Appraisal and Mediation for Property Claim Disputes

Understanding The Appraisal Process

When policyholders and insurance companies have a disagreement regarding the cost of repairing or replacing damaged property, it can be quite frustrating, especially for the policyholder, who often feels he has no choice but to settle for the amount offered by the insurance company. Whether by design or not, the insurance companies do not always notify policyholders of their right to participate in various forums to resolve property damage insurance claim disagreements which are becoming more common.  Consequently, many policyholders never realize that they have a right to dispute an insurance settlement amount, nor do they understand how to properly initiate a property insurance claim dispute.

One way for policyholders to dispute their insurance company’s offer is to invoke the appraisal clause within the insurance policy.  When conducted properly, appraisal can be a very effective alternative dispute resolution process. However, you should know that not all insurance policies contain an appraisal clause. 

The appraisal clause may include the following language and is a good general explanation of how Appraisal works:

APPRAISAL - If you and we fail to agree on the amount of loss, either may demand that the amount of loss be set by Appraisal.  If either makes a written demand for Appraisal, each shall select a competent, independent appraiser.  Each shall notify the other of the appraiser’s identity within 20 days of receipt of the written demand.  The two appraisers shall then select a competent, impartial Umpire.  If the two appraisers are unable to agree upon an Umpire within 15 days, you or we can ask a judge of a court of record in the state where the residence premises is located to select an Umpire.  The Appraisers shall then set the amount of the loss.  If the Appraisers fail to agree within a reasonable time, they shall submit their differences to the Umpire.  Written agreement signed by any two of these three shall set the amount of the loss.

For a more in-depth look at the property insurance appraisal process see our article: How a public adjuster can help you settle your home damage claim through appraisal

If you have a disagreement with your insurance company over the cost of repairs or replacement of your damaged property, Contact an property insurance appraisal professional from Tutwiler & Associates. We can help to determine if your policy contains a property claim dispute appraisal clause provision and also discuss whether or not Appraisal may be an appropriate option for you. See us listed in the Directory of WIND Certified Appraisers.

Understanding Mediation

In addition to Appraisal clauses, many insurance policies now have mediation provisions in them. Mediation unlike Appraisal is not binding and is less costly to the policyholder.  The cost to the policyholder typically is defined by the mediator’s time in setting-up, preparing for and attending the mediation.

Some states such as Florida have enacted a statute that details the process. Florida Statute 627.7015, alternative procedure for resolution of disputed property insurance claims, is an example.

Like anything, there are procedural issues you will need to prepare for. While not all mediations are successful in terms of settling a claim, you do get the benefit of knowing and hearing in detail the other side’s position which may help you to prepare for the appraisal process.

If you have questions about Mediation, we will be glad to discuss this process with you or refer you to competent legal counsel for any legal questions you may have.

FAQs About Appraisal

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If you and your insurance company do not agree on the value of your claim or are still in disagreement on the damages to your property or the price to fix your damage, you may have an option in your insurance policy to invoke what is called the appraisal clause. While appraisal might not be for everyone, it is an alternative dispute resolution method that could expedite the settlement of your claim. So how does appraisal work? You select an independent appraiser to represent you and your insurance company does the same. The two appraisers then agree on the selection of a neutral umpire.  Both appraisers independently value the claim damages and then meet to review the claim in an attempt to reach an agreement. If the appraisers are not able to agree on certain issues, the neutral umpire will render a final decision which becomes binding. Each side pays their respective appraiser and the umpire fee is split equally.

It depends on the nature of the claim and the differences you have with your insurance company.  Generally, if the differences are minimal, Appraisal might not be a good option for you because your costs may be more than the increase in settlement.  Tutwiler & Associates can help you determine whether Appraisal would be advantageous for you.

One of our Licensed Public Adjuster’s / Certified Loss Appraiser’s will initially speak with the property / business owner to learn about the outstanding discrepancies that are ultimately holding up the claim settlement process.  If it is determined that our firm can add value to assist the policyholder to resolve their disputes, we will then request a copy of their Property Insurance Policy to review its Terms & Conditions.   

One way for policyholders to dispute their insurance company’s offer, is to invoke the Appraisal provision/clause within their insurance policy.  When conducted properly, appraisal can be a very effective “alternative dispute resolution method” to resolving what is often a very frustrating insurance claim process.  Having said that, it is my experience that the average consumer does not know that the Appraisal provision even exists, much less the nuances or procedural processes that are involved.  Furthermore, it should be noted that the Appraisal process is not intended to address issues of Coverage, rather it is designed to help when Policyholders and Insurance Companies have considerable disagreements regarding the “Scope” of the necessary damage repairs as well as the “Price.” To give an example, most insurance claim adjusters working in the industry use an estimating software program called Xactimate.  The most popular of many estimating software programs, the Xactimate program says it extrapolates and updates current market prices, but we often see that the price to Replace a Roof for example is vastly different than what a local contractor would charge.  Moreover, there are ways for an adjuster to select “average grade” building materials such as Cabinets in a property where the owner has installed custom (“premium grade”) Cabinetry.  These subtle selections in the program can add up to thousands of dollars even on the smallest of claims.  Then there is Depreciation that has to be factored in.  I have seen where insurance companies will apply 50-70% Depreciation to properties just based on the year they were constructed, but they do not take into consideration that the property was well maintained and therefore, maybe a 10-15% Depreciation calculation should be applied.  Again, all this adds up in the end and for the unknowing Policyholder, they often feel they have no choice but to settle for the amount offered by the insurance company.  Policyholders need to know there is recourse and everything is negotiable; subject to Policy Limits and provisions as stated in the Policy contract.       

Great question.  There is a cost associated with invoking the Appraisal process and I have seen insurance companies sometimes leverage it against the Policyholder by invoking the Appraisal process on them.  Typically, when Appraisal is invoked, the Policyholder must name their Appraiser within 20-days of the receipt of the written demand.  (By that time the insurance company will likely have named their appraiser).  Then the two (2) appraisers will then need to agree on selecting a Neutral Umpire.  Selecting a Neutral Umpire can be time consuming given the small cottage niche of industry professionals who do Appraisal work.  Some Appraisers will not agree to certain Umpires and some Umpires will not agree to work for certain insurance companies or for Appraisers for a multitude of reasons.  But back to the question, the Policyholder must pay for the expense of hiring their own Appraiser (the insurance company pays the expense of their hired Appraiser) and then should the two (2) appraisers not reach an agreement the Policyholder will have to pay for 50% of the Umpire’s time and expense (the insurance company pays the other 50%.)  To summarize, there really should be some considerable discrepancies in both Scope of Repair as a well as differences for Price of Repair for the Policyholder to really have a chance to benefit from the process.  It should also be noted that any potential “Appraisal Award” can come in less than what the insurance company originally offered in their estimate so there is a risk there too, although I have only seen this occur one or two times in my career and they were relatively small claims – less than $50K. 

If you and your insurance company are far apart regarding what should be repaired, how it should be repaired or the cost of repairs, appraisal may be option. Silence can also a good indicator.  If you are not corresponding well with your adjuster or if the insurance company is stonewalling or has simply gone silent, that should serve as a message for a Policyholder to prompt the next step, ie Appraisal.

Either the Property owner’s insurance company has invoked the Appraisal process and the Policyholder is seeking our professional assistance to help and/or they have reached an impasse with their insurance company altogether and are searching for ways to expedite a resolution of their claim.  Typically, the disagreements involve significant disagreements on Scope & Price of Repairs as stated above. 

During the “life of an insurance claim,” there will always be disputes.  That is a certain.  Having said that, if a Policyholder receives a check, we consider that to be a payment for the “Undisputed” amount.  In this scenario, we would advise the Policyholder to cash the check, but before doing so, write verbiage on the back of their check under their endorsement and include the words “For Advance Payment Only / Undisputed Amount.”  That way the insurance company knows the payment is not Full or Final.  Unfortunately, there are some insurance companies who will write verbiage somewhere on a letter or even on the check that suggests cashing the check constitutes their agreement that the check is a “Final Payment.”  We caution folks to look at these checks closely and make certain that the insurance company understands in writing that cashing the check does not constitute the Policyholders agreement that by cashing the check the claim is over. 

We recently handled an Appraisal where the insurance company adjuster prepared a Repair Estimate that totaled $139,345.45 for Loss & Damages to the Policyholder’s house, which sustained considerable hurricane/wind damage and interior water damage.  The Appraisal Award that was rendered and paid totaled $ 2,390,839.98 to repair the home to its pre-loss condition.  The homeowner also received an additional $1,757,000.00 for loss and damages sustained their Personal Property and Furniture Items as well as for their Additional Living Expenses for having to rent another property during the Reasonable Period of Restoration until the Repairs to the home were completed. 

Seeking a qualified, professional and experienced Appraiser is very important.  There are many people who market that they handle these services, but as with hiring any person check references and speak to others within the industry to confirm rates. If someone promises a Policyholder that the Appraisal process is quick and easy or says they can collect massive amounts of money, I would encourage a Policyholder to keep searching. Also, remember that in pursueing appraisal you may give up your right to litigate, depending on the policy language. So check with an attorney or have a professional review your policy. There are absolutely no guarantees, but again if the appraisal process is utilized correctly with the right professional the Appraisal Process can be an effective tool to resolve a claim dispute.

For a list of Certified Appraisers and Certified Umpires you can reference this Directory from the Windstorm Insurance Network. 

Umpire Directory Link

Appraiser Directory Link

Generally that depends on the complexity of the matter being appraised.  You, the policyholder, pay for the cost of your appraiser and one-half the cost of the umpire, if an umpire is needed.  Your appraiser may work on an hourly rate plus expenses or on a percentage basis if allowed in the state where the loss occurred.  The umpire typically works on an hourly rate plus expenses.  The insurance company would pay for the cost of its own appraiser and the other half of the umpire’s fee.

The short answer is no, this is reserved for the courts. There are some states that allow the appraisal panel to consider causation issues beyond just the amount of the loss to help resolve the amount the insurance company owes for the loss.

The general rule is that results of an Appraisal are binding on both parties. Unless it can be proven that there was collusion or fraud involved in arriving at the award amount, it is unlikely the award will be overturned. The appraisal clauses in insurance policies may vary in the terms. So read your policy or consult with us or your agent so you understand the policy parameters. Also, like a lot of issues in an insurance policy, the appraisal clause may have been changed by the courts through case law. In some states appraisal may be called something different. For example in one northern state it is called “reference”.

We are not aware of any restriction on who can be named as an appraiser. Certainly you want someone who has a great deal of experience in this forum as well as someone with experience in the subject matter. If you are thinking of invoking appraisal, we urge you to consider involving an expert that has a significant background and experience in the appraisal process. Understanding all the issues which include appraisal agreements, appraisal award forms, timing issues, and umpire selection procedures are very critical to your success in this dispute resolution procedure.

If you have attempted to work out a settlement with your insurance company and they have acknowledged coverage but are not responding, or you disagree with their offer, you should consider demanding Appraisal.

The Appraisal process can be complex and the results will probably be binding.  Therefore, it is absolutely critical to retain the very best Appraiser for your loss.  Tutwiler & Associates is uniquely qualified to act as your Appraiser because of our thorough understanding of the insurance policy and how it applies to your loss. Our technical ability to thoroughly assess and document damages and prepare professional line-item cost estimates plays an important role in successfully pursuing your appraisal. Our ability to accurately present your claim to the insurance company’s Appraiser and the Umpire in a manner that will be successful also plays a key role in resolving this claims dispute in a reasonable way.

From our experience the first order of business for the two appraisers is to agree on an umpire.  Should a disagreement between the appraisers occur it is doubtful they will agree on an Umpire at that point, which will only delay the resolution of the claim. In addition to offering Appraisal Services, Tutwiler & Associates maintains several Windstorm Certified Umpires on staff. See our Umpire Services page for additional information.

An Umpire is supposed to be a neutral third party, a person that tries to get the two appraisers to agree.  If that is not accomplished, the Umpire will side with one appraiser and sign an award setting out the amount of the loss.  It is equally important that the Appraiser agree not only with the Umpire but also on the appraisal award form. A Memorandum of Appraisal document may also be necessary in complex cases. Call Tutwiler & Associates if you have questions about the appraisals forms.

Please visit our Success Stories page to see examples of appraisal or mediation services we have provided.

Contact a public adjuster from Tutwiler & Associates if you have a question or would like a free consultation about an appraisal or mediation. Or call 1.800.321.4488

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