How Does The Appraisal Provision Of Your Homeowner's Insurance Policy Work?

J.P. Gonzalez-Sirgo
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Founder of J.P. Gonzalez-Sirgo, P.A.

What is an appraisal provision?

Analogous to arbitration clauses, appraisal provisions have been consistently deemed valid methods of dispute resolution. The appraisal process is considered a cheaper and more efficient means of settling disputes than filing a lawsuit. Appraisal provisions in homeowner’s insurance policies have become standard practice in Florida. If you have a homeowner’s insurance policy, then the odds are you have one of these buried somewhere in your contract. So what exactly is an appraisal provision? A common provision will typically say something like this:

If a dispute arises as to the value of the insured’s loss, then the insured and the insurer shall resolve that dispute by electing two appraisers that will work together to determine the value of the loss. Both the insured and the insurer will have the right to elect one appraiser each, and if these two appraisers cannot agree upon the value of the loss, then the parties will select a neutral third party, known as an umpire, to provide a final decision on the value of the loss. If the parties cannot agree on an umpire, then the parties have the right to petition a court to select one for them.

So you see, an appraisal provision sets out the procedure that the insured and the insurer must follow in the event that they cannot agree on the value of the loss. Although an impartial umpire is typically required, there usually is no requirement that each side select an impartial appraiser to value the loss on their behalf. Thus, it would be unrealistic to think that disputes will not arise. However, assuming the proper procedure is followed, a final decision by an umpire will typically not be disturbed by the courts and the umpire’s decision will be usually be final.

What can be challenged in court?

Florida courts have made it clear that there are certain disputes that fall within the purview of the appraisal provision, and there are certain disputes that are reserved for the courts. Generally speaking, disputes can be broken down into one of two categories: value disputes and coverage disputes. A value dispute is one in which the insurer has admitted coverage (and thus liability) but the insurer is contesting the value of the loss. Often, the insurer’s appraiser will provide a much lower estimate of the loss than the insured’s appraiser, thus creating a value dispute. A coverage dispute, or liability dispute, is when the insurer denies the claim all together.

Florida courts repeatedly hold that coverage disputes are matters best reserved for the court system, while value disputes where liability has already been admitted is most efficiently resolved by appraisers. So for example, let’s assume that your roof was destroyed after a hurricane. You have filed an insurance claim for the loss and you claim the damage was caused by wind, which your policy covers. However, your insurance company denies your claim on the grounds that your loss was entirely caused by flooding. This would be a proper matter for the court because the issue is whether coverage even exists.

On the other hand, if the insurer admits that coverage existed but they believe that the covered loss is less than you – the insured – believes it to be, then this is a matter that would be proper for the appraisal process. Often the issue is more intricate. Back to our example, if the insurer had in fact admitted that coverage is proper for the wind damage, but the insurer also claims that a substantial portion of the damage was caused by flooding, a non-covered peril in our example, then courts typically find this to be a matter proper for the appraisal process. In these cases, the appraisers are required to investigate the extent of the damage caused by each of these perils and estimate the value of the loss that was caused by the covered peril.

What else do you need to know about appraisal?

This discussion about the appraisal process only scratches the surface. In reality, insurance litigation in this area is much more intricate. Often the issue of whether a party is entitled to enforce the appraisal provision will depend on the specific facts of your case. Some issues that arise include: whether the parties respected the notice provisions applicable to your case, did a party inadvertently waive their right to enforce appraisal by failing to timely assert it, did the insurer follow other statutory rules requiring the insurer to give notice of applicable mediation programs, whether all conditions precedent to bringing suit have occurred, etc. In addition, many Florida courts have differing opinions as to many appraisal-related issues that may arise. Thus, the specific rules and procedures that apply to your claim will depend on both the specific facts of your case, as well as the jurisdiction where your case will be heard. A keen practitioner will know the applicable rules and will be able to help you receive the maximum recovery for your claim.

If your insurer is treating you unfairly you should seek the help of an experienced  insurance claims attorney. Often, the most important aspects of your insurance claim will happen early on during the claims process. It is never too early to consult.

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].

Sources

Gonzalez v. State Farm Fire and Cas. Co., 805 So.2d 814 (Fla. 3d DCA 2000).

Florida Select Insurance Co. v. Keelean, 727 So.2d 1131 (Fla. 2d DCA 1999).

Paradise Plaza Condominium Ass’n, Inc. v. The Reinsurance Corp. of New York, 685 So.2d 937 (Fla. 3d DCA 1996).

Fla. Stat. §627.7015