Reed Smith is a leader in the representation of policyholders in insurance appraisals. Our insurance recovery attorneys have recovered millions for our clients through this process. In fact, one of our insurance recovery attorneys drafted a cutting-edge analysis and critique of the insurance-appraisal process that was published recently in the Connecticut Insurance Law Journal. Our experience with the nation’s top insurance appraisers and our knowledge of the law of insurance appraisal is a big advantage to our clients facing this little-known process.
What Is Insurance Appraisal?
Virtually every property insurance policy for both homeowners and corporations contains a provision specifying “appraisal” as an alternative dispute resolution mechanism for resolving disputes about the “amount of loss” for a covered claim. In appraisal, the policyholder and insurance company each select an appraiser to appraise the amount of loss. If the appraisers cannot agree on valuation, they select a competent and disinterested umpire to resolve their differences, resulting in a written appraisal award. Questions about the existence or extent of coverage are not appraisable. Consistently, courts make a distinction between questions of liability (the scope or extent of coverage) and damages (the value of the property or the amount of other loss) in deciding whether appraisal is mandated. Insurance policies typically provide little instruction or guidance about how an appraisal is to be conducted, and state laws and precedent vary in their treatment of such provisions. For this reason, policyholders should retain knowledgeable counsel to guide them through the process.
Common Disputes In Insurance Appraisal
Because appraisal is an ill-defined process under the insurance policy and state law, a number of legal disputes repeatedly arise, including: (1) the procedure for appointing an umpire when the appraisers cannot agree; (2) whether the appraisal process is governed by arbitration statutes and precedent; (3) the procedure, if any, for confirming an appraisal award in court; (4) the grounds for challenging an appraisal award; (5) what due process protections, if any, must be afforded the parties to an appraisal; (6) the scope of appraisal provisions (i.e., what disputes are subject to appraisal and what disputes must be resolved in court); (7) whether an appraisal to determine the amount of loss and a declaratory judgment action or a breach of contract action to determine legal rights and liability can proceed concurrently, or whether one should or must precede the other; and (8) whether it is bad faith for the insurance company to manipulate, delay, or obstruct the appraisal process or refuse to pay an appraisal award.
The Reed Smith Insurance Recovery Group has the experience to address these issues in court or in the appraisal process.