Filed Under:Claims, Catastrophe & Restoration

Must appraisers be objective or disinterested?

Coverage Q&A

Appraisers are required to be impartial, disinterested and objective, right? (Photo: AP/Jeff Chiu, File)
Appraisers are required to be impartial, disinterested and objective, right? (Photo: AP/Jeff Chiu, File)

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Question: When involved in an appraisal I have found it more and more common that the appraiser for the insurance company goes to the insurance company for instructions and directions on how to proceed with the appraisal.  Additionally, the appraiser uses documents and reports from the insurance company rather than determining the value of the loss himself.  Does this violate the appraisal clause?  

 — Illinois Subscriber

Answer: The appraisal clause in the homeowners' policy requires that each party choose a competent and impartial appraiser. They are each to separately set the amount of the loss. The point of the appraisal process is to involve neutral parties to review the loss and establish a fair amount of the loss. I have trouble seeing how an appraiser is impartial if he is using documents from the carrier to determine the amount of loss; that is not impartial, nor is the appraiser separately setting the amount of the loss as per the policy requirements. We agree that this violates the nature of the appraisal clause.

I have trouble seeing how an appraiser is impartial if he is using documents from the carrier to determine the amount of loss; that is not impartial, nor is the appraiser separately setting the amount of the loss as per the policy requirements.

We agree that this violates the nature of the appraisal clause.

Related: A look at replacement cost value vs. actual cash value

Must a ‘competent’ appraiser be ‘disinterested’?

 

Question: We have been having trouble resolving a fire loss claim under a homeowners policy. There is no dispute as to the cause of the fire loss and we have prepared a building estimate. The dispute is over the extent and valuation of the loss.

As the insured's representative, we instituted our right of appraisal. We submitted the name of our disinterested builder and asked the insurer to do likewise, but they refused to pick a disinterested builder. Instead, they went to their original builder, the one with whom we could not agree about the amount of damages.

We feel that this is a violation of the policy intent. Our interpretation of the appraisal clause, which states that "each party will choose a competent appraiser," is that both parties should choose a disinterested builder. If these two cannot reach an agreement, they select an umpire. Having one of the original parties to the dispute chosen as an appraiser does not make much sense to us.

— New York Subscriber

Answer: The policy requires only that the appraiser must be competent; it does not require that each party select a disinterested appraiser.

The hope is that because the appraisers are competent professionals who are one step removed from the dispute, they will reach an agreement despite a certain natural bias in favor of their employer. If they cannot, the policy offers a mechanism for them to choose an umpire who decides which of the appraisers is right.

Finally, if they cannot agree on an umpire, the policy provides for a court to select the umpire. These contingencies for involving an umpire are based in part on the recognition that the appraisers chosen by the parties might not be completely unbiased.

Related: When contents claims require specialists

What authority does an impartial appraiser have?

Question: I am an Independent Adjuster assigned to represent a carrier as a competent, impartial appraiser on a homeowners claim. The carrier has stated that I have no authorization in regards to determining scope, damage amount or scheduling meetings with any other party. The opposing appraiser believes this control is contradictory to the intent of the appraisal process and that the lack of allowing full authorization is acting in bad faith on the part of the carrier, myself and my company. Does the opposing appraiser have a valid belief?

— Tennessee Subscriber

Answer: The appraisal clause of the policy makes no statements as to authority to schedule meetings; the appraisers are to select an umpire and then set the amount of the loss. This is not coverage determination, simply the cost of the loss. The appraisers do not determine scope, i.e. whether something is coverage A or B, or whether the entire roof needs to be replaced or not. The appraisers simply determine that the roof repair is X dollars.

Related: Hiring an independent appraiser? Here’s what to look for

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