What is an appraisal under an insurance policy?

You’ve suffered a catastrophic loss at your home or business. Your insurance company has issued a payment for the damages but you disagree with the amount and have submitted competing estimates to your insurance company. Now your insurance company is invoking appraisal under your insurance policy and you have no idea what to do. 

Appraisal is an alternative dispute resolution method that is available in many property and casualty insurance policies throughout Florida. Generally, when an insurance company or an insured requests appraisal, each one appoints an independent appraiser to evaluate the loss. Those two appraisers will generally meet and attempt to reach a resolution on the insurance claim. If they cannot agree, their differences will be submitted to an umpire. The umpire, selected by both appraisers in most cases or court appointed in others, will evaluate the loss and issue his award which will then be signed by one or both appraisers. The umpire’s award is the final say on the insurance claim for the items appraised. 

Why would an insurance company want to participate in appraisal if there’s the possibility that they will have to pay more money? For one, the appraisal process is a much quicker and much less expensive alternative to litigation when an insurance claim has been underpaid. Secondly, the insurance policy may require appraisal as a precondition to litigation of an insurance claim. Third, there is a value to a closed claim. An open claim means that the insurance company may continue to have to pay damages to the property. Appraisal gives finality and insurance companies like finality. 

Why would an insured want to participate in appraisal? It is a quicker, less expensive alternative to litigation and the policy may require the appraisal if the other side asks for it.  

There are downsides to appraisal. If you go to appraisal, receive payment and now discover additional damages to your home or business, it is unlikely that you will be able to ask the insurance company to pay for those additional damages. Additionally, appraisal is not always final. There may be additional coverages under your insurance policy which cannot be appraised like law and ordinance coverage. Lastly, the insurance company may be trying to skirt their obligations to adjust the loss. Appraisal is NOT supposed to be a tool to adjust the loss, it is supposed to be the final step once the parties have tried to resolve the claim under the policy. Many insurance companies try to push cases into appraisal when there’s been no actual dispute between the parties, just an expected dispute. 

Lastly, there are issues that simply cannot be appraised. If your claim was totally denied, appraisal is improper. If your claim involves an interpretation of coverage under the policy, appraisal is improper. 

If you’ve received an appraisal demand from your insurance company or your public adjuster suggesting that appraisal is the next step in the claim process, contact Alvarez Law Group today!

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