Our Option Clause and Loss Settlement

My question involves the Section I – Conditions Section of the HO 00 05 10 00 Policy Form, specifically in regard to the Appraisal and Our Option clauses. Under the Our Option clause the policy specifies that upon an insurer's written notice within 30 days after receipt of a proof of loss, it has the option of repairing or replacing any part of damaged property. We have a few cases wherein we have exercised that clause relative to building damages, but at the same time the insured has asked for an appraisal. There are no disagreements as to the scope of damages, only to the cost to repair the damages. Our position is that we will retain and pay a contractor to repair the agreed upon scope of damages so therefore the appraisal clause is not triggered. We feel that as long as the insured home is put back into its pre loss condition the amount paid to perform those repairs should not be an issue.

I ask for your thoughts. I also ask for your thoughts on taking this kind of position in the event of a disagreement on the scope of damage. Does exercising the Our Option Clause negate the Appraisal Clause?