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.
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