Most people when they first hear the word appraisal think of the word in the context of appraising a home for tax purposes or mortgage purposes. Some, may think of appraisal in the context of appraising an item such as jewelry or art. However, the word appraisal, now days, is often being used by insurance companies in homeowner’s and business owner property claims to determine the value of damages in a disputed claim.
Chances are, if read your homeowner’s or commercial insurance policy, there is an appraisal provision contained within it. Appraisal provisions vary from insurance company to insurance company, but the underlying basis and process is pretty much the same. Before you head down the path of appraisal, make sure you read your policy and understand the process because once you commit to the process it can be very difficult, if not impossible, to get out of.
Below are some common questions and issues to understand before going down the path of appraisal.
First of all, it is important to understand what the appraisal process is in regards to insurance claims.
If you and your insurance company disagree as to the amount of your damages stemming from your insurance claim, either of one you can demand that the value of your loss be determined by an appraisal. An appraisal sets the value of your loss. If you proceed under the appraisal process, you are essentially agreeing to have the value of your loss determined by the process no matter what the outcome might be, favorable or not.
Once an appraisal is demanded by one party, it sets in motion deadlines to appoint an appraiser on both sides and for those appraisers to agree on an umpire. If the appraisers can’t agree on an umpire, then they can request a court to appoint the umpires. The deadline to respond to an appraisal demand is often 20 days form the demand for appraisal but it can vary depending on your insurance company and policy terms. You will have to appoint and disclose who your appraiser is to the insurance company within that time period. You will also have to bear the expense of your appraisal and half of the expense of the umpire. This can get very expensive for a homeowner or business owner because you will have to pay for their time performing the appraisal, which includes any inspections, meetings, estimates, or analysis during the process. Once appraisers have been appointed by each side, the appraisers will inspect your property and discuss your damages between them. They will each come up with an estimate. If the appraisers both agree on the damages, then they will determine the monetary value of those damages. The number they come up with will be binding and set the amount of your damage loss, even if you file a lawsuit later regarding the damage claim. If the appraisers disagree as to the value of the damages, then an umpire will determine the monetary value of those damages and the number determined by the umpire will be binding, even if you file a lawsuit later regarding the damage claim. There have been some courts that have overturned a prior appraisal amount or set aside an appraisal, but it is very rare and case specific.
What do you do if your insurance company invokes appraisal during your claim? Know your rights. Read your insurance policy to understand the appraisal process provision. Make sure to note your deadline to respond to the appraisal demand. If possible, seek advice or counsel from an attorney if you do not understand your policy or the appraisal process.
The appraisal process can be stacked against you because it is typically a favorable process for the insurance company. One reason the process can be stacked against you is because the insurance company typically has “go to” appraisers they appoint in appraisal processes that tend to underestimate damages and overlook areas. They are not independent and they are often biased towards the insurance company.
In addition to seeking advice from an attorney as to your rights or how to proceed, you can also do research on the appraiser appointed by the insurance company. It’s always a good idea to request a resume from the appraiser or your insurance company for that appraiser, review the appraiser’s licensing or certifications through a government website or search engine like google, and check with the Better Business Bureau in your area for complaints. If you come across information that is concerning to you, if possible, send a letter to your insurance company outlining your issues to the appraiser or contact an attorney to preserve your rights. With an appraisal process every day counts and as delay in acting could cost you hundreds if not thousands of dollars in loss payment.