Digitory Solutions Inc.

Insurance Appraisal as ADR: Simple Guideline for Every Appraiser

When a dispute arises between the Insurer and the Insured regarding the settlement amount, either party may invoke the policy’s Appraisal Clause as an ADR method to resolve the claim. Often, during claim negotiations, the Insurance Company may undervalue the claim, overlook damages, and ignore valid arguments that the insured and/or their Public Adjuster makes. Usually, this results in an “impasse”.

When an insured invoke the appraisal clause to dispute the Carrier’s offer, it is very important that they appoint an experienced and well-educated appraiser who not only understands the subject matter of the dispute, but also the components of the appraisal process.

The Policy’s Appraisal Clause is a form of Alternative Dispute Resolution (ADR). While it generally calls for expertise in the subject matter of the underlying dispute, Policyholders and Public Adjusters must also ensure that they choose a professional who has the required expertise in the mechanics and procedural components of “tripartite” arbitration/appraisal. This more often than not is the most critical skill set in an effective Appraiser. The illustration below diagrams the typical Appraisal process.

The Insurance Appraisal Process

Expertise of the Insurance Appraiser

Keep in mind that the appraisal process is essential, although not universally, the last chance to identify and support the policyholder’s sustained damages. It is always possible that the appraisal can rule in the favor of the Insurer, leaving the insured with an insufficient amount to recuperate from their loss. This is known to happen when the Insured appoints an inappropriate choice in Appraiser, specifically, choosing someone who is not a professional Appraiser but rather a contractor that they met during the original adjusting process. Often, unsavory individuals involved somehow during the claim process will misrepresent either themselves or even the Appraisal process, to convince the policyholder to “name them” as their Appraiser. Of course, Insurance Companies will typically not protest the policyholder’s choice to appoint a ” random contractor” or tradesperson who is in essence, under-equipped to conduct themselves in a high-risk, quasi-formal process that relies more on mental abilities and knowledge than physical craftsmanship. Hopefully, the policyholder has either a Public Adjuster or Attorney working closely with them during their claim and can refer to their “network” of professionals when choosing an Appraiser. The following information provides simple tips that a qualified and professional Appraiser should always utilize when acting in the capacity of an Appraiser.

Important Guidelines all Appraisers Should Implement

The moment the claim enters the appraisal process, it is imperative that the appraiser prepares well for the presentation of the case. Here are a few simple guidelines to remember when preparing for the appraisal:

  1. Be organized. Appraisal is like chess, developing a strategy to be a step ahead of your opponent is key. Determine the key issues and disputes with the Insurer’s analysis of the claim. Pinpoint ways to address those key issues and figure out the best way to present those issues, together with your recommendations on how to address them, in the most persuasive way.

  2. Prove the damages and the appropriate solutions. While technically, there should not be a disproportionate “burden of proof”, there sometimes is, and it is best to assume the worst. Make extensive efforts to gather data that would best support your position on the “amount of loss”. Provide exhaustive and organized data and information on each item that you would like to focus on and “explain” what support’s your stance, while also providing material evidence discrediting your opposition’s positions. Present photographic documentation detailing actual damages to items in order to prove that they should be replaced instead of restored. Anticipate how the Insurer’s appraiser will counter your arguments, and be prepared to address those concerns.

  3. Stay objective. Never use personal opinions or “emotion” to argue the value of items, unless your opinions are based on presented facts. This is particularly helpful for items such as collections, antiques, and artworks. Secure independent appraisals by credible experts in these fields to determine the value for complex or unique items, especially when you may not possess the prerequisites to properly evaluate.

  4. Acknowledge weaknesses in the claim. Avoid the temptation to prove every item on your appointing party’s claim to be correct. There may be instances when you would find that the Carrier’s analyses of certain items are valid, and as of such, agreeable. Acknowledging those facts would not only be complying to your charge as Appraiser, but would also strengthen your credibility. This demonstrates your due diligence to independently appraise the loss, and not merely blindly maximizing your appointing party’s settlement. The charge to Appraisers, at the very most fundamental level is to secure what is accurate and commensurate to the loss, ensuring that all aspect’s of your appointing party’s claim are of due consideration.

  5. Review all presentation prior to discussing it with the opposing party. Be very thorough and examine each aspect of the presentation well in advance to give you time to polish and gather additional data if necessary. Unfortunately, the level of knowledge and expertise in the Appraisal field varies, and there are many individuals unethically inviting themselves to act as Appraiser while they are totally incompetent and uninterested in the technical level of the procedure. A true professional will take pride and diligence in putting together a presentation that defines the aspects of the disputes, identifies the items subject to improper valuation, presents their own valuation methods utilized, and provides organized supporting documentation to substantiate their Appraisal of loss.

  6. Final presentation. The final presentation is complete, organized, and presented in a professional manner, as pointed out above. When meeting with the other party, make sure that you know every aspect of your Appraisal and can confidently answer any further concerns or objections that they may have about your presentation.

  7. Bonus Tip: Remember that the number one most important aspect of the entire appraisal process is to secure the right umpire! This “third” panelist is what provides the panel the justice that enables tripartite panels to properly resolve disputes.