Appraisal is a form of Alternative Dispute Resolution included in most home and commercial property owner’s insurance policies. The process is informal and allows for the selection of an appraiser by each side, with the two appraisers or a judge selecting an umpire. An umpire is a competent, disinterested, impartial individual who is charged with making a decision regarding the value of property or the amount of a property loss. The appraisal panel, consisting of the two or three individuals, conducts the business of setting the value of the claim depending on the coverage type. Insurance policies have different language by state and company; these details can be important. Typically, the rub is whether the appraiser is paid a percentage or is a creditor of the policy holder which may make an appraiser not independent.
As you can see from the following provisions, each state has different policies and the appraiser can be disinterested, independent or impartial.
Texas appraisal provision example: If you and we fail to agree on the actual cash value, amount of loss, or cost of repair or replacement, either can make a written demand for appraisal. Each will then select a competent, independent appraiser and notify the other of the appraiser’s identity within 20 days of receipt of the written demand. The two appraisers will choose an umpire. If the appraisers fail to agree, they will submit their differences to the umpire. An itemized decision agreed to by any two of these three and filed with is will set the amount of the loss. Such award shall be binding on you and us. Each party will pay its own appraiser and bear the other expenses of the appraisal and umpire equally.
Being a nonlawyer I do not suggest that I have a full understanding of this case but I do think it important to present some of the details for interested parties to understand as they will. The following is simply my thoughts as an appraiser on how this affects our business and our responsibilities – I have attached the entire opinion for your review. – JM. View Complete PDF >>
State Farm- Lloyds, Petioner v Becky Ann Johnson Argued Jan 15th 2008
Supreme Court Ruling on appraisal In Texas
Appraisal has been around at least since 1888 in Scottish Union & National Insurance Company v Clancy where right to appraisal was upheld. The file referenced above is essentially about the right of a policyholder to have an appraisal even when the insurance company believes that portions of the claims may not be covered due to a portion of their policy excluding wear and tear. I believe it could include flood or other exclusions as they exist. In other words having the appraisers delve into causation. As they talk about the file they discuss how few times appraisal has needed judicial direction. This suggests as they speak that appraisers are reasonably known to not include a damaged rear fender in a front end automobile accident or other similar inappropriate items.
Appraisal is defined as the determination of what constitutes a fair price, valuation or estimations of worth or in the policy the” amount of the loss” It seems that the courts have found that appraisers must contemplate causation in order to set the amount of the loss. Whether or not the appraisal award is to be paid as written is a question for the company and potentially the courts. In my opinion this suggests that an appraisal that has some gray areas to it must do one of two things either not include those items that are known to be excluded such as flood or wear and tear and not include them in the award or include those items but do so in a way that the insurer then can come back and look at the detailed appraisal and delete those items as they deem fit. One of the items that I take from this is the need to have a detailed appraisal award and move away from the one page awards that often get turned in now. This will give the insurers their opportunity to scrutinize the award for items that are simply not covered a thing outside of the qualification of an appraiser.
Florida appraisal provision example:If you and we fail to agree on the amount of loss, either one can demand that the amount of the loss be set by appraisal. If either makes a written demand for appraisal, each shall select a competent, disinterested appraiser. Each shall notify the other of the appraiser’s identity within 20 days of the written demand. The two appraisers shall then select a competent, impartial umpire. 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 shall set the amount of the loss. Each appraiser shall be paid by the party selecting that appraiser. Other expenses of the appraisal and the compensation of the umpire shall be paid equally by you and us.
Mississippi appraisal provision example: If you and we fail to agree on the amount of loss. Either party may make written demand for an appraisal. Upon such demand, each party must select a competent and impartial appraiser and notify the other of the appraiser and notify the other of the appraiser’s identity within 20 days after the demand is received. The appraisers will select a competent and impartial umpire. If the 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 process of appraisal has evolved over the past few years and has been used a great deal more since the Florida hurricanes of 2004. There have been several initiatives to tame what is sometimes known as the “wild west” of appraisal. The Florida legislature has worked on a bill that will mandate the licensing for appraisers. Florida Senate 2008 Bill SB 1018 is under review. For more information on the details of this bill, please visit: www.flsenate.gov.
The Windstorm Insurance Network is an organization of professionals from every aspect of the business. Their code of ethics and umpire training has been the standard of care for the industry for years. The annual Windstorm Insurance Conference is the most important regional event of the year for industry professionals. Classes are offered that are known for their different viewpoints and are presented by the best in the business, both vehemently and with respect for the process. For additional information, please visit www.windnetwork.com or email email@example.com. A code of ethics has been developed by this organization and they can be found by visiting the following link; http://www.windnetwork.com/files/WINDCodeofEthics_Fall2007.pdf. The Windstorm network has developed an umpire list. To view the available umpires, please visit www.CompleteContracting.com/umpirelist.
The Collins Center has recently begun an initiative to send appraisal through their network of administration; the Collins Center has been known for the educational promotion of leading edge technologies and innovative methodologies. To get more information on the process of appraisal through the Collins Center, please visit www.CollinsCenter.com.
Complete, Inc is a licensed general contracting firm specializing in insurance repair, appraisal, and construction consulting out of their home base in Gulf Breeze, Fl. John Minor the licensee, 3rd generation contractor and president of Complete has been involved in settling thousands of files for hundreds of millions of dollars for the last fifteen years. His clients include fortune 100 corporations, insurance companies, municipalities, the NFIP, and select property owners and managers.
Mr. Minor has taught dozens of classes on insurance and construction claims related topics throughout the southeast including most recently the Wind v Flood class at the Florida & Texas Windstorm Conferences. We are aware of our limited role in the process and do not profess to be attorneys, adjusters, engineers or anything other than straight shooters in a difficult business. For a fair appraisal on large loss claims please consider John Minor and Complete. Our next class will be in Orlando September 22, 2009 for the Florida Catastrophic Storm Risk Management Center @ the FSU School of Business
This information should not be substituted for professional legal advice; consult with your lawyer for legal advice and ask your insurance professional to discuss the details of your policy and insurance needs.