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You do have options when your company appears to be offering you less than what you think is fair in the settlement of your claim. Within your policy of insurance is a paragraph headlined as “Appraisal.” Commonly referred to as the “Appraisal Clause,” it is written into the contract to offer an insured, or the insurance company, the opportunity to settle disputes.
Although the actual verbiage will vary by insurance company contract, the Appraisal Clause generally follows this form:
If you and we fail to agree on the amount of loss, either may demand an appraisal of the loss. Each party will choose a competent appraiser. The two appraisers will choose an umpire. The appraisers will separately appraise the property and set the amount of the loss. If they cannot agree they will submit their differences to an umpire. An agreement by any two will set the amount of the loss. Each party will be responsible to pay for its own appraiser and will equally share the cost of the umpire should one be required.
It matters not whether “the amount of loss” refers to the cost to repair the property or the value of the property in the case of a total loss. By design it is intended to be a quick, cost efficient solution to disagreements between the two parties. And most of the time it does work just that way. However, some insurers may use it as a roadblock to delay settlement. In those unusual situations there is additional legal leverage that might come into play.
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Having been in the collision repair business for over 35 years and 26 as a shop owner, I was unaware of the appraisal clause until about 5 years ago. I would presume to guess that less than 10 percent of policy holders ever knew the appraisal process was even available to resolve disputes.
ReplyDeleteAs a consumer advocate, I have come to realize the importance of this clause perhaps too late in my home state of Missouri. Insurers are not required to offer the appraisal clause and many of the larger companies do not have it in their policies.
The new policy verbiage states that the insurer is the expert and determiner of the amount of loss. They consider labor repair data that they have a strong influence on in their calculation for costs of repair on which settlements are based. Talk about the wolf guarding the henhouse! The language basically leaves you only with complaints to the DOI (good luck with that) or suing for the disputed difference in small claims court.
So much for a resolution to ameliorate disputes in an amicable matter with this type of policy language. In a nutshell, they are saying we are the experts, we'll calculate your loss, like it or lump it, or sue us.
I hope to meet with some of my local state representatives as a consumer to see if the appraisal clause can be reinstituted in all casual policies by statute requirements.
Mike,
ReplyDeleteThanks for sharing your perspective, I guess we in Illinois can consider ourselves "lucky" to still have appraisal required by statute.
In Florida we too have the appraisal clause but what I have found is it is often times abused by the insured and of great waste of time and resources to the policyholder unless they know what and how to protect themselves.
ReplyDeleteWhen I have assisted in these issues consumers I have found the insurer is actively involved and mandates their chosen appraiser (often times an employee of the insurer) to not make any agreements of the damages without their expressed approval. Of course this is in direct contrast to the spirit and intent of the appraisal clause. This defies the intent of enabling the un-biased participation of the two supposed "independent" appraisers and rarely will the insurer agree to an unbiased and impartial umpire...unless of course their chosen umpire is selected! The problem stems from no set “rules of engagement” as there is for mediations and arbitrations and other such legally sanctified remedies.
While I have successfully resolved those appraisal clause issue I’ve been involved, they are time consuming and expensive for the policyholder (just as the insurer desires) and often times my success is due to backing the insurer into a corner to where their less than reasonable activities have placed them in a position of defending themselves from a potential lawsuit.
In my opinion, the appraisal clause is not the best recourse for the insured when confronted with an insurer who believes in “Severe Economic Restraint” abuse in their claims handling. While the insurers often adhere to the Stall, Delay and Deny routine, a good attorney familiar with contract law may prove to be the wisest investment the wronged policyholder can make to achieve a swift and “reasonable” settlement while holding the insurers accountable for their actions. This activity oftentimes provides good fodder for the policyholder’s attorney as well which is often paid by the insurer under the terms of the policy. Of course, if a good attorney handles enough of these he or she may find a “pattern and practice of such abuse and who knows, a viable class action may be derived further holding the insurer, and the entire insurance industry on notice.
Florida apparently is a little different than Illinois. We too have to deal with some roadblocks set by insurers in too many times. However, the courts have forced plaintiffs to go through the Appraisal Clause before litigation can go forward. It is the very method by which an insurer and its chosen "independent" appraiser function that could further establish legal action.
ReplyDeleteIt remains a tool for consumers to consider depending on the circumstances and the advice of their legal counsel.
Barrett, your comment on the truly independent umpire is the key. I went to the Illinois Association for Attorneys and was able to locate a number of retired judges that were willing to act as umpires for a reasonable fee. It is very difficult for any insurance company appointed appraiser to deny a retired judge!
ReplyDeleteBarrett's experiences mirror those that I find in Ohio. Consumers are better off getting a lawyer from the get-go rather than waste time and dollars on a bogus appraisal clause process.
ReplyDelete