What is the Insurance Appraisal process?
Appraisal is an insurance policy provision found in the Loss Settlement section. It is an Alternate Dispute Resolution, which can resolve disagreement when the Carrier (insurer) and Policyholder (insured) do not agree on the amount of a covered loss. Appraisal is an alternative to a lawsuit.
When is Appraisal Appropriate?
Sometimes there is a disagreement over the insurance company’s valuation of an insurance claim. Policyholders often think the only way to settle the dispute is to hire a lawyer. Fortunately, this is not the case. Appraisal is a method of Alternative Dispute Resolution often found in many homeowner and commercial insurance policies.
The language will often, but not always, state that appraisal is mandatory when properly demanded by the insurer or insured. It is important to have a qualified Appraiser review your policy to determine your options.
When properly executed, appraisal is binding on the parties as to the amount of loss only. Appraisal does not determine coverage. If not properly invoked, employed, and/or carried out the process may not be binding, so it is important to select a qualified appraiser and umpire.
Once the Appraisal clause/provision is invoked, the insured’s appraiser and the insurance carrier’s appraiser will estimate the damage and try to come to an agreement on the amount of loss. If the appraisers fail to agree, they will submit their differences to the umpire. An itemized decision agreed to by two of these three will set the amount of loss. Such award shall be binding.
Each party will pay its own appraiser and bear the other expenses of the appraisal and umpire equally.
Conducting Appraisal to resolve disputes in insurance claims engages the public trust. Appraisers and Umpires shall put the duty for fair and honest conduct of the Appraisal Process above the Appraiser’s or Umpire’s own interests in every instance. The following standards of conduct define the ethical behavior, and shall constitute a code of ethics that shall be binding on all members of the Insurance Appraisal and Umpire Association:
I. Members of the Insurance Appraisal and Umpire Association shall not engage in practices which may discredit the IAUA or the Appraisal process as a fair, expedient and cost effective Alternate Dispute Resolution method.
II. Appraisers and Umpires shall conduct themselves with the highest of ethical standards in their dealings with policyholders, the insurance companies, the public, Appraisers, Umpires, claim professionals, and experts.
III. Appraisers and Umpires shall remain current on the laws and regulations affecting their professional responsibilities by attending such classes, seminars and training as necessary.
IV. An Appraiser or Umpire shall not undertake any Appraisal concerning matters with which they are not currently competent and knowledgeable, or which otherwise exceeds their current expertise; Appraisers and Umpires must be competent for the particular matter.
V. Appraisers and Umpires shall conduct themselves in such a manner as to command respect and confidence and shall approach Appraisals with an unprejudiced and open mind, while advocating for their client as legally appropriate.
VI. Appraisers and Umpires shall not injure the reputation or professional practice of colleagues.
VII. Appraisers and Umpires shall not approach Appraisals in a manner prejudicial to the policyholder or insurance company.
VIII. Appraisers and Umpires shall handle every Appraisal with honesty and integrity, and allow a fair Appraisal to all parties without any compensation or remuneration to himself or herself except that to which he or she is legally entitled.
IX. Appraisers and Umpires, upon undertaking an Appraisal, shall act with dispatch and due diligence in achieving a proper disposition of the Appraisal.