If your commercial or homeowners insurance claim was denied or underpaid, there is an option for you, found in your insurance policy contract, which can and often does help avoid costly lawsuits and legal actions... when disputes over property values and property settlements arise and seem to become irresolvable.
What would need to go to the Appraisal process? The appraisal process is only for settling disputes where valuation amounts are in disagreement, and one side wants to move the settlement process forward to resolution. The process is not for Denied Claims, or for instances where the insurance company disputes Coverage. Also, the process itself has some expense and time commitment, so the value in dispute should be at least in the $10s of thousands (2 or 3 times what the insurance company is trying to settle for, if the amount in total is under $10,000. For instance, arguing over a settlement of $5,000 when the bids are $12,000 would probably not be worth invoking the process. However, an insurance settlement offer of $50,000 when valid repair bids are $150,000 would be a good case for using the Appraisal Process.
What is the established procedure for discussing and resolving values for property? The Appraisal Provision/"Condition".
The Appraisal Condition, if demanded by either you, or your Insurance Company, functions as follows: You will select and retain your "Appraiser", while your Insurance Company will then select and retain their "Appraiser". This is in no way related to what is commonly thought of as "Appraisal" (ie: Real Estate appraisals and/or Real Estate appraisers). What is a property insurance "Appraiser" in this situation? The term "Appraiser" has to do with a person who evaluates costs - in particular, costs derived from bids to repair and replace either or both "Real" and "Personal" property and/or "Time Element" losses.
The"Appraisers" are selected independently (you select yours and they select theirs) to represent both parties, theoretically without priorloyalty, business relationships, and obligations to the party that has retained them for this Appraisal. Each party will pay the costs of their appointed "Appraiser". And, this will later involve an "Umpire" situation. The person selected as an"Appraiser" needs to be a skilled communicator, and is supposed to remain impartial, to those involved. The "Umpire", who is selected by mutual agreement of both of the retained "Appraisers",should be reasonable, and be able to arbitrate and mediate in good faith with both of the selected "Appraisers".
The Appraisal ("arbitration") process:
- The party demanding the Appraisal, then sends an "Appraisal Demand Notice" to the other party in the property insurance policy (ie: from you to your Insurance Company). That demand stipulates that they then have 20 days to both accept this Appraisal Demand, to name their "Appraiser", and to have their "Appraiser" contact your "Appraiser". Often, a Public Insurance Adjuster will be the proper party for you to retain as your "Appraiser", if you do not have a prior relationship and/or contract with this Public Insurance Adjuster.
- Then the two appointed (independent, competent, and qualified for this particular kind of property valuation) Appraisers have 15 days in which to agree upon the selection of an "Umpire", who's cost is shared equally by both parties to this Appraisal. In the event that an "Umpire" can not be agreed upon, then either party can petition a Court of local jurisdiction to appoint the "Umpire".
- Once the "Umpire" is determined and contracted by both parties, they then sit out and "on the sidelines", while the two "Appraisers" work together to resolve each and every difference in valuation so far unresolved.
- Once that is completed, and if any items remain in disagreement, then those items and those items alone are submitted to the "Umpire" by the two "Appraisers". Both sides present a detailed case for their claim of property value.
- The Appraisal "Umpire" listens to both arguments, then decides the monetary value to placed on the property that is in dispute.
- If one side from either party agrees with the Appraisal "Umpire," then the ruling on the claim amount for that disputed item is made. It only takes one side's "Appraiser" to agree with the Appraisal "Umpire," not both.
- In most cases, that resolves all of the disputed item valuations (Structure, Other Structures, Personal Property, Loss of Use, Time Element, etc.). It is in very few cases that the Appraisal "Umpire's" ruling is overturned.
- Then the Appraisal "Award" made is submitted to the Insurance Company; and payment is made to you, within the policy time limit applicable (usually within 30 to 60 days).
This process can be used when both parties want to mediate in good faith. It can be either "binding" or "non-binding"; however "non-binding" is oftentimes an unsuccessful effort.
Both parties need to agree upon a neutral, qualified, and reasonable "Mediator", share the costs of retaining their services, and then present their valuation matters to the "Mediator".
This often results in what is known as "splitting the baby" (settling the Mediation somewhere in the middle of the difference in valuations, but will resolve matters in most cases.
So, it is VITALLY important that you choose an experienced, professional, licensed Public Insurance Adjuster who will truly represent YOUR interest, FULLY.
REMEMBER... If you are dissatisfied with your insurance settlement, unsure if it was properly paid or not, and even if you feel that it was paid fully and completely, DO NOT STOP THERE.