What is the Role of an Appraisal Umpire?
By Jason Kaplan
During a claim, your insurer will determine the value of the loss to determine the payout. This process often goes smoothly, with the claimant receiving the payout needed to recover from the loss.
However, disputes are possible. When the insurance company and policyholder disagree on the valuation of a loss, an appraisal umpire can help settle the dispute.
The Umpire Clause
Your insurance policy may include an umpire clause. According to Investopedia, this means that, if there is a disagreement regarding the value of a claim, both the policyholder and the insurance company can hire an appraiser to assess the loss. The two appraisers then select an umpire who acts as an arbitrator. This results in a panel of three members: the policyholder’s appraiser, the insurance company’s appraiser, and the umpire. Two of the three need to agree on the final claim settlement amount. The umpire makes the final decision as to the value.
An insurance umpire is much like the more familiar sports umpire: an unbiased third party who watches the game and makes calls in accordance with the rules. In insurance, the umpire examines the loss and makes a decision in accordance with the terms of the insurance policy.
When Do You Need an Appraisal Umpire?
An appraisal umpire can be useful when the policyholder and insurance company cannot agree on the value of a claim.
Imagine you have a vehicle insured for actual cash value. After the car is totaled in a crash, you file a claim. The insurer offers a settlement that you think is too low. If the difference between what you expect and what your insurer is offering is significant, you may wish to use an appraisal umpire. Likewise, if you have a property claim and think your insurer is not offering a fair payout for the repairs, you could choose to use an umpire.
What’s the Alternative to Using an Appraisal Umpire?
If you have a dispute regarding a claim, there are two primary options for resolution: a lawsuit or an appraisal umpire.
If the only point you are disputing is the valuation of the claim, an appraisal umpire can resolve the matter. However, if you want to dispute other issues, a lawsuit may be necessary. For example, if the insurance company has denied the claim but you think it should be covered under the terms of the policy, you may need to file a lawsuit to resolve the coverage dispute.
What Are the Advantages to Using an Appraisal Umpire?
Policyholders don’t have to accept the insurance company’s valuation of a claim if they think it is incorrect. The umpire clause gives policyholders a way to arbitrate valuation disagreements.
According to the Insurance Appraisal and Umpire Association (IAUA), the appraisal process tends to be faster and less expensive than lawsuits. It can also be less adversarial.
How to Exercise the Umpire Clause
If you want to use an appraisal umpire, you first need to check your policy to see if it’s an option. According to the IAUA, this alternative dispute resolution is an option in many homeowners and commercial insurance policies.
Typically, either party has the option to invoke the umpire clause if there is a disagreement regarding the value of the property or the cost of a repair or replacement. To invoke the umpire clause, follow the guidelines laid out in the umpire clause. This process will usually require a written demand letter. Once you have made the demand, both parties will have a limited amount of time to select an independent appraiser. The two appraisers will then select an umpire.
Do you need help navigating a claim? As a client of Century Risk Advisors, you have access to claims advocacy, meaning you never have to face a claim alone.
We also provide appraisal umpire services for those who are not insured through Century Risk Advisors.