What is Insurance Code 2071 Appraisal?

The Appraisal process is the method established in California Insurance Code 2071 to resolve disputes over the actual cash value (defined in California by Assembly Bill No. 2962 filed with the Secretary of State September 20, 2004) or the amount of loss.  Most people think of "appraisal" as a procedure such as that done by real estate professionals for a bank or someone interested in determining the value of a property.  While determining value is the purpose of the "appraisal" process set out in California Insurance Code 2071, those considering using this process are encouraged to think more in terms of an arbitration.  Each party to the dispute selects an appraiser, but this person is not their advocate.  They are to be "competent and disinterested" as stated in the Code.

This code is literally the minimum required language of a property insurance policy in the State of California. No part of this standard form fire insurance policy may be omitted in any policy written in California unless the replacement language is “substantially equivalent to or more favorable to the insured than that contained” in the Code. (Section 2070)

The most recent changes in California Insurance Code 2071 went into affect governing all polices originated or renewed on or after January 1, 2004 following enactment of Senate Bill 658 of the 2001-02 Regular Session of the California State Congress.

The full text of the Appraisal section of California Insurance Code 2071 is as follows:

In case the insured and this company shall fail to agree as to the actual cash value or the amount of loss, then, on the written request of either, each shall select a competent and disinterested appraiser and notify the other of the appraiser selected within 20 days of the request. Where the request is accepted, the appraisers shall first 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 in the state in which the property covered is located. 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 appraisers shall then appraise the loss, stating separately actual cash value and loss to each item; and, failing to agree, shall submit their differences, only, to the umpire. An award in writing, so itemized, of any two when filed with this company shall determine the amount of actual cash value and loss. Each appraiser shall be paid by the party selecting him or her and the expenses of appraisal and umpire shall be paid by the parties equally. In the event of a government-declared disaster, as defined in the Government Code, appraisal may be requested by either the insured or this company but shall not be compelled.

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