by Jeffrey C. Pellet
featured in the Claims Magazine, an insurance industry publication


Appraisal 101

When an insurance claim reaches the appraisal stage, the parties invariably brace for an adversarial experience, but it need not be one. If the participants realize that appraising is a mixture of both science and common sense, the process would result with no one feeling as if they had lost something as a consequence of the appraisal.

In my 25 years of experience as an appraiser in the insurance industry, I have worked on behalf of both policyholders and insurers. I have learned that the process of satisfying a claim functions best when all those involved in the process are willing to compromise without having to sacrifice their client's particular interests.

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

In claims involving water damage, many adjusters perform cursory examinations of the premises and offer modest sums for removing rugs, replacing sheetrock and personal property, and performing other obvious necessary repairs. Rarely, however, have I witnessed the same adjusters working diligently to fully assess all existing damages. Instead, inattention to detail may prevent adjusters from offer to check or clean duct work that might be plagued with mold damage or to pay for increased electrical use, which results from the use of fans needed to help remediate the property. An adjuster trying to shave down the claim also may fail to pay for suitable additional living expenses for policyholders, who may feel forced out of their homes until full remediation occurs.

One well versed in the appraisal process may ask "How many adjusters recommended shrink-wrapping furnishings to protect them during storage, while remediation is ongoing?" Too often, the answer to this question is, "Not many." The tendency is for adjusters to try to limit the scope of damages, focusing particularly on the obvious structural issues, while ignoring all that must be accomplished to adequately remediate residences. I can cite numerous cases in which the actual existing damages represented three or four times more than the initial proposed estimates.

Why Appraise?

The appraisal process exists in order to resolve disputes relating to actual amounts of loss and costs for placing policyholders in the same positions that they would have been in had the loss never occurred. Appraisal is becoming a popular alternative to resolving claims under most insurance policies. Most insurers assume that appraisals will benefit their interests more than the interests of their insured, because the parties charged with settling claims often fail to place themselves in the policyholder's shoes when conducting appraisals. They may fail to consider the question, "If I had suffered this loss, what would I be seeking in terms of a settlement?"Although it may seem elementary, a great portion of a proper appraisal requires a common-sense approach. Proficient appraisers will support their positions with documentation, in the form of estimates from contractors, photographs of damages, and documents substantiating the full extent of recovery necessary to resolve the claims. Appraisal files should include information chronicling the original scopes of damages from adjusters.

If both sides have engaged appraisers and an agreement fails to materialize, the next step would involve the selection of and impartial third party responsible for issuing a decision as to the findings of both sides. The appraisers from each party are free to recommend their choices of three candidates for umpire but, ultimately, only one will be appointed by the court. When selecting an umpire, the court often will evaluate a candidate's experience with he appraisal process and the insurance industry, and whether the candidate has an adequate background in construction or other technical knowledge critical for assessing the type of damage that the policyholder has sustained.

Once an umpire is selected, it is recommended that the appraisers from each side contact him and become familiar with his goals and objectives for the specific appraisal. A short phone call to a newly appointed umpire may communicate a desire to be reasonable and that, while the appraisers must represent their client's interests, they are open to compromise.

Throughout the process, it is necessary to remember that data should be shared. Regardless of whether they represent insureds or insurers, appraisers should not act like Perry Mason, waiting fort he right moment to pull rabbits out of hats. The material gathered in support of clients needs to be shared with the other side if there 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 return telephone messages, fail to respond to faxes or other correspondence, and ignore e-mail. This can set the tone for unnecessary delay in reaching settlement. Negotiation should remain at the heart of all appraisals.

Most importantly, the process must be kept simple. Impatient appraisers may muddy the waters by introducing attorneys or other outside parties, which could detract from the spirit of artful negotiation. Attorneys should be consulted when cases set for appraisal go awry; however, lawyers introduced in appraisals at the wrong times and for the wrong reasons will only hurt the interests of all parties. Although lawyers are great at interpreting legal matters, they should never communicate directly with appraisal panels.

By adopting the proper attitude, an appraiser can contribute to the prompt resolution of a claim. When the facts of a particular claim call for an appraisal, the parties should embrace it. Both sides should reflect upon the toll that a loss even may have upon insureds, and conduct thee appraisal with sensitivity toward the personal concerns of policyholders. A desire to become familiar with the umpire's goals and objects, and a commitment to compromise and the art of negotiation, will only server to further the interests of the appraisers' clients. Basic courtesies, such as maintaining open lines of communication and constant sharing of information, will keep the appraisal on the right track. Adherence to these principles will ensure that the appraisal process works best for all parties involved.

Jeffrey C. Pellet is an independent adjuster with Professional Appraisal & Estimating in Fort Lauderdale, Fla. He can be reached at

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