Sufficiency of Appraisal Estimates: Is Your Insurer Disregarding its Obligation Under the Policy?

Property Damage

Appraisal has been invoked in my claim! So… what does this mean?

Generally, you won’t see this aspect of the claim process unless there’s a dispute between you and the insurer as to coverage as it relates to the scope of the damage and the pricing related to that scope. If appraisal has been invoked, it means that the conflict could not be resolved between you and your insurer and now either you or the insurer has determined that the intervention by third parties will help to achieve a resolution out of Court. The appraisal process is designed to be easier, cheaper, and more efficient.

Many policies require appraisal if either side invokes it. Some policies require both sides to agree to invoke it. Either way, once it is properly invoked, both parties must comply with appraisal.

When invoked, generally, each party participating in the appraisal will select an appraiser they deem “competent” to protect their interest during appraisal. These appraisers will either agree as to a scope of repairs, or if they fail to agree, will submit their competing scope of repairs to an impartial umpire who will then issue a decision, and if in favor of the Insured, will include an Appraisal Award. The contents of the Award will generally be governed by the terms of your policy and includes such things as a detailed list of materials, with their description and grade, to be used for the loss’ repairs or replacement as well as language the Award must contain itself.

Recently, there has been a trend where certain Insurance Companies are producing appraisal awards with little to no description as to type, quantity, or grade of the materials it purports are needed for repairs to take place. Particularly in option to repair or Managed Repair policies. In Option to Repair and Managed Repair policies the Insurance Company has the right to repair the insureds property themselves. In those cases, Insurers are asking their appraisers to include the only the general scope of the work but refusing to include the pricing. After the award is issued, these insurance companies then are relying on their own contractors to make important determinations on price of materials, labor, depreciation, overhead, profit, etc. that a licensed appraiser or insurance adjuster is normally tasked with. As such, this behavior could be viewed as a failure by the Insurer to comply with its appraisal duties under the policy by failing to provide such necessary terms and figures when it issues an appraisal award. It also completely removes the Insured from knowing how much is being paid to their contractor under their own insurance policy. Serious questions arise related to policy limits, properly qualified and licensed workers, proper code compliance, and substandard work.

If the purpose of appraisal is to be forthright with regards to the scope of the repairs needed, is it fair to let Insurers shirk their duty under the policy to provide an appraisal award that specifically addresses scope and pricing? Can a cause of action arise against an Insurer who fails to produce an appraisal award which meets the plain and unambiguous standards set forth in the policy it designed itself? Various questions arise about the legality of the practice under Florida’s new law’s that were designed to protect homeowners and provide transparency in the claim process. Regardless of how such actions or schemes play out, one thing is for certain: if an Insurer so willfully tries to hide how much it is paying its own contractor and then tries to manipulate the plain language of its own policy when it comes to appraisal awards, what else is it inclined to do throughout the rest of the construction process when a contractor needs a change order?

If you have a question regarding this article, or your claim in general, follow the link here, email us at, call us at 754-260-5410, or stop by our Fort Lauderdale office for a free consultation. Your Loss is Our Concern.

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