When a policyholder and an insurance company cannot agree on the amount of a loss, many property policies include an appraisal clause that allows either party to invoke a structured process to resolve that disagreement. That process generally begins with a written demand for appraisal.
A typical demand letter identifies the policy and claim in question, states that the party is invoking the appraisal provision of the policy, and names the appraiser that party has selected to represent its interests in the process. It often includes a brief statement that the parties have reached a genuine disagreement over the amount of loss, since appraisal clauses are generally intended for valuation and scope disputes rather than coverage questions.
Once a demand is received, the responding party typically has a defined period, set by the specific policy language and sometimes affected by state regulations, to name its own appraiser. The two party appraisers then attempt to agree on an umpire, a third, neutral individual who helps resolve any items the two appraisers cannot agree on themselves.
After the appraisers and umpire are in place, the process generally moves into inspection and evidence gathering, where each appraiser examines the property, reviews estimates and supporting documentation, and develops a position on the disputed items. The two appraisers then attempt to reach agreement on the amount of loss. Items they agree on are typically final. Items they cannot agree on are submitted to the umpire, whose decision, combined with agreement from either one of the two appraisers, generally becomes the binding award on those items under most appraisal clauses.
Timelines for each of these steps, how quickly a demand must be answered, how an umpire is selected if the appraisers cannot agree on one, and how long the process is expected to take, vary by policy language and by state, since some states have adopted specific regulations or standard appraisal clause language that applies to certain policy types. There is no single universal timeline that applies to every claim, and a demand letter drafted for one policy or one state should not simply be copied for use on another without checking the applicable language first.
It is worth restating that the appraisers and umpire in this process are not advocates arguing a position on behalf of either side. Each is expected to form an independent opinion of the amount of loss based on the condition of the property, applicable documentation, and relevant construction and industry standards. The demand letter simply starts that structured, documented process, it does not determine its outcome, and the process itself is designed to produce a fair, evidence based resolution regardless of which party initiated it.
This article is general education about how the appraisal process commonly works. It is not legal advice, and specific procedures can vary by state and policy.
Russ Lis is a working property insurance appraiser and umpire based in Minnesota, serving clients nationwide. His construction background supports an independent, evidence based opinion on scope and value in property insurance disputes. Contact Appraisal Resolution.