Reserves generally refer to the funds an insurance carrier sets aside to cover the estimated cost of an open claim, and managing these reserves appropriately during an ongoing appraisal is a routine part of the carrier’s internal claims process.
While a claim is in appraisal, carriers typically maintain a reserve reflecting their best estimate of the likely outcome, which may be adjusted as new information becomes available during the appraisal process.
Reserve management during appraisal is generally an internal financial and accounting function for the carrier, separate from the actual evaluation of the loss being conducted by the appraisers and, if needed, the umpire.
Once an appraisal award is reached, the carrier typically adjusts its reserve and processes payment based on the final award amount and the applicable policy terms, such as deductibles or coverage limits.
This reserve process is largely an internal carrier matter and generally does not affect the independent, fact based evaluation appraisers and umpires are expected to conduct during the appraisal itself.
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. If you have questions about a specific claim, review your policy language and talk with your insurance company 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.