Insurance Appraisal Guide

What Is Appraisal?

Appraisal is a standard policy provision that provides a structured process for resolving disagreements about the dollar value of a claim without going to court.

How Does the Appraisal Process Work?

If you disagree with your insurance carrier’s assessment of your claim, you may invoke appraisal by submitting a formal Demand for Appraisal.

Can the Insurance Company Deny Appraisal?

Generally, no. Insurance carriers are bound by the terms of the policy and the regulations established within your state. However, you can only Demand appraisal for a covered loss. In states like New York and Texas, causation is part of the appraisal process. In general, appraisal procedures and timelines vary from state to state making it best to seek guidance from an experienced claims professional, like a Public Adjuster.

Demand Estimate

Some insurance companies may request a “demand estimate” before agreeing to proceed with appraisal. While this requirement may not always be supported by policy language, carriers often operate within gray areas and may use these requests to delay the process or hold you to an improperly assessed figure..

If a Demand Estimate is required, it is important to provide a detailed and accurate estimate that reflects the full scope of damage to your property, including costs commonly incurred during repairs, such as:

• Permits
• Architectural fees
• Engineering fees
• Emergency services
• Code upgrades
• Other associated costs

Selecting an Appraiser

Once appraisal is demanded and accepted, both parties must select an impartial and qualified appraiser.

You, as the policyholder, will hire and compensate your own appraiser. A knowledgeable appraiser should focus on preparing an accurate scope of damage, developing a fair estimate, and negotiating in good faith to help resolve the claim.

Fees vary from appraiser to appraiser but are often tied to an hourly rate to ensure impartiality. A retainer fee is often customary acting as a down payment towards the hourly rate. Your appraiser may not sign the Award Letter if not first compensated; so, it’s best to ensure funds are readily available for disbursement. 

The Insurance Company’s Appraiser

Your insurance carrier is also required to hire an impartial and qualified appraiser.

In practice, however, insurance companies often hire large independent firms that rely heavily on carrier relationships for continued business. This can create concerns about impartiality. In some cases, appraisers may be guided on scopes or toward pricing positions that align with what the carrier typically is willing to pay.

Selecting an Umpire

After both appraisers are selected, they must agree on an umpire within the timeframe outlined by state guidelines. In New York it is 15 days.

The umpire serves as a neutral third party who becomes involved only if the appraisers cannot reach an agreement on disputed items. While disagreements do occur, many appraisers attempt to resolve differences without involving the umpire.

If the umpire must participate, the associated fee is split between the policyholder and the insurance company.

Once the umpire is selected, the parties complete a Declaration of Appraisal, which identifies all individuals participating in the process.

What Happens If the Appraisers Cannot Agree on an Umpire?

If the appraisers cannot agree on an umpire, one may need to be appointed through the court system.

This increases the overall cost of appraisal because both parties may incur legal fees associated with obtaining a court-appointed umpire.

What Happens During Appraisal?

The appraisers will conduct a joint inspection of the property and work toward establishing an agreed-upon scope of repairs.

During the inspection, both appraisers should review all relevant documentation and substantiated costs related to the claim. This may include:

• Contractor estimates
• Invoices
• Engineering reports
• Expert evaluations
• Code requirements
• Additional living expenses (ALE)
• Period of restoration
• Personal property documentation

After the inspection, the appraisers exchange their position estimates and attempt to reconcile any differences.

If an agreement is reached, they will prepare and sign an Award Letter outlining the agreed-upon values associated with the claim. This may include:

• Dwelling repairs
• Debris removal
• Emergency services
• Ordinance and law/code upgrades
• Personal property
• Additional living expenses (ALE)/Period of restoration (POR)
• Other applicable coverages

What Happens If the Appraisers Cannot Reach an Agreement?

If the appraisers remain at an impasse, the umpire will become involved.

At that stage, another joint inspection may take place with all interested parties present. It is important that all communications regarding the claim remain transparent and involve all parties to avoid side discussions or misunderstandings.

Each appraiser will present the items they disagree on, and the umpire will evaluate those disputed issues before preparing their own position estimate.

Once the umpire finalizes their estimate, they may allow limited input from both appraisers before issuing the final Award Letter.

For the award to be binding, it must contain at least two signatures:

• Both appraisers
• Or one appraiser and the umpire

The ideal outcome is for all three parties to sign the award.

The Award Letter

The Award Letter is a legally binding document.

Once issued, the insurance carrier is required to compensate the insured based on the figures contained within the award, subject to applicable policy limits, deductibles, and prior payments.

What If I Disagree With the Outcome?

Just like the insurance carrier, policyholders generally cannot reject or alter the outcome of a properly completed appraisal award.

For that reason, selecting experienced and qualified professionals throughout the process is critical.

Final Thoughts

Appraisal can be an effective tool for resolving disputes over the value of an insurance claim without the expense and delay of litigation. While the process can seem intimidating, understanding your rights and working with knowledgeable professionals can make a substantial difference in the outcome of your claim.

If you believe your insurance company has undervalued your loss, appraisal may be an option worth exploring. We at Manhattan Public Adjustment are versed insurance professionals with a successful track record in recovery substantiated insurance proceeds on an insured’s behalf. We at Manhattan Public Adjustment are also versed at insurance appraisals. We can assist you should you desire to demand appraisal.