Appraisal Settles The Amount, Not The Coverage

Most American property policies contain an appraisal clause: a private mechanism for resolving a disagreement about the value of a loss. It answers how much, and it does not answer whether.

The clause splits two kinds of dispute

Claim disputes divide into coverage questions and valuation questions. Whether a peril is excluded is a coverage question, and courts and regulators handle those.

Whether a covered roof costs one figure or another to replace is a valuation question, and that is what appraisal is designed for.

Filing appraisal on a dispute that is really about coverage produces delay, because the appraisers have no authority over the question actually being argued.

Each side picks one appraiser and they pick an umpire

The policyholder names an appraiser and the insurer names another, each competent and impartial in the terms the policy uses. The two then agree on an umpire.

If they cannot agree, the policy generally provides for a court to appoint the umpire on application. That step is routine rather than adversarial.

An award agreed by any two of the three is typically binding as to the amount of loss, subject to the insurer's remaining rights under the policy.

Costs are shared in a defined way

Each party normally pays its own appraiser and half of the umpire's fee. That structure is written into the clause rather than negotiated afterward.

Because the process is private, it is usually faster and cheaper than litigation, which is much of why the clause exists.

It is not free, so appraisal makes little sense where the gap between the two estimates is smaller than the cost of running it.

Invoking it is a formal step

Appraisal is demanded in writing, and the policy sets out how. Informal complaints about a low estimate do not start the process.

Some states require the insurer to complete its investigation first, and some limit when either side may demand appraisal.

Timing rules and the enforceability of particular clause wording differ by state, and both have moved in recent years.

The award is not the end of every argument

An award fixes the amount of loss. The insurer still applies deductibles, policy limits, depreciation holdbacks and any coverage defenses it has preserved.

Awards can be challenged in narrow circumstances, generally involving partiality, fraud or an appraiser exceeding authority, and that challenge goes to a court.

Whether appraisal fits a particular dispute is a judgment about which kind of disagreement is actually in play, and an attorney or the state insurance department is the right place to test that view.