F. Appraisal
If the “insured”
and the insurer disagree on the amount of loss, either party can demand that
the loss be appraised. In this process:
·
each party chooses a competent,
impartial appraiser no later than 20
days after getting the other party’s request for an appraisal,
·
the two appraisers will choose an
umpire
·
each party has to share the cost
of the judge and pay the entire expense for their own appraiser.
If the appraisers
cannot agree upon an umpire within 15 days, either the insurer or the “insured”
can ask that a judge be selected by a court of record in the state where the
"residence premises" is located.
The appraisers
have to submit separate opinions on the loss amount and an agreement (submitted
to the insurer in writing) between any two persons (among the appraisers and
the judge) becomes binding on both the insurer and the policyholder.
CP 00 10–BUILDING AND PERSONAL PROPERTY
COVERAGE FORM ANALYSIS
E. LOSS CONDITIONS
2. Appraisal
The
insurance company and the insured may occasionally disagree on the value of
property or on the actual amount of loss. The appraisal condition is designed
to resolve these disagreements without a court intervention. In the first step,
one party decides it has reached an impasse with the other party and makes a
written request for an appraisal. Each party then hires an independent
appraiser. Each appraiser must be both competent and impartial.
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Example: Jane is the insured
and her insurance company is Bargun-Downe Property Company. They disagree on
the value of the roof damaged by a lightning strike. They both agree to
submit the dispute to appraisal. Jane selects an experienced appraiser who
just happens to be her brother. Bargun-Downe selects a totally impartial
party who does not have any appraisal credentials. Both appraisers are
rejected. Jane’s selection is biased and the company’s selection is not
qualified.
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The
appraisers then choose an umpire. If they cannot agree on one, they can request
that a judge of a court that has jurisdiction select one. Once all parties are
selected and are in place, each appraiser states the value of the property and
the amount of loss. If both parties agree, the amount of loss is settled. Only
disputed amounts are submitted to the umpire. Any decision made by any two of
the three is binding on both the insurance company and the insured.
The
expenses associated with this process fall outside the category of expenses the
coverage form pays. The insured pays the following costs or expenses. The
insurance company does not reimburse it for them:
- Its appraiser
- Its equal share of the cost of the umpire
- Its equal share of any other appraisal
expenses
The
insurance company pays the following costs and expenses. None of these expenses
reduce the limit of insurance:
- Its appraiser
- Its equal share of the cost of the umpire
- Its equal share of any other appraisal
expense
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Example: A tornado seriously damages Baron’s Furniture Store. Furniture is strewn
over many city blocks. Sheila is the owner and believes the value of the loss
is $560,000, based on her inventory records. The Cheapskate Mutual claims
representative visits the store, views both damaged and undamaged
merchandise, and determines the loss to be $350,000. Each side presents its
case to the other but the impasse cannot be resolved. Sheila needs to restore
the inventory in order to get back in business. She sends a letter to Cheapskate
and requests an appraisal. Each party selects a qualified and impartial
appraiser but cannot agree on an impartial umpire. They ask a local judge to
select one and he does so. Sheila’s appraiser determines the loss to be
valued at $625,000 but Cheapskate’s appraiser determines a value of the loss
of $450,000. The umpire reviews their figures and agrees with the insured on
some items and with Cheapskate on others. The final settlement is $510,000.
Each party bears its own expenses for the appraisers and umpire but the
agreed value of the loss is $510,000.
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