Insurance policies in most states have the insurance appraisal clause that allows both parties of the contract resolve disputes on the “amount of loss.” This means, the amount needed to fully complete the required repairs of an insurance claim. For example; a policyholder may be forced to hire an independent appraiser to protect their interests.

In a recent Texas case, JM Walker, LLC v. Acadia Insurance Company, shows how an independent appraiser and the appraisal process protected a policyholder from severe insurance company mistakes. Each case can be a little different depending upon how the appraisal clause is worded in the contract, the type of damage, and all the facts pertaining to the loss.

JM Walker owned and insured five buildings in North Richland Hills, Texas. A severe hailstorm caused damage to the roofs on each of the five buildings. Mr. Walker submitted his claim to his insurance company, Acadia. At first Acadia denied payment on the claim after their adjuster inspected the roofs. The adjuster determined that the roofs had minimal hail damage and did not need to be fully replaced. This assessment resulted in non-payment because the adjuster’s estimate was under the $5,000 deductible that applied to the policy.

Mr. Walker disagreed with that assessment from the insurance company’s adjuster. The two parties could not agree, so Acadia executed its contractual right to appraisal. At first, Mr. Walker tried to litigate the matter in court by filing a lawsuit. However, the Judge advised that the parties should continue with the appraisal process. It is not uncommon for judicial courts to suggest this process, as most policies require that all policy provisions be exhausted before entering the courtroom.

The appraisal clause states that each party will hire an independent appraiser. The two appraisers will then choose an umpire. If the two independent appraisers cannot agree on the amount to repair the damages they will submit their differences to the umpire. The umpire in this appraisal agreed that the roofs required replacement and produced an award favoring Mr. Walker in the amount of $423,053.96. Appraisal awards are binding. In turn, Acadia had to pay the full amount of the award. (I should remind you that Acadia’s adjuster first determined the loss amount to be $0 because they believed the damages were below the $5,000 deductible.)

After the appraisal award was completed, Walker tried to file an appeal of the award to the United States Fifth Circuit. It was Walker’s belief that the hail damage would cost more than the award. He was also seeking additional proceeds for what he believed was “bad faith” by the insurance company’s adjuster’s poor assessment and the way they handled the claim.

In this appeal, the Court ruled that under Texas law, “appraisal awards made pursuant to the provisions of an insurance contract are binding and enforceable, and every reasonable presumption will be indulged to sustain an appraisal award.” The Court also ruled that a binding appraisal can only be overturned in only three situations:

(1) when the award was made without authority; (2) when the award was made as a result of fraud, accident, or mistake; or (3) when the award was not in compliance with the requirements of the policy.

Mr. Walker diligently tried to argue on all three points. However, the court dismissed his rebuttal on all three. This appraisal and case is a good resource showing the respect the Texas courts have for the appraisal process. It is my opinion that the Independent Appraiser and the insurance appraisal process protected the policyholder in this situation. Mr. Walker should be happy the policy had such a clause. The work that the Independent Appraiser did during this Appraisal was responsible for Walker receiving $418,053.96 over what the insurance carrier said they owe on the claim.

In the event that you find yourself in an insurance claim dispute, you should highly consider calling an Independent Appraiser for assistance in the insurance appraisal process. Insurance Appraisal Services is all we do. Feel free to call Insurance Claims Group, Inc. at 919-669-9111 to have all your insurance appraisal questions answered.

(C) Joe Brennan is President and owner/operator of Insurance Claims Group, Inc., a national independent adjusting, appraisal, and umpiring firm. We will answer your claim questions FREE – Ph: 919-669-9111 . Get Independent Appraiser Help, by visiting http://www.insuranceclaimsgroup.com or http://www.insurance-appraisal-services.com

This entry was posted on Saturday, February 13th, 2010 at 6:20 pm and is filed under Homeowners Insurance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.