Appraisal Clause Intent in Homeowners Policy

Is the intent of the appraisal clause in an HO3 to settle differences in the actual cost of repairs, or in the damage that should be covered? We recently denied coverage for hail damage to a roof because the roof was in too poor of a condition to determine if hail had actually damaged it. Would the appraisal clause apply to a situation like this, where the cause of damage, not just the amount of the claim, is the main question?

Tennessee Subscriber

The intent of the appraisal clause is to settle disputes regarding the value of the claim, not whether or not coverage exists. In your example, an appraisal might be necessary if the insured thinks the cost of repairs is $10,000 and the carrier thinks the cost of repairs is $3,000; at that point the issue can be solved by an appraisal- each party hires an appraiser and the appraisers review the loss. If they can't agree then it goes to an umpire; the agreement of any 2 of the 3 sets the amount of the loss. Your issue however isn't one of value, it's an issue of fact – did hail damage the roof or did the roof wear out. The weather service can probably verify dates of hail storms, and while the roof may have been in bad shape before, it could be worse now. Without any reason to doubt the integrity of the insured, you should give him the benefit of the doubt.

However you may want underwriting to have a property inspection completed to review the insurability of the home.

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