A large condo development suffered substantial hail damage to many of its buildings' roofs. After initial interaction with its insurer, the two parties went to arbitration in hopes of resolving their dispute over the extent of the loss. Dissatisfied with the non-binding decision made by an appraisal judge and the appraiser selected by the insurer, the condo association sued.

Click here to see if the courts viewed the loss in a manner that met the condo association's coverage expectations.

When a large loss occurs it can be a stress test of the coverage promise that is the heart of every insurance policy. Filing a claim does not automatically result with a loss payment. An insurer and the policyholder may end up disputing what is owed. In the best case, the loss adjustment process may lead to an agreement over what's due on a given loss. In the worst case, the dispute ends up being resolved in court. However, an appraisal may be a tool that could resolve matters before having to deal with the slow, expensive process of litigation.

Click here for an excerpt of wording on appraisals found in the ISO CP 00 10-Building And Personal Property Coverage Form Analysis in PF&M.

Yes, we're going back to the basics here. When disputes do go to the courts and involve very high financial stakes, we might assume that complicated issues are involved. Most root causes of litigation are usually quite simple. In the above case, a key issue was the lack of understanding about covered losses. An insurance policy protects against eligible losses, not all losses. The passage of time and regular use are the primary reasons for property losing its original value. Accidental loss is often a portal that reveals the existence and extent of different sources of reduced property value. It's critical to keep in mind that, while insurance is a valuable source of protection, its role is narrowly defined.

Click here for an excerpt about the role of the insurance contract found in "P&C Insurance by Gordis," a component of Rough Notes Advantage-Plus

Prevention or mitigation of exposures to loss is always a good idea. While, ideally, clients should have a firm grasp of the condition and value of their property and be willing to take steps to deal with issues, that's not reality. An insurance professional can provide invaluable service by initiating action or, at least, raising their clients' awareness. Take the situation where an agent may have made their observation of a condition that should be addressed and creating a way to open the insured's eyes.

Click here to see how a letter may be used to prompt expert assistance in gauging property conditions. This comes from Business Building Letters.