The next step once an appraisal has been demanded by either party is for each party to choose a competent and impartial appraisal. This is critically important. While the terms are not defined, they are key to a successful and fair appraisal. Merriam Webster online defines competent as “having requisite or adequate ability or qualities”, or “legally qualified or adequate”. A plumber is not the right person to assess the cost of damage to the wiring, and a roofer is not the right person to assess the cost to repair the plumbing. The appraiser must be knowledgeable in the area he has been called in to assess. Impartiality is the next requirement. Merriam Webster defines impartial as “not partial or biased; treating or affecting all equally”. The insured cannot select his brother as his appraiser, and the carrier cannot use on of its own adjusters or an appraiser it has used extensively over the years. This walks a fine line, as the use of the same appraiser regularly risks showing bias in favor of the carrier. The appraiser must have no bias towards either party involved. If an appraiser has prior knowledge of the claim, a financial interest in the outcome, or any bias towards not only the company or the insured but the other appraiser or umpire than another appraiser must be selected. This type of information must be disclosed at the beginning of the appraisal process, as soon as an appraiser has been selected by either party.

Some policies use slightly different wording. A policy may require an independent, disinterested, competent, impartial appraiser, or any combination of these or similar terms may be used. The intent is the same; the appraiser must be knowledgeable in the area he is being called in to assess, and he must not have any bias towards either the insured or the carrier, and have no financial stake in the result of the appraisal.

Once the appraisers have been selected, the appraisers then select the umpire. If they cannot agree on an umpire, then either party may request that a judge of a court of record in the state where the residence premises is located or a court having jurisdiction be used to select an umpire. The judge is not the umpire, he just selects one.

The appraisers then review the estimates of the damage needed, and determine the cost to repair or replace the damaged property. If the appraisers agree then the value is established and written notice is provided to the carrier. If they do not agree the matter is placed before the umpire. If two of the three parties come to an agreement about the damage and the cost to repair then that agreement sets the amount of the loss. Most policies consider the agreement by the appraisers to be binding on both the carrier and the insured.

Each party is to pay its own appraiser, and other expenses of the appraisal and the cost of the umpire are to be evenly divided. In the building and personal property form, the carrier reserves its right to deny the claim, even after the appraisal. Remember, the appraisal determines the amount of the loss, not whether or not there is coverage for the loss. The amount of damage can be agreed on and coverage can still be denied due to exclusions in the policy.

Appraisal is a fair way to settle differences between insureds and carriers without filing suit. Before a suit is filed all terms of the policy must be followed, and that includes appraisal. Appraisal should be tried first before filing suit on a carrier so that every chance for the differences to be settled quickly and cheaply can be tried. An appraisal gives the insured the opportunity to get the matter resolved without having to resort to a suit.

Christine G. Barlow, CPCU is managing editor with FC&S®, the premier resource for insurance coverage analysis. She has an extensive background in insurance underwriting. She may be reached at [email protected]. Additional information about FC&S Online is available at www.NationalUnderwriter.com.