When an insurance claim reaches the appraisal stage, the partiesinvariably brace for an adversarial experience, but it need not beone. If the participants realize that appraising is a mixture ofboth science and common sense, the process would result with noone's feeling as if they had lost something as a consequence of theappraisal.

In my 25 years of experience as an appraiser in the insuranceindustry, I have worked on behalf of both policyholders andinsurers. I have learned that the process of satisfying a claimfunctions best when all those involved in the process are willingto compromise without having to sacrifice their client's particularinterests.

Appraisal is a process that is included within the language ofmost insurance policies but, just as a jack is in the trunk of allnew cars, most people would rather not use the appraisal provision,due to a lack of understanding as to what it entails and how it canbest benefit them. In the case of the appraisal tool, it could beleft on the shelf if more carriers made better attempts to clearlydefine the scope of damage in property claims from the inception ofcoverage under the policy.

In claims involving water damage, many adjusters perform cursoryexaminations of the premises and offer modest sums for removingrugs, replacing sheetrock and personal property, and performingother obvious necessary repairs. Rarely, however, have I witnessedthe same adjusters working diligently to fully assess all existingdamages. Instead, inattention to detail may prevent adjusters fromoffering to check or clean duct work that might be plagued withmold damage or to pay for increased electrical use, which resultsfrom the use of fans needed to help remediate the property. Anadjuster trying to shave down the claim also may fail to pay forsuitable additional living expenses for policyholders, who may feelforced out of their homes until full remediation occurs.

One well versed in the appraisal process may ask, “How manyadjusters recommend shrink-wrapping furnishings to protect themduring storage, while remediation is ongoing?” Too often, theanswer to this question is, “Not many.” The tendency is foradjusters to try to limit the scope of damages, focusing primarilyon the obvious structural issues, while ignoring all that must beaccomplished to adequately remediate residences. I can citenumerous cases in which the actual existing damages representedthree or four times more than the initial proposed estimates.

Why Appraise?

The appraisal process exists in order to resolve disputesrelating to actual amounts of loss and costs for placingpolicyholders in the same positions that they would have been inhad the loss never occurred. Appraisal is becoming a popularalternative to resolving claims under most insurance policies. Mostinsurers assume that appraisals will benefit their interests morethan the interests of their insureds, because the parties chargedwith settling claims often fail to place themselves inpolicyholders' shoes when conducting appraisals. They may fail toconsider the question, “If I had suffered this loss, what would Ibe seeking in terms of a settlement?”

Although it may seem elementary, a great portion of a properappraisal requires a common-sense approach. Proficient appraiserswill support their positions with documentation, in the form ofestimates from contractors, photographs of damages, and documentssubstantiating the full extent of recovery necessary to resolve theclaims. Appraisal files should include information chronicling theoriginal scopes of damages from adjusters.

If both sides have engaged appraisers and an agreement fails tomaterialize, the next step would involve the selection of animpartial third party responsible for issuing a decision as to thefindings of both sides. The appraisers from each party are free torecommend their choices of three candidates for umpire but,ultimately, only one will be appointed by the court. When selectingan umpire, the court often will evaluate a candidate's experiencewith the appraisal process and the insurance industry, and whetherthe candidate has an adequate background in construction or othertechnical knowledge critical for assessing the type of damage thatthe policyholder has sustained.

Once an umpire is selected, it is recommended that theappraisers from each side contact him and become familiar with hisgoals and objectives for the specific appraisal. A short phone callto a newly appointed umpire may communicate a desire to bereasonable and that, while the appraisers must represent theirclients' interests, they are open to compromise.

Throughout the process, it is necessary to remember that datashould be shared. Regardless of whether they represent insureds orinsurers, appraisers should not act like Perry Mason, waiting forthe right moment to pull rabbits out of hats. The material gatheredin support of clients needs to be shared with the other side ifthere is to be any chance of reaching an early conclusion.Appraisals, unlike fine wine, do not get better with age.

Courtesy is a critical element in any appraisal. Too often,appraisers get so caught up in the process that they fail to returntelephone messages, fail to respond to faxes or othercorrespondence, and ignore e-mail. This can set the tone forunnecessary delay in reaching settlement. Negotiation should remainat the heart of all appraisals.

Most importantly, the process must be kept simple. Impatientappraisers may muddy the waters by introducing attorneys or otheroutside parties, which could detract from the spirit of artfulnegotiation. Attorneys should be consulted when cases set forappraisal go awry; however, lawyers introduced into appraisals atthe wrong times and for the wrong reasons will only hurt theinterests of all parties. Although lawyers are great atinterpreting legal matters, they should never communicate directlywith appraisal panels.

By adopting the proper attitude, an appraiser can contribute tothe prompt resolution of a claim. When the facts of a particularclaim call for an appraisal, the parties should embrace it. Bothsides should reflect upon the toll that a loss event may have uponinsureds, and conduct the appraisal with sensitivity toward thepersonal concerns of policyholders. A desire to become familiarwith the umpire's goals and objects, and a commitment to compromiseand the art of negotiation, will only serve to further theinterests of the appraisers' clients. Basic courtesies, such asmaintaining open lines of communication and constant sharing ofinformation, will keep the appraisal on the right track. Adherenceto these principles will ensure that the appraisal process worksbest for all parties involved.

Jeff Pellet is an independent adjuster in Ft. Lauderdale,Fla. He can be reached at [email protected].