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Appraisal of Insurance Claim Disputes

By: Jim Kern

I recently attended the PAMIC (PA Association of Mutual Insurance Companies) Claims Summit held in Gettysburg, PA, and served on a panel that discussed the appraisal of insurance claim disputes.

The presentation covered the appraisal process from start to finish. Having served as both an appraiser and an umpire, I shared some of my experiences. This article summarizes some key thoughts that the panel discussed.

Start with a Written Appraisal Agreement  

The panel offered a number of tips to get the appraisal process started on the right foot. An important first step is to have a written appraisal agreement. The agreement should:  

  • Specify, in detail, the items in dispute to be the subject of the appraisal
  • Identify the appropriate measure of value (RCV, ACV, both)
  • State responsibility for fees of appraisers and the umpire
  • Set forth the parties’ selection of appraisers
  • Set forth the appraisers’ selection of an umpire

The agreement should be signed by the policy holder, insurance company and their appraisers, as well as by the umpire.

Consider the Pros and Cons of an Appraisal

Before opting for an appraisal, be aware of their pros and cons.

The Pros

  • It’s less expensive than a lawsuit
  • It’s an informal process
  • The matter gets resolved much more quickly than litigation
  • The cost is shared by each party paying their appraiser; the umpire costs are shared equally
  • The appraisal process is designed to be fair and balanced, and mutually beneficial to policy holders and insurance companies
  • Using knowledgeable, qualified appraisers and umpires can result in a more informed and reasoned award

The Cons

  • An appraisal does not resolve all disputes; only valuation disputes are to be appraised, not disputes as to coverage or liability … those disputes may still need to be litigated
  • Parties sometimes do not understand the appraisal process
  • Umpires may  not understand their role and may just split the difference between parties
  • The award is binding and you must live with the result

Final Thoughts

It’s essential that you select a qualified appraiser. You should look for the following qualities in an appraiser:  

  • Competent and impartial
  • Knowledgeable and experienced in the areas of dispute
  • Good communication skills to present position and support for that position to the other appraiser and the umpire
  • Decision maker – makes good decisions to work towards resolution of disputes

Furthermore, your appraiser should make sure the umpire:  

  • Understands the appraisal process
  • Considers the applicable policy provisions
  • Applies the appropriate measurement standard (RCV, ACV, both)
  • Understands the role of the umpire

Most insurance policies include provisions whereby the policy holder or the insurance company can demand appraisal of disputes as to measuring the value of the loss. Proper understanding and use of the appraisal process can resolve disputes avoiding the high cost and time delays of litigating such disputes.

Need Help?  

Contact us online or call 800.899.4623.

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Published May 14, 2015

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