What Is Appraisal And Why Does My Insurance Company Want It?
By Mindy McLester
You might hear the word appraisal and think of the appraisal you have done when you purchase a house. However, in the context of property insurance, appraisal means something very different. Most property policies provide for appraisal, a voluntary dispute resolution procedure used by insurance companies to avoid the court system. Appraisal is typically invoked by the insurance company when they have underpaid the claim.
The appraisal process is mostly the same for all insurance policies. The insurance company will provide written notice that they would like to go to appraisal. This can be done before or during litigation. The written notice will contain the name of their appointed appraiser. At that point, you have twenty days to name your own appraiser, who you will need to pay yourself. The two appraisers will then inspect your property and prepare estimates of the damage related to your claim.
The two appraisers will try to reach an agreement on the amount of damage. If they are not able to, the case will go to an umpire selected by the appraisers. If the appraisers are unable to agree on an umpire, either party can request the Court appoint one. This can create a problem if the case is not already in litigation as you would need to appear without an attorney or pay out of pocket for representation before the Court. This is because the insurance company is not typically obligated to pay the policyholder’s attorneys’ fees for appointment of an umpire.
Once the umpire is appointed, he or she will also inspect the property and prepare a proposed appraisal award, which determines the amount of damage. Any award must be signed by the umpire and at least one of the appraisers. Usually, the appraiser the award favors most signs it. The policy then provides a time period of usually 60 to 90 days to pay the amount of the award minus prior payments and your deductible.
Now that you have a better understanding of appraisal, you can probably tell why insurance companies want appraisal. They can take a case out of the court system and away from the hands of a jury, but they can also force you to incur some of the costs of appraisal and avoid the expenses they incur for defending their own behavior. Unfortunately, in Florida, there are few ways for a policyholder to avoid appraisal, but always make sure to check your policy as some require both parties to agree to appraisal. If that’s the case, then you have ultimate control over whether your claim goes to appraisal.
Mindy McLester, Esq.
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