What Is the Appraisal Provision?
The appraisal provision is a clause found in many auto insurance policies that allows both the insured and the insurer to settle a claim disagreement by appointing an independent appraiser. When the parties cannot agree on the amount of a loss, each selects an appraiser, who then selects a third, neutral appraiser to make the final decision.
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When Does It Apply?
Appraisal typically triggers after the insurer has paid the claim and the insured disputes the payout, or vice versa. It is not a substitute for a lawsuit; the dispute must involve a monetary amount that the policy covers and the parties must have already reached a deadlock.
How the Process Works
1. Notice and AppointmentEach side notifies the other of its intent to use appraisal and appoints an appraiser within the timeframe specified by the policy, usually 30 days.
2. Selection of a Third AppraiserBoth appointed appraisers agree on a neutral third appraiser. If they cannot agree, the policy may allow a court or insurer to appoint one.
3. Independent DecisionThe third appraiser reviews the evidence, interviews relevant parties, and issues a written decision. That decision is binding on both sides.
Timing and Costs
The entire appraisal can take several weeks, depending on the complexity of the loss and the availability of the appraisers. The insured typically pays the appraiser's fees, while the insurer covers the third appraiser's fee. Some policies cap the total appraisal cost.
Pros and Cons
Pros- Faster resolution than litigation.- Neutral decision maker reduces bias.- Costs are usually lower than court.
Cons- Requires cooperation from both parties.- Final decision is binding, limiting appeal options.- Not all disputes qualify for appraisal.
Key Takeaways
The appraisal provision serves as a structured, cost-effective method for resolving claim disputes. Knowing the steps, timelines, and cost responsibilities can help policyholders navigate the process confidently.