How Does the Property Insurance Appraisal Work?

In the property insurance coverage process, all properties must undergo an appraisal. This is what will help insurers to determine the value of the property and how much it must be insured for. But how exactly does the process work?

In most appraisals, the neutral third person on the panel, known as the umpire, will actually be the one making the decision. Therefore, for a party appraiser to be effective, they must be familiar with the subject matter of the appraisal. For instance, if the subject matter of the appraisal is roof damage, the opinions of a forensic accountant are unlikely to carry any weight with the umpire.

The Appraisal Process

Since the majority of appraisals are informal affairs, it’s beneficial to select someone who has been through the process before. That person will know the best way to present positions to an umpire, when and how to narrow issues through negotiations with the other party-appointed appraiser and negotiate with the umpire. If the appraisal is likely to be more formal, or the parties contemplate formal presentation of evidence, consideration should be given to whether the party-appointed appraiser has enough presence to enact a significant role in that type of proceeding.

The third primary criterion for the selection of an appraiser is familiarity with others in the field. If party appraisers know and respect each other, they should be able to greatly narrow the differences to be presented to the umpire, promote a smooth process and minimum cost. When appraisers are respected by the umpire, it improves their effectiveness in advocating positions and negotiating reasonable awards.

Choosing the Umpire

Typically, the two party-appointed appraisers select the umpire. It is more likely that the appraisers will be able to agree on an umpire before they actually sit down to try to narrow the substantive disputes. If the umpire is selected early on, the appraisers can also consult with the umpire on the protocol they will follow, the nature of the hearing which will be allowed, and, sometimes, resolution of preliminary issues or even the differences between the appraisers as they come up.

If the appraisers cannot agree on an umpire, one party petitions the court, and the umpire is appointed by whatever motions the judge happens to hear. Given how judges frequently pick umpires, selection of an umpire is fraught with a certain amount of peril, particularly in hotly disputed, complex losses. Therefore, it’s recommended that the parties agree on an umpire selection protocol. This should, at the least, include an agreement that no candidate for an umpire is contacted by one side without the other. 

The parties should agree on a proposed letter to a candidate, description of the subject matter of the appraisal, a list of the involved parties so the umpire can run a conflict check, and suggested dates and times for a joint conference call. 

Scope of Appraisal

Another key issue that should be resolved by the parties very early on in the process is precisely what is being appraised. Where the scope of the loss is at issue, it may be less clear precisely what is to be appraised. The sooner the parties can agree on this point, the less likely there will be wasted time and effort by the appraisers, and the sooner an award can be agreed. If the parties cannot agree, finding out earlier allows them to seek a ruling from the court. 

Parties should prepare and sign a formal appraisal agreement and appraisal protocol. The most important part of this agreement is clarity on the scope of the appraisal. 

About AmSuisse

Formed in 2013, AmSuisse, Inc. has quickly distinguished itself as a wholesale operation that specializes in working very closely with our agents and broker partners to develop responsive, individualized service for each client. Our unparalleled writing support, industry-specific expertise, marketing support, responsive proposals and quotes, strong customer service, and strong relationships with our carrier partners have all helped us to provide the best possible coverage for our clients. To learn more about our available coverage, contact us today at (800) 485-0229 to speak with one of our representatives.