The appraisal process, available under most homeowner’s insurance policies, provides an insured property owner and its insurer an opportunity to resolve a dispute over the amount of a covered loss through an alternative dispute resolution process.  Generally, insurance policy conditions regarding appraisal state that if the insured and insurer fail to agree as to the amount of a loss, either party may request an appraisal of the insurance claim within a specified period of time.

During an appraisal process, the insured property owner and insurer each select their own independent appraiser.  These two appraisers will then select a neutral umpire to settle any disagreements between the appraisers, should any arise.  Once the appraisers and umpire are selected, the appraisers will review any documents, estimates and records between them.  The appraisers then meet to discuss and hopefully resolve any differences in damages and cost of the insured’s loss.  Should the two independent appraisers ultimately disagree on certain issues, those difference will be presented to the umpire.  The appraisers and the umpire will discuss these issues and attempt to reach an agreed settlement, called the appraisal award.  Only two of the three individuals need to agree for the dispute to be resolved.  The amount of the award is binding and paid by the insurer to the insured.

Insurance companies, however, repeatedly fail or refuse to comply with an insured’s request for appraisal, often alleging that appraisal is either premature or inapplicable.  In this situation, insureds are left with no other remedy but to file a lawsuit to enforce their rights even when appraisal, an alternative dispute resolution process, is the most effective way to resolve the insurance claim.

Recently, the Third District Court of Appeals (the “Third DCA”) delivered an opinion on this issue and affirmed a trial court’s order compelling appraisal of a homeowners’ supplemental Hurricane Katrina claim.[1]  The Third DCA held that despite the insurer’s allegations to the contrary, the insureds had “sufficiently complied” with all their post-loss obligations prior to demanding appraisal because the insureds had provided to their insurer all requested documentation and also permitted the insurer to inspect the unrepaired damages being claimed.[2]  In affirming the trial court’s ruling, the Third DCA ultimately held that “sufficient compliance…requires that all post-loss obligations be satisfied before the trial court can properly exercise its discretion to compel appraisal.”[3]

More recently, however, the Third DCA reversed a trial court’s order compelling appraisal of an insureds’ supplemental Hurricane Wilma claim.[4]  In overturning the lower court’s order, the Third DCA established that the insureds “failed to produce necessary documentation and protect the property from further damage as required by the governing policy.”[5]  The Third DCA ruled that pursuant to these shortcomings the insureds failed to comply with all their post-loss obligations and, as such, “the trial court erred in ordering appraisal.”[6]

Accordingly, prior to demanding appraisal as to the amount of their covered loss, insured homeowners and business owners must ensure that they (1) sufficiently comply with all post-loss obligations stated in their policy, and (2) afford their insurer a reasonable opportunity to investigate and adjust the claim.

Although most property insurance policies contain similar post-loss obligation language, homeowners and business owners should always consult with an attorney who is well-versed in analyzing and deciphering complicated and convoluted property insurance policies.