Homeowner’s insurance policies often include appraisal clauses that detail the process for resolving valuation disputes between a policyholder and her insurance company. These provisions are valid despite the fact that a policyholder may never get to see her day in court. Courts like these provisions because they alleviate the strain that litigation has on the judicial system. They believe the appraisal process to be an efficient dispute resolution mechanism. Although this process is similar to arbitration (in as far as it is an alternative dispute resolution), courts have been clear that the two are not the same and the rules that apply to arbitration will not apply to appraisals.
Typically, the appraisal process will go something like this. A dispute will arise as to the valuation of damages to an insured’s home. The insurance company will give the insured a lowball estimate, and the insured will counter with an estimate of her own, generally much higher than the insurer’s estimate. Note, the insurance company is not denying coverage. In fact, they’re admitting coverage but they are claiming the damages to be much less than they usually are. Often, the insurance companies estimate is lower than your deductible, having a similar effect to an outright denial. Because it is not a denial, the case can be appraised (assuming there’s an appraisal clause in your policy).
The insured will select an appraiser, and the insurer will select its own appraiser. Sometimes the policy will require the parties to select an independent appraiser and sometimes it will not. However, generally the appraiser must be competent in the area. Because the appraiser is valuing your damages, they must have some level of expertise. The appraisers will then select an “umpire.” Usually the policy language will require the umpire to be independent and competent on the matter. If the appraisers cannot agree on an umpire, then the parties can ask a court to select one for them. Once an umpire has been selected, the appraisers will discuss the claimed damages and attempt to negotiate a settlement. If the appraisers agree, then the valuation will be set. If the appraisers cannot agree, the umpire will be called to help resolve the dispute. A typical policy will state that if two of the three individuals agree in writing, then the value will be binding. As mentioned, these decisions are usually not appealable. Absent some foul play, courts will not interfere with the agreement.
However, in some instances the agreement can be challenged on the grounds that the umpire was not truly impartial as required by the contract. If the insurance company and the umpire have had previous dealings, then this may violate the contractual requirement that the umpire be independent. Even if the umpire was selected by a court, previous dealings between an insurer and the umpire can bring into question the umpires impartiality making the agreement susceptible to a challenge.
Florida courts have determined the scope of issues that may be determined by appraisal. As mentioned earlier, appraisal is a valuation question which can be determined by appraisal. On the other hand, whether coverage exists is a question of law that must be determined by the court. But courts also typically hold that causation questions may be determined by appraisal. So although appraisal cannot be used determine whether wind damage is a covered peril, appraisal can be used to determine whether the damage was caused by windstorm or by rain, and if the damage is caused by a covered peril appraisal will also be used to determine the amount of the damages.
Needless to say, the selection of the umpire is important. In appraisal, it is usually the umpire that has the final say. It is important that you select an appraiser that is competent not just in valuation, but also in the appraisal process in general. If your appraiser agrees on the wrong umpire it could mean the difference between recovering something and not recovering anything at all. In the selection process, your appraiser should lobby for an umpire that has a history of impartiality and fairness. If an umpire has done a lot of work with insurance companies, you can probably guess where their loyalty resides. You and your appraiser should carefully review an individual’s complete background before agreeing. Even if the court selects the umpire, a review of their background may unearth something that will allow you to challenge the appointment or outcome. Of course, your insurance company is not going to agree to an insured friendly umpire. Chances are a court will have to step in and select one for you.
Whether your claim will be subject to appraisal will depend on the language in your policy. These provisions are becoming increasingly common, but a review of your specific policy is necessary to determine whether your claim will be subject to appraisal, and if so the exact process that must be followed. If you’re undergoing a homeowner’s claim, and your policy has an appraisal provision, you should consider hiring a professional to ensure you get the fairest treatment and recovery. The process is often complex and since these decisions usually cannot be challenged, selecting the right appraiser to represent you is crucial. An experienced insurance claims lawyer can recommend a good appraiser and help you through the process
You can reach Miami Insurance Claims Lawyer J.P. Gonzalez-Sirgo by dialing his direct number at (786) 272-5841, calling the main office at (305) 461-1095, or Toll Free at 1 (866) 71-CLAIM or email Attorney Gonzalez-Sirgo directly at [email protected].