Appraisal in an insurance contract is similar to arbitration.  It was written into the insurance contract as a way to settle disputes on property coverages without the expense of litigation.  It is also a tool that is being used more frequently by policyholders to resolve their disputes and reach a final agreement.  Most awards from appraisal are final, but there are some limited circumstances where an award might be challenged such as if there was hidden damage not included in the appraisal. 

The process can be time consuming and costly because both sides normally need to hire representatives that are experienced in handling appraisals.  There may also be extra expense in hiring experts to help support your side.  Additionally, the cost of the Umpire is shared between the two parties.

A typical insurance policy might read as follows:

Appraisal. If you and we fail to agree on the amount of loss, either may demand an appraisal of the loss. In this event, each party will choose a competent appraiser within 20 days after receiving a written request from the other. The two appraisers will choose an umpire. If they cannot agree upon an umpire within 15 days, you or we may request that the choice be made by a judge of a court of record in the state where the "residence premises" is located. The appraisers will separately set the amount of loss. If the appraisers submit a written report of an agreement to us, the amount agreed upon will be the amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will set the amount of loss.

Each party will:

     a.  Pay its own appraiser; and

     b.  Bear the other expenses of the appraisal and umpire equally.