Insurance Appraisal Clause for Denied Insurance claims

What is the Insurance Appraisal Clause and Process?

Want More Money for Your Claim? Use the Insurance Appraisal Clause!

Have you ever heard of the “Insurance Appraisal Clause?”

Have you experienced an insurable loss? Is your insurance company low-balling your settlement or withholding payments?

Learn how the Insurance Appraisal Clause that is in almost every insurance policy can help you get more cash for your claim. See our list of recent insurance recoveries – you’ll be amazed at how much more we earned for our clients.

If you’ve heard terms like:

  • Insurance Appraisal Demand Letter
  • The Insurance Policy Appraisal Clause 
  • Insurance Claim Umpire
  • Insurance Low-Balling

Keep reading. 

We’ll define each of these terms and show you how they can get you more money on your insurable loss.

Insurance Companies Like to Collect Premiums, NOT Pay Claims

Insurance companies are notorious for holding up claims delaying the settlement and the adjustment and even causing them to go through the appraisal process. They often go to the extremes of doing full denial or partial denial of legitimate claims. 

Keep in mind that across the country there are thousands of claims being filed every day. There are also thousands of claims being delayed or denied on a daily basis too.

There are hundreds of millions of dollars being held by insurance companies, invested to make them more money. This is one reason they are reluctant to pay out claims. 

This is all happening while the insureds are either partially homeless or with the business or entity that has been damaged or destroyed by a peril.

What is an Insurance Appraisal Clause?

The insurance appraisal clause is a provision that is required in almost all states in the USA. It was first used in practice in New York in 1943. And the “165 lines” of the 1943 New York Insurance Appraisal Clause policy have since been adopted throughout most of the country. 

For example, Arizona has adopted the New York standard fire policy “165 lines” into the Arizona revised statutes. So, the New York policy standard is now an insurance industry standard in Arizona also.

This simply means the “165 lines” is written in the policy it is thereby used as the industry standard appraisal clause language for insurance companies in Arizona. 

However, some Insurance companies have become quite active in trying to revise, redesign or change the appraisal provision of the standard policy. They want it to be more favorable to their bottom line. 

Appraisal Clause Definition

Appraisal Clause — property insurance provision allowing either the insurer or the insured to demand a binding appraisal of damaged property in the event of a dispute as to its value and establishing the required appraisal procedure. A few jurisdictions now allow either party to reject the demand for appraisal, as evidenced in state amendatory endorsements for commercial property policies, homeowners policies, or both. Allowing the insurer to reject an insured’s demand for appraisal is disadvantageous for insureds.

Quote from the International Risk Management Institute

Summary of the New York Standard Fire Policy Appraisal Clause

Following is a summary of the wording from the standard appraisal clause in your insurance policy. You can read the entire 165 lines of the provision here.

Arizona Standard File Policy Appraisal Provision. 

If you and we fail to agree on the amount of the loss, either may demand an appraisal of the loss.

In this event, each party will choose a competent and impartial appraiser within twenty days after receiving a written request from the other.

The two appraisers will choose an umpire.

If they cannot agree upon an umpire within 15 days, you or we may request that a judge of a court of record in the state where the residence premises is located, make the choice.

The appraisers will separately set the amount of loss. 

If the appraisers submit a written report of an agreement to us, the amount agreed upon will be the amount of loss.

If they fail to agree, they will submit their differences to the umpire.

A decision agreed to by any two will set the amount of loss

Each party will:

  1. Pay its own appraiser: and 
  2. Bear the other expenses of the appraisal and umpire equally.

How to Invoke the Appraisal Clause 

In the past invoking the appraisal clause was a fairly simple process. A client could merely state that they had a dispute and the entire claim was sent to appraisal. 

Today, the process is more of a moving target due to various insurance companies changing their policies or procedures.

Other insurance companies have taken the lead of State Farm and want to be given specifics on all the issues before allowing an appraisal to move forward.

Under the “165 lines” of the Arizona Standard Fire Policy, after a formal written demand, the insurance company would have 20 days to name their appraiser. 

And after 15 days if the two appraisers could not reach an agreement as to an umpire then the court could be petitioned for the selection of an umpire.

Unfortunately based on State Farm’s new policy, which does not conform with the Arizona revised statutes, is again a moving target. 

We are currently in the midst of several cases that are going to be litigated regarding the State Farm appraisal language which we believe does not conform to Arizona law.

What is an Insurance Appraisal Umpire?

Very simply, an appraisal umpire is basically the mediator between the two appraisers. The umpire is expected to render an objective decision because they have “no dog in the fight.” 

In other words, an appraisal umpire should be a neutral, impartial, and disinterested 3rd party. 

The problem for the layman, the insured, is that most of us don’t know the track record and inclinations of the local appraisers and umpires. How do you select the best one for your case? So very often it will be necessary to petition the court and have the court appoint an umpire. 

The insurance defense attorneys, who represent the insurance companies in these minor legal proceedings, will put in suggestions for umpires that will be most favorable to themselves. This is why a seasoned skilled public adjuster is necessary to make sure to weed out the umpires that will lean towards the insurance companies.

Advantages of an Insurance Appraisal

On average, in our experience, insured people we represent usually receive at least a 50 percent increase and up to 500 percent more than the original settlement offered by their insurance company. 

Even when you back out the fees for the appraisal incurred by the insured it is still a large increase in the amount you recover for your covered damages. Especially when compared to what the insurance company initially agreed to pay as undisputed funds.

Disadvantages of Using an Insurance Appraisal

Disadvantages of requesting an insurance appraisal include the fact that the insured will be required to pay the hourly rate for their appraiser. They’ll also need to pay 50 percent of the cost for the umpire. This is because the insured will equally split the empire’s bill.

Additionally, if the two appraisers cannot agree upon the selection of an umpire there may be additional costs. This could include the insured hiring an attorney to either petition the court for the selection of an umpire or join in the petition that the insurance carrier may have filed. 

The average fee of hiring a lawyer to petition the court to appoint an appraiser may be approximately $2000. But we have seen some bills for appraisers much higher than $2000. And that would be above the cost of the insured’s appraiser and half of the umpire’s billing.

Can I Request an Appraisal as the Insured?

The answer is yes. But, as explained above, the appraisal process is full of technical details that may overwhelm and confuse the uninitiated or inexperienced.

Insurance companies don’t always follow the same procedures or processes and this makes the Appraisal process more of a moving target and more difficult to win.

We always advise an insured to have competent, professional representation in the appraiser process, rather than “going it alone” without the help of a public adjuster.

What is an Insurance Appraisal Demand Letter?   

If you think that your insurance company isn’t offering enough to return your property to its pre-loss condition you can write an Insurance Appraisal Demand Letter.

Simply put, you take your estimate showing the increased differences in costs compared to that of the insurance company. This creates the dispute as to the value which the Appraisal Clause is designed to resolve.

Then to your own damage estimate attach a demand letter for appraisal. In this letter, you should name your appraiser and request the insurance company name their appraiser within 20 days of the date of this demand. 

The demand for appraisal is fairly simple and there is no set form that is necessary to submit to your insurance company. The165 lines of the Arizona Standard Fire Policy clearly lay out the time requirements for the insurance company to name their appraiser. They have 20 days from the date you submit the appraisal request.

Insurance Appraisal Clause Case Studies

Following are four good examples where we used the Insurance Appraisal Clause to protect families or businesses from insurance company low-balling.

Example 1: American Family Insurance’s Unfair Arbitration Provision

American Arbitration Association Logo

I was involved in a claim representing a client who was insured by American Family Insurance (AFI).

American Family changed the appraisal provision of their policy to restrict any appraisal to arbitration through the American Arbitration Association (AAA). And whoever demanded the arbitration would have to pay the fees associated with the arbitration.

The AAA’s rules are very different from and come nowhere close to the language of the Arbitration from American Family Insurance

The expense of going to the American Arbitration Association is much greater than going through the appraisal process. 

Because of the wording in the American Family policy, if they chose to lowball the insured, American Family would not demand arbitration because they would have to pay for the cost of it. American Family‘s initial estimate was unfair. 

If the insured felt, they would have no alternative but to demand arbitration as it was stated in the American Family policy.

This means that the insured would have to pay all the costs of the arbitration – which could be thousands of dollars.

The long and the short is that American Family Insurance attempted to force my client to choose arbitration through AAA. 

I refused to allow my client to bear this expense, as it was unfair. Instead, the insured filed suit against AFI. 

American Family did not prevail — my client won the lawsuit. And the court concluded American Family could not force its insureds to use AAA to resolve the dispute as to the amount owed on the covered losses and damage.

Today, if you were to read an American Family Homeowners Insurance Policy they have included an option for insurance appraisal along with arbitration through the American Arbitration Association. 

This was a big win for my client and for all policyholders with American Family Insurance

We were very successful in stopping AFI from changing the appraisal provision in their policy to benefit the insurance company instead of the insured.

Keep reading to see how much the insurance industry has changed.

Example 2: State Farm Insurance – Smoke Damage Claim

Wildfire Smoke Damage Insurance Claim denied

Recently we had to deal with State Farm Insurance (SFI) for a smoke damage claim. They have changed their policy to:

  1. limit who you can select as an outside appraiser.
  2. make it difficult to present your disputes to State Farm.  
  3. limit their Scope of Damages

Here are the details.

Limited Appraisers

By limiting who you may select as an appraiser there is the possibility of not getting an objective appraisal. They could have filled their list with appraisers who have been swayed by State Farms policies or way of doing business.

We believe that an insurance company should welcome a qualified and objective third party to review their work.

Limited Scope of Work

When SFI creates an estimate they consider that estimate to be their approved and complete scope of damages.

Due to this provision, when an appraisal is requested they will only allow the specific items from the scope of work to be appraised. 

This limits the new appraiser from finding problems that may have been overlooked by SFI. 

In other words, they are taking the position that you can only appraise the unit cost differences in their estimate: not square-foot, not lineal foot, and not the scope of damages. We believe SFI’s new appraisal clause is improper and does not comply with the “165 lines” and other industry standards. 

State Farm Smoke Damage Appraisal

Here are the specifics of our interaction with State Farm Insurance. We recently received an appraisal award for $13,149.39 on a small smoke damage claim. 

To get an idea of how a large insurance company pushes back, read their initial response in this letter. State Farm Appraisal Demand Appeal Letternames and addresses have been redacted.

State Farm Claims Denial Letter Insurance Appeal
A copy of the State Farm claims denial letter – with personal information redacted. Click to see the entire letter.

This is why you need us to work on your behalf.  

The house did not catch fire but there was significant smoke in the area from a brushfire. 

The two appraisers presented their evidence and estimate to the third-party umpire.

The umpire determination was based upon the evidence and environmental testing. The appraiser utilized accredited labs for smoke, physical inspection, expert testimony, etc. 

Eventually, the umpire’s assessment was submitted identifying more than $13,000 to remediate the smoke damage of this residential property.

This determination was submitted to State Farm who then reduced it to $1,191.75 after deductible. The reason is that State Farm took the position is that only the items which were on their original lowball estimate could be appraised. 

And their original estimate was under the deductible, so no original payment was authorized. This case is currently awaiting litigation but we are hopeful that there will be a positive outcome.

Insurance Appraisal Victories and Illegal Activity

We’ve prevailed in some very contentious cases. Following are more examples of earning victories when the insurance companies didn’t want to play fairly.

Example 3: False Accusations as a Criminal Syndicate

I represent clients who are insured by a particular large insurance company. This insurance company did not like the fact that we were successful in winning high appraisal awards. Because we regularly prevailed and won large payments for clients, they actually sued my company for racketeering. 

They claimed that our awards were excessive, and implied that we ran a criminal syndicate that regularly cheated insurance companies out of millions of dollars through the appraisal process.

In this case, once again, the insurance company had to pay the insured AND my company a large sum of money to dismiss their frivolous lawsuit.

What is The Expected Outcome of an Insurance Appraisal

By demanding an insurance appraisal, you’re hoping for an increased insurance payout or an appraisal award. 

On average, an insurance appraisal demand returns a one-hundred percent increase from the insurance company’s prior offer. Of course, every claim is different, some will pay more, some will pay less. 

Keep in mind that you really don’t have an option but to go to appraisal if there’s a dispute in the value and the loss and damage. The only other choice is to take it to appraisal and litigate the damages, in other words, file a lawsuit. But this is an extremely costly and complicated process because you have to hire an attorney and experts to present the evidence in court. 

It should also be kept in mind that if you are forced to go through the appraisal process as a result of lowballing and bad faith tactics of the insurance carrier all those expenses including the public adjuster’s fees should be calculated as you are extracontractual damages in the event you go after the carrier for their bad faith bad behavior and breach of contract.


Insurance Appeal Claim Approved

As you can see from the examples and definitions we’ve provided you have a lot of power as the insured. 

If you know the rules and put together a sound appraisal you’re very likely to win … and win big.If you’d like to see some other examples of insurance appraisal victories we’ve made for our clients visit our recent recoveries page. We’ve contested and won millions of dollars in appraisal awards for our clients.

Please contact us if you feel as if your insurance company is not giving you the settlement you deserve.

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