CHICAGO — When a homeowner and their insurance carrier cannot agree on the value of a property damage claim, the appraisal process — a provision included in most homeowner's insurance policies — provides a structured mechanism for resolving the dispute without litigation. Here is how the appraisal process works and when to invoke it.
The appraisal process is triggered when either the homeowner or the carrier demands appraisal after the parties have been unable to agree on the amount of loss. Once appraisal is demanded, each party selects a competent, independent appraiser. The two appraisers then select a neutral umpire.
Each appraiser submits their estimate of the loss to the umpire. If the two appraisers agree on the amount of loss, that amount becomes the binding settlement. If they disagree, the umpire reviews the estimates and issues a binding award. The award of any two of the three parties — the two appraisers or one appraiser and the umpire — is binding on both parties.
The appraisal process is generally faster and less expensive than litigation, but it is not without cost. Each party pays for their own appraiser, and the parties share the cost of the umpire. Appraisers and umpires typically charge $150 to $300 per hour, and the total cost of the appraisal process can range from a few thousand dollars to tens of thousands for large, complex claims.
Restoration contractors who serve as appraisers in the appraisal process must be careful to maintain their independence and objectivity. An appraiser who advocates for a specific outcome rather than providing an objective estimate of the loss may be disqualified and may expose themselves to liability.
