The Umpires Role of the Appraisal Dispute

​Insurance policyholders often disagree with their insurer’s assessment of damages. Many policyholders assume they must hire a lawyer to settle the dispute, but they may have another option - the umpire clause.

Also the APPRASAL clause is the dispute resolution alternative to litigation. The umpire is the third member of the Appraisal panel a Umpire is used to resolve a disagreement between an insureds Appraiser and the Appraiser representing the insurance company over the disputed amount of loss and the scope of damages. The umpire rules on the differences in appraisal. Each Appraiser submits a list of written damages and supports the values of the damages with expert reports or other evidence. The policyholder can hire an independent appraiser to evaluate their damages.

For example, any sudden accidental damages or event causes physical damages to their insured property . They file a first-party claim with their insurer. The insurer values the damages at $15,000 and offers to pay the claim. the policy calls for a $2,500 deductible. The insured property owner researches and finds that the damages are valued at $20,000. Given the considerable difference, the property owner and their insurance company agree to invoke the appraisal clause in the policy and use the services of appraisers and an umpire to assess the total value of all the damages being disputed.

Both the insured and insurer must pick a qualified impartial and competent appraiser and exchange each other their names and identity within 20 days of invoking Appraisal. Both appraisers then attempt to jointly select an umpire who acts as a neutral arbitrator. Typically, the appraisers have 15 days to choose. If they fail, the insured or the insurance company may request that a judge of the jurisdiction appoint the umpire.

The appraisal panel of the umpire and two appraisers aim to reach the dollar amount to repair or replace the damaged property. The appraisers review the supporting documentation, including estimates and any related differences, and try to settle. They discuss any issues with the umpire and seek to agree on a resolution. If the two appraisers cannot agree, the umpire reviews their reports, and decides on one of the values or comes up with another balanced amount.

The resolution does not require the unanimity of the appraisal panel, but two of its three members must agree. The policyholder then receives the amount stipulated. Any two signatures on an appraisal award then sets the amount of the loss.

Lawsuits can protract and consume significant financial resources. The Appraisal clause enables policyholders to resolve insurance claim disputes more expediently and less costly. In addition, the procedure is less strict and less adversarial than the litigation process. On the downside, however, the dispute resolution is binding, and no appeal is possible. Binding means that each disputing party must accept the amount established by the umpire. Also, policyholders and insurance companies must pay their appraisers and cover other related fees and costs. In the event of fraud or, collusion on behalf of any of the panel members, the award stands. A motion to vacate the award is possible with the aforementioned. Lastly - an egregious mathematical error is also grounds to vacate an award.

An umpire’s work is subject to the presence and invocation of the Appraisal clause. Umpires must be disinterested, impartial, and qualified. Most often, experienced and skilled claims adjusters, general contractors, or retired judges assume the role. They must not benefit from the resolution of the dispute. The insured and the insurer equally split the cost of the umpire’s service.

Umpires play an integral role in the insurance industry, with their knowledge and expertise contributing to the system’s efficiency and effectiveness. As dispute mediators, they reinforce the insurance claims’ accuracy and fairness and ensure that parties abide by the rules.

Jeffrey C Pellet

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