2017 brought with it three major hurricanes causing widespread flooding to thousands of homeowners and business owners. Those policyholders with a flood insurance policy through the National Flood Insurance Program (“NFIP”) might consider invoking the flood policy’s appraisal provision.
Here are three things you should know about the Standard Flood Insurance Policy (“SFIP”)’s appraisal provision:
1. Policy Language: The language of the appraisal provision is similar to that found in most ISO forms:
If you and we fail to agree on the actual cash value or, if applicable, replacement cost of your damaged property to settle upon the amount of loss, then either may demand an appraisal of the loss. In this event, you and we will each 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 or a court of record in the State where the covered property is located. The appraisers will separately state the actual cash value, the replacement cost, and the amount of loss to each item. 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 actual cash value and loss, or if it applies, the replacement cost and loss.
Each party will:
1. Pay its own appraiser; and
2. Bear the other expenses of the appraisal and umpire equally.
2. Scope of Appraisal: Unlike many states across the country, “appraisal can be invoked only where the parties agree about what items are covered by the policy (what the covered loss is) but differ on the value or cost of these items. A dispute over what was damaged or in what way it was damaged falls outside the scope of appraisal.1
For example, assume that an SFIP covers a 3-story home. After a flood, the insurer finds—contrary to what the insured asserts—there was damage to the structure and to items on the first floor of the home, but there was no damage caused by the flood to the second or third floors. Appraisal is not available to resolve disputes concerning the issue of causation as to the second and third floors.2
3. Time Limitations: Invoking the appraisal provision will not waive or toll deadlines in the SFIP, such as the Proof of Loss requirement or Statute of Limitations. If you’re going to participate in appraisal you must still be aware of these important deadlines.
Unfortunately, the limited scope of appraisal will make invoking appraisal futile for the great majority of policyholders’ disputes.
1 De La Cruz v. Bankers Ins. Co., 237 F.Supp. 2d 1370, 1374 (S.D. Fla. 2002).
2 Id. at 1376.