The Appraisal Clause: Settling Disagreements Over How Much a Claim Is Worth
Most property policies include an appraisal process for disputes about the amount of a loss. Here is how it works, what it costs, what it can't decide, and when it makes sense.
Many property insurance disputes aren't about whether something is covered. They're about how much the damage is worth. Most homeowners and commercial property policies include an appraisal clause for exactly this situation: a structured process, outside of court, to set the amount of the loss.
The short version
- Appraisal resolves disagreements about the amount of loss, not usually about whether the loss is covered.
- Either side can typically demand it in writing.
- Each side picks an appraiser; the appraisers pick an umpire. Agreement by any two sets the amount.
- Each side usually pays its own appraiser and splits the umpire's cost.
- The result is generally binding on the amount, though coverage questions can still be disputed.
How the process works
- Written demand. Either party requests appraisal under the policy.
- Each side picks an appraiser. Usually within a set number of days; appraisers must be impartial under many policies.
- Appraisers pick an umpire. If they can't agree, a court may appoint one.
- Appraisers estimate the loss. If they agree, that amount is set.
- Umpire decides differences. Agreement by any two determines the award.
An example
A hypothetical dispute after a storm:
- Insurer's estimate: $42,000
- Homeowner's contractor estimate: $78,000
- Appraisal award: $61,000
Show the numbers behind this chart
| Amount | |
|---|---|
| Insurer's estimate | $42,000 |
| Homeowner's estimate | $78,000 |
| Appraisal award | $61,000 |
If the homeowner's appraiser cost $1,500 and the umpire $3,000 split evenly, the homeowner's process cost was about $3,000, compared with a $19,000 increase over the insurer's estimate. Costs vary widely; some appraisers charge a percentage of the award.
What appraisal usually can't decide
- Coverage: whether the policy covers the loss at all, or whether an exclusion applies.
- Bad faith or legal claims: those go through regulators or courts.
- In some jurisdictions, causation questions may or may not be within appraisal's scope; this varies by state and policy language.
When appraisal makes sense
- The insurer agrees the loss is covered but disputes the value.
- The gap between estimates is large enough to justify the costs.
- You have good documentation: photos, contractor estimates, invoices.
When it may not
- The dispute is about coverage, not value.
- The amount at stake is small relative to appraisal costs.
- You may want to preserve other options; read the policy and consider professional advice first.
See how to dispute a claim denial for other routes, including your state insurance department.
Choosing an appraiser
- Look for experience with the type of loss.
- Ask about fees, including whether they charge hourly or a percentage.
- Check whether the policy requires the appraiser to be disinterested or impartial.
- Public adjusters and appraisers have different roles; some states regulate both.
The takeaway
The appraisal clause gives policyholders and insurers a faster, cheaper way than litigation to settle disputes about how much a covered loss is worth. It's not designed for coverage disputes. When the gap in estimates is large and the documentation is solid, it can be an effective tool.
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