When the policyholder and insurer agree that damage is covered but disagree about the amount of loss, the appraisal clause may offer a structured way to resolve the valuation dispute.
Important: Appraisal generally determines the value of the loss. It does not decide whether the policy provides coverage or who is legally responsible.
When Appraisal May Be Appropriate
- The insurer undervalues the damage
- Carrier estimates are much lower than contractor estimates
- Necessary repairs are missing from the scope
- The parties disagree about the amount of damage
How the Appraisal Process Works
Demand for appraisal
Either party may invoke appraisal according to the policy language.
Selection of appraisers
Each side chooses a qualified and impartial appraiser.
Selection of an umpire
The appraisers select a neutral umpire in case they cannot agree.
Evaluation of the loss
Each appraiser inspects, reviews documentation and prepares a valuation.
Resolution
An agreement signed by two of the three participants generally becomes binding.
Pros and Cons
Potential Advantages
- Often faster than litigation
- May be more cost-effective
- Focused on valuation
- Can produce a more accurate scope and amount
Important Limits
- Does not resolve coverage disputes
- Appraiser and umpire fees may apply
- The result may be binding with limited appeal options
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