THE APPRAISAL PROJECT
You are all quite familiar with appraisals conducted in property insurance claims and each of you, I am sure, has your own opinion regarding them.
Appraisal is an option contained in every property insurance policy and is designed to resolve differences in the quantification of the value of the loss. The process is supposed to be simple. Each side names a competent appraiser and the two appraisers name an umpire. The appraisers attempt to reach agreement and submit any items on which they do not agree to the umpire. The agreement by any two of the three participants results in an award. By statute, the appraisal provision is in every NJ homeowner's policy.
Traditionally, appraisal has only been concerned with a calculation of values. It has not been used to resolve legal issues or to determine disputes regarding coverage or the scope of the loss. In some states, courts are beginning to allow the appraisal to take on attributes of arbitration and to determine the disputed scope of a loss. Other states (California, Texas) have reported cases refusing to allow such expansion. As with any issue, sometimes this expansion can be beneficial to the insured and sometimes an insured will want to preserve the issue for a jury's determination.
The downside to appraisal is the lack of control both the insured and the insurer have over the time it takes to obtain an award. This can sometimes become extended and the intended benefit of a prompt resolution is lost. Another fact to remember is that each party to the appraisal pays its own appraiser and divides the cost of the umpire. Once the process starts, the parties lose the ability to control the costs of the appraisal. This is particularly of interest to the insured as these costs come directly out of the recovery, which is limited to start.
In most instances, the appraisal results in a larger payment to the insured than originally offered by the insurer, although less than the insured originally claimed. The costs of the appraisal, in terms of both money and time, need to be considered to determine the benefit to the insured. Often, the mere statement of an intent to submit a dispute to appraisal can induce the insurer to increase its offer. The insurer recognizes that it will also have to absorb its own appraisal costs and most realize that the award will exceed their current offer.
I propose that we gather some empirical data regarding appraisals. My suggestion is that we create a database of appraisals and attempt to draw some conclusions about cost, effectiveness and timeliness from the data. I agree to collect the information from you and attempt to analyze it. Here's how I think it should work:
Send me a note on each appraisal in which you become involved at its conclusion containing the following information:
Date of appraisal demand;
Amount claimed by the insured;
Type of claim (building, contents, ALE, EE, BI)
Identity of insurer;
Amount offered by insurer;
Date of award;
Amount of award;
Costs of appraisal to insured.
We should be able to reach some helpful conclusions if we have a large enough basis to make the exercise meaningful. I encourage each of you to participate. Are you in?
If you or your insureds have any questions or encounter any issues regarding an appraisal, please feel free to contact me at 973-538-4100 or by email at www.thomasmaloneylaw.com. We are here to help