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UMPIRE INTERVENTION – PROPER APPRAISAL CLAUSE PROCEDURAL GUIDANCE

A concept of the Insurance Appraisal Clause that often takes on an erroneous and invalid methodology is the formal “Umpire Intervention”. Too often, inexperienced Appraisers are simply forwarding their entire Appraisal reports to the Umpire without any efforts to exchange with their opposition to determine which, if any, line items have been agreed to.

Often, Appraisers will realize that some line items are, although not in agreement, the total sum in deviation is so minute, that good faith efforts can easily bring many of these items to agreement. Remember, the Appraisal Clause calls for a process was designed this way so that the Umpire only has to consume time and resources on the items that the two Appraisers were not able to resolve. This directly saves the policyholder from undue costs, as the Umpire will not have to address line items that the two Appraisers already had agreed to. This is supported by language in the Appraisal Clause itself (underlined below), and is a very basic tenement of the Appraisal process.

APPRAISAL CLAUSE – “If you and we fail to agree on the amount of loss, either may demand that the amount of loss be set by Appraisal. If either makes a written demand for Appraisal, each shall select a competent, independent appraiser. Each shall notify the other of the appraiser’s identity within 20 days of receipt of the written demand. The two appraisers shall then select a competent, impartial Umpire. If the two appraisers are unable to agree upon an Umpire within 15 days, you or we can ask a judge of a court of record in the state where the residence premises is located to select an Umpire. The Appraisers shall then set the amount of the loss. If the Appraisers fail to agree within a reasonable time, they shall submit their differences to the Umpire. Written agreement signed by any two of these three shall set the amount of the loss.“

Referenced below, is an example of a professional level Appraisal Umpire intervention letter, that clearly and concisely segregates the items that were eventually agreed to between the two Appraisers, as well as the remaining items that could not be agreed to, and subject to the “differences” of the two party appointed Appraisers.

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.

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