Filing an insurance claim can be a complex process depending on the type of claim and the policy itself. This is true for many business and commercial property owners that have dealt with insurance disputes this year. With the many complexities that come with filing a commercial insurance claim, it’s important to consider an appraisal. An appraisal clause can be found in most insurance policies and, when invoked properly, it can help maximize the value of commercial insurance claims.
Commercial Appraisal Process
An appraisal clause is designed to be a way of reaching a settlement when the insured and the insurer disagree over the amount of a loss; and, either party can invoke the appraisal process. An insurance appraiser can be an adjuster, contractor, or an engineer who is competent to determine the amount of loss. However, before an appraisal, both the insurance company and the insured should attempt to agree on a valuation of the damages.
The appraisal clause can be utilized when there is a dispute over the cost to repair the damaged property once a claim for loss has been filed. Appraisals are binding contractual processes used to settle valuation disputes when policyholders and insurers cannot agree on the amount of loss. However, disputes centering on coverage or causation issues cannot be decided by appraisal.
Under a typical insurance policy, an appraisal may be requested by either party. Then, each party will select a competent and impartial appraiser within a limited amount of days after receiving a written request from the other party. Following this, the two appraisers will then choose an umpire. A property insurance umpire refers to a competent, disinterested, and impartial individual charged with making a decision regarding the property value or amount of property loss. However, in the event the appraisers cannot agree on an umpire within a certain amount of time, either party can typically ask a court to appoint the umpire.
Maximizing Commercial Insurance Claims
In order for commercial property owners to fully maximize insurance claims, it’s important to hire experts who understand the process from start to finish. Understanding whom to select as an umpire is particularly crucial, as they must be entirely impartial to the issue in order to have a successful commercial property appraisal. If not properly executed with impartial experts for both appraisal and umpire roles, an appraisal can quickly compound claim problems and result in further costly delays for business owners.
When Not to Invoke an Appraisal Clause
Despite the potential benefits in invoking an appraisal clause for valuation disputes, appraisal is not always an appropriate course of action.For instance, if a claim presents disputes involving overall policy coverage, provisions, deductibles, or how much was previously paid on the claim, appraisal is probably not a good option. Additionally, because appraisal is not free (I.e., the appraisers and umpires must be compensated for their time), the difference in the disputed amount should be substantial enough for the appraisal to be worthwhile.
Insurers May Not Conduct Reasonable Investigations
Unfortunately, insurance companies can use appraisal clauses or provisions as a double-edged sword. Insurers can be discouraged to conduct a reasonable investigation of claims at the beginning of the appraisal process assuming most policyholders either do not understand the appraisal provision and will not invoke it. Insurers may also assume the insured will not have the resources or the desire to pay their own appraiser and the fee of the umpire. Insurance companies may attempt to use appraisal clauses to impose unnecessary burdens on the insured and to eliminate the insured’s potential to file a lawsuit against the insurance company and its adjusters for violations of the Texas Insurance Code, among others.
It’s important to note that there are also no guarantees once an appraisal is invoked and conducted. Once an award is signed, there are very few options in getting the award overturned unless fraud, collusion, or similar issues can be proven. By the same token, even if the amount of an award is favorable to the insured, the insurer retains its ability to deny the claim and not pay the award. Given these tricky issues, it’s important to consult with an experienced insurance appraisal attorney to see if further legal action against your insurer for breach of contract or acting in bad faith is appropriate.
Houston Complex Appraisal Attorneys
While invoking an appraisal clause can have many benefits for commercial property owners, insurers may still attempt to deny, delay, and grossly underpay valid claims. When this happens, the insurance coverage attorneys at Raizner Law can help. At Raizner Law, we’ve handled large, complex insurance disputes with every major insurance company, delivering successful results for our clients and holding big business accountable. If you are a commercial property owner considering appraisal, contact us today to ensure the best interests of your business are met.