Appraisal
An Appraisal clause is common in nearly every insurance policy, business, and homeowner. The idea is to provide for extra-legal dispute resolution and solve the dispute before you have to go to court.
This allows the parties to try and resolve their differences in the valuation of a covered loss using independent, unbiased, disinterested parties. That means that the Appraiser that you select should not benefit from the process. Their compensation should not be dependent upon the outcome of the negotiations. This allows them to be a truly independent, unbiased, expert.
It is important to note that Appraisers cannot extend coverage to an item not already determined to be covered. Appraisers typically provide Replacement Cost Value (RCV) and Actual Cash Value (ACV) of the items or property already deemed to be a covered loss.
While every policy is different, here is an example of a common appraisal language and the description of an Appraiser:
“If you and we fail to agree on the amount of actual cash value or amount of loss, either one can demand a determination by appraisal. If either makes a written demand for appraisal, each shall 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 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 resident premises are located to select an umpire. The appraisers shall then set the amount of the actual cash value and loss for each item. If the appraisers submit a written report of an agreement to us, the amount agreed upon shall be the amount of the actual cash value and loss. If the appraisers fail to agree within a reasonable time, they shall submit their differences to the umpire. A written agreement signed by any two of these three shall set the amount of the actual cash value and 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.”
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