When you buy an insurance policy for your property – no matter whether that property is commercial or residential – that policy is most likely going to have an appraisal clause. Although few people take advantage of the appraisal process, nearly all insureds have the option of using appraisal to resolve disputes over the “amount of loss.”
When a property owner sustains damage because of, for example, a hail storm, the insurance company will typically send someone to inspect the damage and prepare an estimate. The policyholder might think the damage is worth X; the insurance company believes it is worth Y. At this time, either the policyholder or the insurance company may invoke the policy’s appraisal clause. When people hear the word “appraisal,” they usually think of a real estate appraiser, but in the insurance context it is more appropriate to think of an appraiser as a damage assessor. Pursuant to the appraisal clause, both the policyholder and the insurance company must select an appraiser to value the amount of the loss, and those two individuals will attempt to reach an agreement on the replacement cost value and actual cash value (replacement cost minus depreciation) of the loss.
If the two appraisers are unable to agree, a third neutral party, called “the umpire,” comes in and resolves the appraisers’ disagreements. The umpire is the third member of a three-person appraisal panel. In most policies, an agreement between any two of the three members of the appraisal panel becomes binding as to the amount of the loss.
How is an appraiser different from an adjuster?
An insurance adjuster is the person who inspects your property to determine how much damage has been done, and what that damage is worth. Remember that insurance adjusters usually work for the insurance company – not the policyholder (public adjusters are the exception; they work for policyholders). Although insurance adjusters are supposed to accurately value the loss, they often leave things out which can leave the policyholder in a lurch when it comes time to make repairs.
An appraiser is the person who comes in after the adjuster has offered a settlement, if the insured feels the payment offered is inappropriate. Adjusters assess the damage, investigate the cause and extent of the loss, take statements, make recommendations for payment, and interpret the policy. On the other hand, appraisers serve the singular purpose of determining the amount of the loss in the context of the insurance policy’s appraisal clause when the insurance company and insured are unable to agree.
Appraisal can be an awesome tool for insureds because it takes the decision-making power out of the insurance company’s hands as it relates to the amount of the loss. By the same token, insurance companies can invoke appraisal too. However, appraisal does have its limitations because appraisers are not authorized to make coverage decisions, i.e., determine whether damage is covered by the policy.
Why you might need a lawyer to uphold your rights as a policyholder
Our firm has represented clients in countless claims involving appraisals. Sometimes we conclude appraisal is the best option to quickly resolve a dispute. In those cases, we will help our clients screen and select an independent and impartial appraiser and guide the insured through the process. In other cases, we are hired because the insured has already demanded appraisal, but the insurance company has refused to allow the claim to go to appraisal based on assertions of “coverage questions.” Additionally, we are often called upon to represent clients who have received an appraisal award, but the insurance company refuses to pay it. The scenarios are endless, but whatever the facts may be, call us for a no obligation consultation and we’ll point do our best to get your claim heading back in the right direction.
Dealing with property loss is frustrating; choosing the right attorney to fit your needs should not be. McWherter Scott & Bobbitt has been protecting commercial and residential policyholders for years. To speak with an insurance dispute lawyer like Brandon McWherter, Clint Scott or Jonathan Bobbitt, please call 731-664-1340, or to fill out our contact form. We maintain offices across Tennessee, with satellite offices in Mississippi, for your convenience.