What is an Appraisal?
Most first-party homeowners policies contain an appraisal provision. An appraisal provision is something that allows the insured and the insurer to resolve a difference about the amount of a particular loss.
Most of these appraisal provisions have some common provisions. One, either party may invoke the appraisal provision by making a written request for appraisal. Two, within 20 days of that written request, both parties have to appoint their appraiser. Three, these appraisers have to be, one, competent and then, two, some combination of either impartial, disinterested, or something along those lines. Three, the appraisers, if they can't agree on the amount of a loss, then the appraisers select an umpire. The next provision is if the appraisers are unable to agree on an umpire, then you can appeal to a local court of record to select that umpire for you.
Next provision, if either the two appraisers or one appraiser and the umpire, so any two of the three, agree on the amount of loss, that becomes the agreed amount of loss under the policy and is payable by the insurance company, assuming that every portion of the amount of loss is covered. Then the final provision is that each party will pay for the cost of their appraiser, and then the parties split the cost of the umpire.
The scope of appraisal should be the amount of the lost and nothing more. The appraisal should not consider coverage and the appraisal should not consider the cause of the loss, which is often inextricably intertwined with coverage. Once the appraisal process begins, the insurer loses all control over the claim. Once each party appoints their appraiser and the appraisers agree on the umpire, neither the insured nor the insurer have any control whatsoever over the appraisal process. It's all up to the appraisers and the umpire.
About the Author: Nathan D. Meyer is a Partner at the Phoenix law firm of Jaburg Wilk. One of his specialties is insurance coverage and bad faith. Nate advises and represents insurance clients in coverage, bad faith, contribution and liability matters.