyholders on the amount of loss. If a business suffers a severe loss and files a property damage claim and the insurer returns with a low amount, the policyholder or the insurance provider may invoke the appraisal clause before pursuing legal action. While there are benefits to this process, in many cases it is mandatory once invoked by either party and can often lengthen the duration of processing an insurance claim. Because of this, it’s important to understand how long an insurance appraisal can take.
The Insurance Appraisal Process
An insurance claim appraisal helps to determine an accurate amount of compensation the insurance company should pay out after a covered event causes damage to a commercial property. 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 an 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 help to resolve the claims dispute without the policyholder filing a lawsuit, which may be a faster, lower-cost option to resolve a claim.
Once the appraisal clause is invoked, the insurer and the policyholder must retain a competent, independent appraiser to estimate the damage and determine the amount of loss. The appraisers will meticulously inspect the damaged property, taking into account all relevant details and gathering essential information and documentation. The length of this inspection can vary depending on the extent of the damage, and may take several days to complete. Once complete, the appraisers will each submit their findings for review to determine an appropriate amount.
If the parties’ appraisers cannot agree on an amount, an umpire will be appointed to make the final decision. Sometimes it can take months for each side to hire an appraiser before they separately assess. Most policies specify a period within which each party must hire an appraiser and some policies may also provide a time limit for an umpire to be chosen. However, there are no 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 the payment of valid claims.
Factors That May Influence the Length of the Appraisal Process
A few factors can influence the timeline of an insurance appraisal, one of which is the extent of the damage to the property. For instance, if a commercial property suffers minor flood damage after a few days of heavy rainfall, an appraisal may take a shorter amount of time to complete. However, if a major fire causes extensive property damage, it may take much longer for an appraisal to be completed.
Another factor that may increase how long an insurance appraisal takes is the size of the property itself. Smaller boutiques, storefronts, and office spaces may not take very long to be thoroughly reviewed by both appraisers and thus the corresponding claims disputes may sometimes be resolved more efficiently. However, if a commercial property owner has a large warehouse or owns several properties that have all been compromised in a catastrophic event, the process may take months or even longer in some circumstances.
Providing incomplete or insufficient information for the appraiser to review can also result in a lengthier appraisal process. Ensuring you take and maintain a good amount of photos and videos of the damage, as well as proper documentation of the state of the property before the damage occurred, is incredibly important to securing a fair payout by the insurance company.
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 they receive all photos, videos, 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 must provide reasoning if the claim has been denied. This time can be extended by 45 days if the insurer properly notifies the policyholder that more time is needed. 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 decide.
While there are no uniform 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 if they cannot agree on the claims assessment. If the appraisers cannot agree on an umpire, they may request a judge or court of record to decide.
- Once an umpire is selected and the appraisers have each investigated the claim, they will separately determine the amount of loss and submit a written report of agreement, which will then detail their assessment of 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.
Why The Appraisal Process Can Negatively Impact the Policyholder
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 anyway. This becomes an additional waste of time, money, and resources, ultimately creating an even greater power imbalance 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 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.
Commercial Property Insurance Claim Attorneys
Dealing with any sort of property damage can be frustrating for business owners looking to get back to work. These feelings are often only exacerbated in the event an appraisal is necessary for the policyholder and the insurance company to agree on the amount owed under the policy.
At Raizner Slania, our experienced commercial property insurance claims attorneys are leading the way in establishing a positive and safe appraisal process for Texas business owners to counter the bad faith efforts of insurance carriers.
