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Eaton & Johnson, Inc. Appraisal Services
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Should you enter Insurance Code 2071
Appraisal?
Do you have a dispute about the amount of loss to be paid under a California property insurance policy? Are you unable to resolve this dispute? Are you able to clearly articulate your position and the position of the other party in order to define the dispute?
If the answers to the above questions are “Yes” the Appraisal process may be the best method of resolution. You should check the wording of the policy under which the claim is being presented and confirm the wording. Look for the Appraisal paragraph usually found in or following the “Conditions” section of a policy. The first words of the section are:
In case the insured and this company shall fail to agree as to the actual cash value or the amount of loss
You are encouraged to make every reasonable effort to resolve the dispute. Remember that as confident of your position as you may be, both sides of the dispute will be heard in the Appraisal process and the results are binding. You may not be happy with the eventual award.
Advantages to Appraisal
Expense – Appraisal is an “alternative dispute resolution (ADR)” method intended to avoid litigation of the determination of the amount of loss under a property policy in the State of California. It is intended to be handled by individuals who are experts in the field of determination of the extent of damage, repair methods, and repair or replacement costs, rather than attorneys and other litigation specialists. Accordingly, it should be much less expensive than resolution of the amount of loss by way of litigation. While the professional fees of the appraisers, umpire, and experts may be high, they are typically much less than the fees associated with litigation.
Speed – Appraisal is typically a quicker process to resolution of the amount of loss than litigation. If the parties to the Appraisal are organized, clearly define their dispute and respective positions for the appraisal panel, then the process may take only weeks. It is possible to bring the matter to a hearing and get an award within days.
Informal – Appraisal may be a relatively simple process and the Code makes it clear that it is to be “informal”:
Appraisal proceedings are informal unless the insured and this company mutually agree otherwise. For purposes of this section, "informal" means that no formal discovery shall be conducted, including depositions, interrogatories, requests for admission, or other forms of formal civil discovery, no formal rules of evidence shall be applied, and no court reporter shall be used for the proceedings.
The parties to the appraisal should be able to present any evidence that they believe supports their determination of the amount of loss.
Simple Issues – The Appraisal process determines value of loss. The panel has no authority to make determination concerning policy coverage interpretation and may not resolve questions of liability or fault. The only question to be determined is “the actual cash value or the amount of loss”. The parties may agree to submit additional issues for resolution of the panel, but this is optional.
Binding Award – There is no right of appeal of a valid Appraisal award. The process will resolve “the actual cash value or the amount of loss” and the parties must abide by the award. It is designed bring closure to the dispute over value.
Disadvantages to Appraisal
Expense – While Appraisal is generally a less expensive route to resolution of a dispute of the value of a loss, it can become a complicated process. Disagreements sometimes arise over selection of the appraisers, and more often in the selection of umpire. The Code holds that the appraisers:
select a competent and disinterested umpire; and failing for 15 days to agree upon the umpire, then, on request of the insured or this company, the umpire shall be selected by a judge of a court of record
Obviously, if the appraisers do not agree on the umpire selection or if their selection is challenged by either party the process of appointment by the Court will take time and expense. If the parties to the appraisal do not agree on a hearing, or delay in presentation of evidence the process may become more drawn out and expensive. If the parties do not clearly define issues or are disorganized in their presentation of evidence additional effort is required on the part of the appraisal panel with the resulting increase in time and expense. The professional fees of the appraisers, umpire, and experts may be high. The parties may be represented by attorneys whose fees must also be considered.
Binding Award – There is no right of appeal of a valid Appraisal award. Each party runs the risk of not liking the result once an award is issued by the panel. Courts will usually refuse to overturn an award unless there is a finding of corruption or bias on the part of the appraisers or umpire. Fraud of either party, such as the concealment of material evidence, may be grounds for vacating an award. The Appraisers must disclose any current or past significant business or personal relationship with a party to the appraisal or their representatives. The appraisal panel must also stay within the limits of their authority. If you have questions concerning the validity of an award or challenging an award you must seek legal counsel.
To Appraisal Step-by-Step
