The Appraisal Process
While each policy contains its own appraisal clause with its own distinct language, which language may be governed by statutes enacted by the individual state in which the policyholder resides or maintains its business, or where the damaged property may be located, the procedure is generally the same. When either the insurer or the insured determines that it cannot reach agreement on the amount of damages, or the value of the loss, the appraisal clause may be invoked. Each party appoints an appraiser, who conducts his or her own examination and assessment of the loss and makes a determination of the value of the property damages. The determination may be based upon existing information, or may require development of new avenues of exploration that may involve outside experts.
Once each side has has made a determination as to the amount of damages sustained in the loss, the two appraisers discuss their respective findings
in an attempt to reach common ground. If there are areas where the appraisers agree, then that portion of the claim is settled. For those portions of the loss where the appraisers cannot agree, then
an impartial third party, called an umpire, is selected to settle the dispute. If the two appraisers cannot agree on the selection of an umpire, either side may apply to the local court for the
appointment of someone to serve in that capacity. In selecting an umpire, the parties should choose someone who will not only be fair and impartial, but will also maintain a sense of order over the
appraisal process. To that end, someone with experience as a mediator or in some other capactiy involving dispute resolution would best serve the interests of both sides to the dispute.
Once the umpire has been selected, the appraisers present their assessment of the loss, often invovling informal testimony from the parties involved in the claim. Whenever possible, and in order to provide the umpire with a better understanding of the true circumstances of the loss, the appraisers and the parties will meet at the actual loss location and review the details of the claim. Either before the loss, or at the time that they meet at the site, the appraisers will provide the umpire with documentation supporting their respective assessments of the loss. After hearing testimony, even on an informal basis, the umpire might request a post-hearing submission where the appraisers submit their final assessment of the loss. The umpire will then render a decision which, if agreed to by either or both appraisers, constitutes the appraisal award.