Insurance Appraisals

Insurance attorneys in Fort Worth and the Dallas area will have clients calling at one time or another asking about appraisals.
Many property insurance policies contain appraisal clauses. These clauses define a process for appraising the value of the damaged property, if the parties cannot agree. Common provisions call for each party to chose an appraiser. Those appraisers then choose a neutral third appraiser, called the umpire. If the parties and their appraisers cannot agree on an umpire, either party may petition a court to appoint one. Once the appraisers and umpire are chosen, they value the loss. If all do not agree on the value, the decision of any two will control. The intent is to give the insurance company and the insured a simple, speedy, and fair means of deciding disputed values.
When the two appraisers do not agree, the umpire doe not simply choose between them. It is the duty of the umpire to to ascertain and determine, in the exercise of his own judgment and as the result of his own investigation, the values of the disputed items.
Either party may seek specific enforcement of the appraisal clause, and the court will abate any pending lawsuit and compel the parties to submit to the appraisal process. In addition, an insured may recover consequential damages sustained as a result of the insurance company’s failure to comply with the appraisal clause. This was stated in the case styled, Standard Fire Insurance Co. v. Fraiman, in a 1979, opinion issued by the Houston Court of Appeals, 14th District. What is unusual about the case though, is that it is the insured trying to enforce the appraisal process. Usually it is the insurance company trying to enforce appraisal clauses in a policy.
Although either party may seek abatement to compel the appraisal process, the trial court has discretion on the timing of that process and does not have to order an immediate appraisal.
An appraisal award is binding and enforceable. An appraisal award may be disregarded:
1) when the award was made without authority;
2) when the award was the result of fraud, accident, or mistake; or 3) when the award was not made in substantial compliance with the terms of the contract.
The effect of an appraisal award is to estop one party from contesting the issue of damages in a suit on the insurance contract, leaving only the question of liability for the court.
While the appraisers have power to determine the money value of the property damage, they do not have power to determine whether the insurance company is liable for the loss. Appraisers may answer some questions touching on causation but not others, depending on the nature of the parties’ dispute and the possible causes of loss alleged, among other factors. Generally, if different causes are alleged for a single injury to the property, causation issues are outside the scope of appraisal. This was stated in the Texas Supreme Court in the 2009 case, State Farm Lloyds v. Johnson.
If an insurance company imposes unreasonable conditions on the appraisal, or seeks to invoke appraisal other than in accordance with the policy’s terms, the insurance company may be found to have waived the appraisal requirement.
It is best to seek the advice of an experienced Insurance Law Attorney when an insurance company is invoking the appraisal clause in an insurance policy. It is a pretty safe bet that the company is violating the Texas Insurance Code in some way.