The appraisal clause
When you file a property claim, two questions get answered in order. First, does the policy cover this loss? Second, how much is the loss worth? The carrier answers both, and most of the time the second answer is the one people end up disputing. The adjuster's estimate is missing a slope of the roof, or prices drywall at a rate no contractor in the county will accept, or leaves out the matching siding, and the number falls short of what it will take to put the house back.
The appraisal clause exists for that second question. It is a condition in the policy, agreed to by both sides when the policy was written, that says: if you and we cannot agree on the amount of loss, either of us can demand that the amount be set by appraisal. Each side appoints an appraiser. The two appraisers choose an umpire. The amount agreed by any two of the three is the amount of loss.
The wording in most homeowners policies follows the Insurance Services Office form, HO 00 03, nearly word for word:
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 and impartial 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.
The clause descends from the 1943 New York standard fire policy, which most states adopted as the minimum content of a fire policy. That is why the twenty-day and fifteen-day clocks appear in policies from Maine to California, and why many state statutes contain the clause verbatim. Commercial property forms carry a close cousin, usually without the fixed day counts, and often adding that the carrier keeps its right to deny the claim even if there is an appraisal. That sentence is worth remembering: appraisal sets the amount, and nothing else.
Where to find it in your policy
The declarations page, the one or two pages at the front with your name, address, limits and premium, will not have it. You need the policy jacket, the booklet of printed conditions that the declarations page refers to. If you do not have it, your agent or the carrier must give you a copy on request.
In a homeowners policy the clause sits in the section of conditions that applies to property coverage, usually headed Section I – Conditions, in a numbered or lettered list that also covers duties after loss, loss settlement, loss payment and suit against us. Look for the heading Appraisal. In the 2011 ISO form it is condition F; in the 2000 form, condition E. Carrier-drafted forms sometimes call it Appraisal Process or Appraisal of Loss. Massachusetts policies do not use the word at all: the statutory form there provides for a reference to three referees, and the mechanics are different enough that we describe them on the Massachusetts page.
When you find it, read it twice and note four things: the deadline to name an appraiser, the deadline to agree on an umpire, who appoints the umpire if the appraisers cannot, and the standard the clause sets for appraisers. Most say competent and impartial. Older forms and many statutes say competent and disinterested. The difference matters when it comes time to choose.
How the process works
Appraisal begins with a letter. One party writes to the other, states that they have failed to agree on the amount of loss, demands appraisal under the policy, and names their appraiser. From that letter, under most forms, the other side has twenty days to name its own appraiser.
- Day 0 Written demand Either party. Certified mail.
- By day 20 Appraisers named 20 days for each side
- By day 35 Umpire chosen 15 days, or a judge appoints
- On site Inspection Both estimates, line by line
- The award Award signed Any two of three
- After filing Payment Commonly within 60 days
- Day 0 Written demand Either party. Certified mail.
- By day 20 Appraisers named 20 days for each side
- By day 35 Umpire chosen 15 days, or a judge appoints
- On site Inspection Both estimates, line by line
- The award Award signed Any two of three
- After filing Payment Commonly within 60 days
The two appraisers then have fifteen days to agree on an umpire. In practice, experienced appraisers know the umpires in their region and settle this quickly. If they cannot, either party asks a judge of a court of record in the county where the property sits to appoint one. A few states send the request elsewhere: the Commissioner of Insurance in Massachusetts, the Insurance Division's random draw in Iowa, or a Louisiana panel by agreement.
With the panel complete, the work is a valuation. Both appraisers inspect the property, usually together, and each prepares an itemized estimate of the repair, line by line, in the estimating software carriers use. They then compare estimates and work through every difference: this room was missed, that unit price is out of date, this material cannot be matched and the whole elevation has to go. Everything they agree on is settled. What remains, and usually it is a short list, goes to the umpire, who considers both positions and decides.
The result is an award: a written statement of the amount of loss, signed by the two appraisers if they agreed, or by the umpire and one appraiser if they did not. That signed award is what the clause means by a decision agreed to by any two.
What it decides, and what it cannot
An appraisal panel answers one question: what is the amount of the loss? Within that question it decides a great deal. The cost of materials and labor. The scope of the repair. Whether an item should be repaired or replaced. How much to allow for depreciation and what the actual cash value is. In many states, how much of the damage the covered event caused, because you cannot price the storm's damage without separating it from the wear that was already there.
It does not decide whether the policy covers the loss. It does not interpret policy language, apply exclusions, decide whether a condition was met, or rule on whether the carrier acted in bad faith. Those questions belong to the courts. A panel that strays into them produces an award that can be set aside, which is why a good appraiser stays inside the lines and notes, rather than decides, any item the carrier says is not covered.
The line between amount and coverage is drawn differently from state to state. Texas, Iowa, Illinois and Florida let the panel decide causation as part of the amount. Alabama, Mississippi and Tennessee reserve causation to the court. Georgia and Missouri have treated some scope disputes as coverage questions. The state pages on this site say where each state stands.
When appraisal fits, and when it does not
Appraisal fits when the carrier has accepted that the loss is covered and the disagreement is about how much. The signs are familiar: an estimate well below the contractor's, a partial payment followed by silence, a supplement that goes unanswered, a dispute about whether the roof needs replacing or patching. Those are amount disputes, and they are what the clause was written for.
It does not fit when the carrier has denied the claim. A denial is a coverage dispute. Demanding appraisal in the face of one accomplishes little, and in several states the carrier can simply refuse. The path there runs through the state's Department of Insurance, a mediation program where one exists, or an attorney.
There is a middle case that needs care: a partial denial, where the carrier pays for some damage and says the rest is not covered. Whether the panel can value the disputed part depends on your state and on how the disagreement is framed. This is where the choice of words in the demand letter, and the framing of the estimate, matters most.
One thing to check before anything else. Your policy sets a deadline for filing suit, often one or two years from the date of loss. In most states, demanding appraisal does not pause that clock. Michigan and Utah pause it by statute; Massachusetts guarantees ninety days after the award. Everywhere else, find the date first and plan around it.
What it costs and how long it takes
The clause allocates the cost plainly. Each party pays its own appraiser. The umpire's fee, and any other expense of the appraisal, is split equally. The carrier's appraiser costs you nothing.
Appraiser fees around the country run from a few hundred dollars an hour to flat fees, and a residential appraisal commonly costs the policyholder somewhere between one and five thousand dollars all in. Ours is a flat $2,500 for a residential loss, due regardless of outcome. Umpires are often paid by the hour or at a flat rate for an inspection and decision, split between the parties. An appraiser who asks to be paid a percentage of the award should give you pause: the policy requires impartiality, and courts in Florida, Rhode Island and Colorado have looked hard at appraisers with a stake in the number.
On time: the clocks in the clause take the panel from demand to complete in about five weeks. From there, a straightforward residential appraisal often reaches an award within one to three months. Texas data gathered for its new rules found that three quarters of residential appraisals without an umpire concluded within a hundred and twenty days of the demand, and half of those with an umpire within about two hundred. Litigation, by comparison, commonly runs a year or more.
Appraisers and umpires
An appraiser is not an adjuster and not an advocate. The policy says competent and impartial, and it means it. Competent means able to inspect, document and price a property loss to a standard the other side and, if it comes to it, a court will respect. Impartial means having no stake in the outcome: not the contractor who will do the work, not a public adjuster paid a share of the claim, not an employee of either party. Some states have written that into law. Louisiana registers appraisers and umpires and bars contingent fees. Iowa licenses them. Florida's supreme court has held that a public adjuster on contingency cannot be a disinterested appraiser.
You are appointing someone to value your loss properly, in the same language and software the carrier's appraiser uses, and to work through the differences with that person until the number is right. The best appraisers are former adjusters who know how carrier estimates are built and where scope tends to go missing. That is what we are.
The umpire is the neutral. Often a retired adjuster, a contractor, an engineer or a lawyer with claims experience, chosen by the two appraisers because both trust them to be fair. A good umpire rarely has to decide much, because good appraisers settle most of the estimate between themselves.
The award, and after
Once the award is signed and delivered to the carrier, the policy's loss payment condition takes over. Most homeowners forms make the loss payable within sixty days after the carrier receives proof of loss and an award is filed. The carrier pays the awarded amount less what it has already paid, less the deductible, subject to the policy limits, and, under a replacement cost policy, may hold back recoverable depreciation until the work is done.
In nearly every state the award is binding on the amount. Courts set awards aside only for fraud, a material mistake, an appraiser who was not impartial, or a panel that decided something outside its authority. California treats appraisal as arbitration and gives a hundred days to challenge an award; Connecticut gives thirty. Oklahoma and Oregon bind only the party who demanded appraisal. Arkansas, Nebraska and South Dakota do not allow appraisal to be demanded at all, only agreed to.
We, the undersigned, having been duly appointed under the appraisal condition of the policy, have examined the damaged property and have determined the amount of loss to be as set out below. This award is made without determination of coverage.
- Replacement cost value
- As agreed, per attached itemization
- Actual cash value
- As agreed, per attached itemization
What the award does not do is end the rest of the claim. Coverage disputes, bad-faith claims and statutory penalties survive it, though once an award is paid a contract claim for the same amount is usually foreclosed.
How states differ
The clause is nearly universal; the rules around it are not. Twenty-nine states write it into statute or regulation. Three allow it only by consent. Two license or register the people who serve. Several run on shorter clocks or route the umpire appointment somewhere other than a judge. We keep a page for every state we serve, every one but Minnesota, and for the District of Columbia, with the deadlines, the authorities, and the points where that state departs from the common form.
Two kinds of policy run on rules of their own, wherever the property is. A flood policy under the National Flood Insurance Program is federal: its appraisal clause settles price and nothing else, and FEMA sets the conditions for using it. How flood insurance claims work. A commercial property policy carries its own appraisal condition, which can also set the value of the building and the business income lost. How commercial property appraisal works.
Questions
Is the appraisal award binding?
In most states, yes, as to the amount of loss.
Courts set awards aside only on narrow grounds such as fraud, a material mistake, an appraiser who was not impartial, or a panel that decided something outside its authority. A few states differ: Oklahoma and Oregon bind only the party who demanded appraisal, and Arkansas, Nebraska and South Dakota allow appraisal only by agreement.
Can the insurance company invoke appraisal against me?
Yes. The clause says either party may demand it.
Carriers sometimes do, particularly when a policyholder has an attorney or public adjuster and the disagreement is about scope. If you receive a demand, you have the same twenty days to name your appraiser.
Does invoking appraisal waive my right to sue?
No. Appraisal settles the amount of loss.
It does not settle coverage, bad faith, or your other rights under the policy or state law, though once an award is paid, a contract claim for the same amount is usually foreclosed. What you must watch is the suit-limitation deadline in your policy, which appraisal generally does not pause.
What if the two appraisers never agree?
That is what the umpire is for.
The appraisers submit their differences, usually as competing itemized estimates, and the umpire decides them. An award signed by the umpire and either appraiser sets the amount. In practice, experienced appraisers resolve most items between themselves and take only the genuine disagreements to the umpire.
Can I use a public adjuster or my contractor as my appraiser?
Be careful.
The policy requires an appraiser to be competent and impartial, and courts in Florida, Rhode Island and elsewhere have thrown out awards where the policyholder’s appraiser was paid a percentage of the claim or held an assignment of it. A public adjuster paid on contingency, or the contractor who will do the work, has a stake in the outcome. Some states now bar the arrangement by statute.
Is there a deadline to demand appraisal?
The clause itself usually sets no deadline, but two things do.
First, your policy’s suit-limitation period, which in most states runs from the date of loss and is not paused by appraisal. Second, courts in several states have found that a party who waits too long, or litigates first, has waived appraisal. Texas is proposing a one-year window from the carrier’s coverage decision. Demand it as soon as the disagreement is clear.
Related: How to invoke the appraisal clause, Appraiser, public adjuster, or attorney, and the glossary.