Most property insurance policies, whether for a home, a commercial building, or a business, include a provision called the appraisal clause. This clause offers a specific process for resolving one particular type of disagreement: how much a covered loss is actually worth in dollars, not whether the loss is covered in the first place.
In many policies, the appraisal clause becomes available once the policyholder and the insurance company agree that a loss is covered, but disagree on the amount of damage or the cost to repair or replace it. Rather than heading straight to a lawsuit, either party can typically invoke appraisal, which is a structured, out of court process built directly into the policy language itself.
Here is generally how it works. Each side selects a qualified, independent appraiser to represent its interests, and those two appraisers first work to select an umpire together, or ask a court to appoint one if they cannot agree. The two appraisers estimate the loss independently, using accepted estimating methods. Where they agree, that figure typically becomes part of the final award. Where they disagree, the umpire reviews both positions and helps settle the difference. An award signed by any two of the three, an appraiser from each side plus the umpire, or the two appraisers themselves, is generally treated as the binding amount.
It is worth being clear about what appraisal does not typically do. It is usually limited to the amount of the loss, not broader questions such as whether coverage applies at all, whether a claim was filed on time, or other policy interpretation disputes. Those issues typically still fall outside the appraisal clause and may need to be resolved separately.
Appraisal clause language, timelines, and procedures vary from policy to policy and from state to state, so the exact rules that apply to any given claim depend on the specific policy in force and the law of the state where the property is located.
This article is intended as general education about how appraisal clauses commonly work and is not legal advice. If you are dealing with an active claim, it is worth reviewing your own policy language closely or speaking with a qualified professional about your specific situation.
Russ Lis is a working property insurance appraiser and umpire based in the Twin Cities, serving clients nationwide. Have a question about your own claim? Contact Appraisal Resolution.