In an ideal claims scenario the insured suffers a loss, reports it, coverage is promptly determined, and the insurer issues payment for the value of repair or replacement. However, there are instances where the insured and the insurer don’t agree upon the scope of damages, and/or the costs associated with it, leaving both parties at a disadvantage with few options to explore.
These disputes often end in litigation, but one of the lesser-known options is to invoke the appraisal process provision. The purpose of the appraisal process is to come to a final and binding resolution on quantum disputes.
Appraisals are less formal than arbitration, however there are still guidelines for how they are conducted. To begin the process, a proof of loss must be filed and the party making the demand formally identifies who will be acting as their appraiser. The other party then has seven working days to appoint their chosen appraiser. Once both appraisers are elected, they move forward with the full authority of the respective principals and come to an agreement on the amount of loss.
If their efforts do not yield a full agreement, an umpire is appointed to settle their differences. In situations where an insurer triggers this mechanism and the policyholder refuses to participate in the process, the insurer can petition the court to appoint an appraiser.
Prior to the pandemic almost all meetings were in person and held in a boardroom environment with parties on either side of the room and the Umpire in the middle guiding the process. During the pandemic, the Tribunals slowly switched to holding the meetings online via Zoom or Microsoft Teams.
Online Appraisal Tribunals can eliminate travel expenses and reduce delays but many appraisers still find it more effective to meet a witness in person or review large volumes of files in a boardroom. Much like the court system, holding Appraisals virtually has now arrived and is likely to continue for straightforward losses with minimal evidence.
The appraisal provision is one of the best-kept secrets within the insurance industry, and its usefulness in addressing and resolving claim disputes concerning quantum is unequivocal. It is certainly something to consider if you find yourself in a claim tug-of-war.
To read more about how the appraisal process provision can help streamline and expedite claims while avoiding litigation and the costs associated with it, download the Stuck in a Tug-of-War Claims Scenario? white paper.