Insurance Appraisal Clause for Claim Disputes: A Primer


In the normal course of day-to-day affairs, disputes are often inevitable. Even when parties are under a carefully written contact, disputes of all kinds can arise. This is especially true in Insurance Claims, when a policy dictates the individual rights and obligations between an individual policyholder and a large Insurance Carrier. Coupled with the traumatic nature of a loss, and the devastating effects it can have on the victims, any type of dispute regarding the obligations or performance owed to the damaged party can be particularly challenging.

A common element of insurance claim disputes is the disagreement in the amount of the loss, i.e. settlement amount disputes. Often, policyholders believe they hold very little leverage in the negotiation process, and see the expensive, time consuming process of filing a lawsuit as their only remedy when facing an undervalued settlement offer.

While utilizing the courts is often the only solution to complex issues, such as coverage interpretation or breach of contract, nearly every policy contains an “Appraisal Clause” that serves as a Alternative Dispute Resolution function. The Appraisal clause allows for disputes regarding the amount of settlement to be resolved by an independent panel, without involving the Courts and the associated costs that come along.

While utilizing the courts is often the only solution to complex issues, such as coverage interpretation or breach of contract, nearly every policy contains an “Appraisal Clause” that serves as a Alternative Dispute Resolution function. The Appraisal clause allows for disputes regarding the amount of settlement to be resolved by an independent panel, without involving the Courts and the associated costs that come along.

An Appraisal Award

Appraisal Award

In the context of Insurance Appraisal, the Appraisal Clause serves as an Alternative Dispute Resolution (ADR) function. ADR is a generic term that describes various methods of resolving conflicts rather than going to court. Insurance claim dispute appraisal, in theory, offers a quicker and less expensive alternative to litigation. The parallels of Insurance Appraisal to “Arbitration”, specifically “tripartite arbitration”, becomes evident in both form and function.

”In Theory, Appraisal Should Only Be Used To Provide A Simple, Speedy, Inexpensive, And Fair Method Of Determining The Amount Of Loss..”,Fire Ass’n Vs. Ballard, 112 S.W.2d 532, 534 (Tex. Civ. App. – Waco 1938, No Writ).”


The Appraisal Clause requires that valuation disputes between the insurer and insured relating to the policy be submitted to a process called Appraisal. The appraisal is often invoked after efforts of settle moment between the parties fail, and is typically triggered by a written demand by either party.