The Appraisal Clause And Valuation Disagreements

Many property claim disputes are not about coverage at all. Both sides accept the loss is covered and disagree only on the amount, and most policies contain a dedicated mechanism for that situation.

What the clause provides

Either party may demand appraisal. Each appoints a competent and impartial appraiser, and the two appraisers select an umpire before beginning.

The appraisers each value the loss. Where they agree, that figure binds. Where they do not, the differences are submitted to the umpire.

An award agreed by any two of the three is generally binding on the amount, which is what makes the process an alternative to litigating valuation.

Its scope is narrow by design

Appraisal determines the amount of loss. It does not decide whether a peril is covered, whether an exclusion applies or whether a condition was breached.

The line between amount and coverage is not always clean. Whether particular damage was caused by the insured event is arguably causation rather than valuation.

Jurisdictions differ on how far appraisers may go in allocating damage between covered and uncovered causes, which is the most litigated aspect of the clause.

Why it is faster than the alternative

The process avoids pleadings, discovery and court scheduling, and it is decided by people who value building damage for a living rather than by a general tribunal.

Timelines are measured in weeks or months rather than years, which matters when repairs are waiting on the outcome.

Costs are usually split, with each side paying its own appraiser and sharing the umpire, which is predictable compared with the open-ended cost of a lawsuit.

Who can demand it, and when

Either party may invoke it, and insurers do so as well, typically where they consider a policyholder's estimate inflated.

Some wordings require the demand within a defined period, and some require the parties to have reached a genuine impasse rather than merely differing initially.

Invoking appraisal generally does not waive either side's position on coverage, provided the reservation is stated clearly at the time of the demand.

Where the process disappoints

An appraiser who is not genuinely impartial can be challenged, and awards have been set aside where a party's appraiser was effectively an advocate.

The award binds on amount but leaves any coverage dispute unresolved, so a policyholder can win an award and still face a denial on other grounds.

Availability, mandatory language and judicial treatment of appraisal vary by jurisdiction and change over time, so the wording and local law determine how it operates.