If you're dealing with an insurance company that won't pay your insurance claim or is refusing to pay the full amount of the damages, you may have heard that "invoking the appraisal clause" is an option you can take to hold that insurance company accountable.
An appraisal clause is a provision in your insurance policy that gives you the right to demand an appraisal of the loss when there is a disagreement on your property insurance coverage.
For example, let's say your roof was damaged in a windstorm, but the insurance company only agrees to pay for the shingles that fell off, and not for a full roof replacement. If you think the full replacement is warranted, you can invoke the appraisal clause to get a second chance at evaluating how much damage was caused, and how much the insurance company should pay you.
Unfortunately, the appraisal clause is necessarily favorable to an insurance company. They have a full dispute resolution team dedicated to managing this process, and they have included that appraisal clause in your contract because they know they can win.
That's why, in this blog, we're talking about the three main reasons that invoking an appraisal clause is a bad idea. Don't worry — we'll also offer alternative solutions to the appraisal clause to ensure you're made whole for the damage done to your property.
1. No Matter The Outcome, Property Owners Are Never Made Whole
Insurance companies are set up to manage and win cases just like these. Let's use an example to show you how even an appraisal clause won't make you whole for property damages.
If you decide to invoke the appraisal clause, it is your responsibility to find and hire an appraiser. This alone can cost between $500-$1,000 and significantly more if your dispute is related to a commercial property.
The insurance company, on the other hand, has its own appraiser on staff, ready to respond to requests whenever they need.
Once both appraisers have been selected, they head to your property site and inspect the damage. They'll both make an assessment and your appraiser will offer an adjusted damage amount. If the insurance company's appraiser agrees, you'll get that updated amount, but you're still out the money that you've paid to the appraiser.
If the two appraisers can't agree on adjusted damages (which is what happens most often), then it's time to bring an umpire into the process.
You, the property owner, are responsible for paying at least half of the umpire's costs, which can vary. Let's say for the example that you're required to pay $1,000 for the umpire.
Between the appraiser and the umpire, you've now spent around $2,000. Even if the umpire rules in your favor and all of the damages you're requesting are paid for, you won't recover the fees you spent throughout the appraisal clause process.
Appraisal clauses do not cover you for expert fees. You'll only get coverage for the damages minus your deductible. That's why property owners who invoke the appraisal clause are never made whole.
2. There is No Deadline Associated with an Insurance Appraisal
At The Lane Law Firm, insurance dispute resolution is one of our primary practice areas. We have an entire team of experienced insurance claim attorneys who work to protect property owners from big insurance companies. That experience is how we know that insurance appraisals are often referred to as the wild west of insurance law.
There are very few regulations imposed on the insurance company during an insurance appraisal. They have a deadline to name their appraiser, but after they have completed that step, the process can drag on indefinitely.
In general, we've seen insurance appraisal cases take anywhere from 6 months to a year or more.
There is no deadline, and if you have to go to court to get an umpire, that only extends your out-of-pocket cost and the timeline. Plus, the entire time you are working to have your insurance appraisal completed, you still have to deal with the damage that's been done to your property.
3. The Property Owner Has No Control Over the Final Decision
In most appraisal situations, the umpire is the person who makes the final decision on your damages, and ultimately how much coverage you receive for those damages. Unfortunately, there are no regulations regarding who this umpire can be.
To choose an umpire, both parties must submit a list of umpires they prefer. Together, you choose an umpire you agree on.
The issue here is that you and your appraiser are likely new to the situation and the area. You're unlikely to have a list on hand of approved umpires, which means you'll have to do the work to discover good candidates for the role.
The insurance company has a set list of preferred umpires they've worked with before. These umpires are vetted and have shown over time that they support the insurance companies.
This process makes it nearly impossible to find a truly unbiased umpire who will make the decision based on facts alone. That's an uncomfortable outcome, especially when it comes at such a cost to you.
Invoking the appraisal clause in an insurance policy is a high risk for most. In the majority of cases, the insurance company will be able to turn over a favorable solution for them. But even when they do have to pay, the costs you win are unlikely to cover the cost of the appraiser and umpire you needed to make this right.
If I don't invoke an appraisal clause, how can I be made whole for unpaid damages?
If you know you're owed more than the insurance company is offering, talk to an insurance dispute resolution attorney. Choose an attorney who only works for property owners and whose fee is contingent upon success.
In the State of Texas, if you win in a case like this with an attorney, the insurance company must pay your attorney fees.
That means you get the remainder of the unpaid damages, plus you don't have to pay for the experience of your attorney. Not only does hiring an attorney increase your chances of potentially winning, but you also don't have to pay for that attorney. The insurance company will make those payments in addition to the cost of the damages they owe you.
If you're having trouble with an insurance company paying your claim, remember not to accept their first offer. If you feel your claim is being underpaid, or your insurance company has refused to pay for a claim, get in touch with the Insurance Dispute Resolution attorneys at The Lane Law Firm.
