The insurance policies in most states have an appraisal clause that allows the parties of the contract to resolve a dispute on the “amount of loss.” In short, the amount required to fully complete the repairs caused by a covered event. For instance; a policyholder could be forced to hire an independent appraiser to enter into the appraisal process to protect their interests.

A recent Texas case shows how an independent appraiser and the appraisal process protected a policyholder from severe insurance company mistakes. Each case can be a little different depending upon how the appraisal clause is worded in the contract, the type of damage, and all the facts pertaining to the loss.

In this situation, the policyholder owned five buildings in North Richland Hills, Texas. A hailstorm caused damages to the roofs of the five buildings. The policyholder submitted a claim to his insurance company. However, at first the insurance company denied the claim after their adjuster determined that the roofs did not need to be fully replaced, and that the damage that was caused by the hail, did not reach the $5,000 deductible that applied to the policy.

The policyholder disagreed with that analysis and the adjuster’s findings. The insurance company then invoked its contractual right to appraisal. The policyholder tried to take the matter to court by filing a lawsuit, but the Judge compelled the parties to agree to the appraisal process. It is not unusual for the courts to suggest this, as most policies require that all policy provisions be exhausted before entering litigation.

The appraisal process includes two independent appraisers (one hired by each party) and an appraisal umpire. If the independent appraisers cannot agree on an amount of loss they can submit their differences to the umpire. The umpire in this appraisal process found on behalf of the policyholder and produced an award for the amount of loss at $423,053.96. Appraisal awards are binding, therefore, the insurance company paid the amount. (You may recall that their first offer was $0, because they determined the loss to be below the $5,000 deductible.)

The policyholder filed an appeal in the United States Fifth Circuit. He believed he was entitled to more insurance proceeds for his damages, plus was seeking additional monies for which he believed was “bad faith” conduct by the insurance company and their poor handling of the claim.

The Court stated that under Texas law, “appraisal awards made pursuant to the provisions of an insurance contract are binding and enforceable, and every reasonable presumption will be indulged to sustain an appraisal award.” The Court also stated that an otherwise binding appraisal may only be disregarded in three situations:

“(1) when the award was made without authority;

(2) when the award was made as a result of fraud, accident, or mistake; or

(3) when the award was not in compliance with the requirements of the policy.”

The policyholder argued on all three of these points and was overruled by the court on all three. This case is a good resource for how the courts look at the appraisal process in Texas. Overall, in my opinion, the Independent Appraiser and the Appraisal Process protected and worked for the policyholder. As a result of the work by the Independent Appraiser and the Appraisal Process, The policyholder received $418,053.96 over what his insurance company was willing to pay for his loss.

In the event you find yourself within an insurance claim dispute, call upon an Independent Appraiser for assistance in the insurance appraisal process. Insurance Appraisal Services is what we do. Feel free to call Insurance Claims Group, Inc. at 919-669-9111 to have all your insurance appraisal questions answered.

Copyright of Insurance Claims Group, Inc. & Joseph P. Brennan: Joe Brennan is President and owner/operator of Insurance Claims Group, Inc., a national independent adjusting, appraisal, and umpiring firm. Joe has been in the property loss business for more than 24-years. Mr. Brennan is highly educated with the appraisal process and has acted as an appraiser and umpire on dozens of claims.