Bad faith is a legal concept that can arise in the insurance context when there are allegations that an insurer failed to handle a claim fairly or in accordance with its obligations under the policy and applicable law. Understanding how this relates to appraisal can help clarify what each process is actually designed to address.
Appraisal is generally focused narrowly on resolving a disagreement over the dollar amount of a covered loss. It is not designed to determine whether either party acted in bad faith during the claims handling process.
Because bad faith is a separate legal question from the valuation of a loss, allegations of bad faith are generally handled through other legal avenues, such as litigation, rather than through the appraisal process itself.
In some cases, the outcome of an appraisal award, such as a significant gap between an insurer’s original offer and the final award, is sometimes referenced in a separate bad faith discussion, but the appraisal process itself does not evaluate or decide that question.
Because bad faith standards and procedures vary significantly by state, anyone with concerns about how their claim was handled should discuss the specifics with an attorney familiar with their state’s laws, separate from any appraisal process addressing the dollar amount of the loss.
This article is general education, not legal advice, and rules can vary significantly by state and by policy. If you have questions about your own claim or your legal options, talk with your insurance company, agent, or an attorney familiar with your state’s laws.
Russ Lis is a working property insurance appraiser and umpire based in Minnesota, serving clients nationwide. Have a question about your own claim? Contact Appraisal Resolution.