Dealing with insurance claims can be immensely stressful, especially when you’re grappling with the aftermath of losing your car and potentially dealing with injuries or worse. The process is sometimes exacerbated by insurance companies, notorious for their unsympathetic tactics aimed at minimizing payouts. Fortunately, if you disagree with your insurer over the value of your claim, you may be able to invoke what is commonly referred to as the “appraisal clause”
What is the Appraisal Clause?
The appraisal clause is a provision in most insurance policies that allows policyholders and insurers to resolve disagreements regarding the value of a claim. It provides an alternative to litigation and can help expedite the claims process. The appraisal clause can usually be found in the “Loss Settlement” section of your contract.
How Does the Appraisal Clause Work?
When a policyholder and insurer cannot agree on the value of a claim, either party can invoke the appraisal clause. Here’s how the process typically unfolds:
- Notification: The policyholder or insurer must notify the other party in writing of their intent to invoke the appraisal clause. This notification should include a clear explanation of the disagreement and a request for appraisal.
- Selection of Appraisers: Each party selects a competent and impartial appraiser. Fair Auto Appraisals LLC performs total loss vehicle appraisals that include the following:
- USPAP compliant appraisal
- Cover letter
- Demand letter
- Minimum of 3 comparables
- Adjustments for make, model, year, mileage, options, condition, market and location
- Instructions how to file finished value claim tailored to your specific insurance company
- Supporting Documents
- Negotiation: The two appraisers review the claim and independently assess the value of the loss. If you hire Fair Auto Appraisals LLC, I will carefully inspect the opposing appraiser’s appraisal and dispute poor comparables and improper valuation adjustments (one favorite trick of opposing appraisers is to use comparables that have spent most of their lives in “rust belt” states. These vehicles can be worth up to 40% less than non rust belt vehicles on the open market)
- Agreement: If the appraisers agree on the value of the loss, their decision is binding, and the insurance company must pay the agreed-upon amount. This resolves the dispute.
- Umpire: If the appraisers cannot agree on the value, they can appoint an impartial umpire to help resolve the disagreement. The umpire’s decision, when agreed upon by any two of the three parties (the two appraisers and the umpire), is binding.
- Payment: Once the value of the loss is determined, the insurance company is obligated to pay the policyholder the appropriate amount within a reasonable timeframe.
Benefits of the Appraisal Clause
The appraisal clause offers several benefits to policyholders:
- Speed: The appraisal process is typically faster than pursuing legal action, allowing policyholders to receive a resolution more quickly.
- Cost-effective: Engaging in the appraisal process is generally less expensive than going to court, as it avoids the costs associated with litigation.
- Impartiality: The involvement of impartial appraisers helps ensure a fair and unbiased assessment of the claim’s value.
When Should You Consider Invoking the Appraisal Clause?
You may want to consider invoking the appraisal clause if:
- You believe your insurance company undervalued your claim.
- You have evidence to support a higher valuation.
- You want a faster and more cost-effective resolution to your claim.
However, it’s important to note that the appraisal clause is not appropriate for all types of disputes. It is typically limited to disagreements over the value of a claim and does not cover coverage disputes or issues related to policy interpretation.
Conclusion
The appraisal clause is a valuable tool for policyholders who find themselves in disagreement with their insurance company’s offer. By understanding the process and benefits of invoking the appraisal clause, you can navigate the claims process more effectively and work towards a fair resolution. If you believe your claim has been undervalued, consider discussing the appraisal clause with your insurance company to explore this alternative dispute resolution option.