Nebraska appraisals are virtually non-existent. The Supreme Court of Nebraska equated an appraisal clause to an arbitration clause, as both serve to “oust” courts of their jurisdiction, and therefore unenforceable.1

So, I was surprised last week when the Nebraska Department of Insurance issued a Bulletin which seemed to suggest that appraisal is possible. I was also surprised that the Nebraska Department of Insurance does not seem to know that a “fire and lightning” policy is not a “fire and lighting” policy nor a “fire and lightening” policy. I assume that spelling may be the problem rather than suggesting that “lighting” and “lightening” are some type of special coverages.

The important part of the Nebraska Insurance Bulletin provides:

The Standard Fire Policy contains a provision related to appraisal which allows either party to the insurance policy to demand an appraisal when the parties cannot agree on the actual cash value or the amount of loss. In 1989, the Nebraska Supreme Court in Rawlings v. Amco Ins. Co., 231 Neb. 874 (1989), ruled that an appraisal clause in an insurance policy substantially similar to the appraisal language in the Standard Fire Policy was void and unenforceable because it bound parties to a nonjudicial determination of future disputes and was thus contrary to public policy.

Policy language that allows both parties to agree to the appraisal process after a dispute arises is permitted.

It is not practicable for insurers to include in fire and lightening policies appraisal language that conforms exactly to the Standard Fire Policy as such language would be void and unenforceable in Nebraska courts. To “conform as nearly as practicable to” the conditions of the Standard Fire Policy and to address the ruling of the Court, fire and lightening policies should contain an appraisal provision that would permit appraisals only if agreed to by both parties, after a dispute arises.

(Emphasis added)

Perhaps appraisals will be an agreed method to resolve disputes in Nebraska’s future. The bulletin is certainly suggesting appraisal as an alternative dispute resolution process.

My research also led to a very good American Bar Association paper on the appraisal process from a national perspective, which I suggest others maintain for reference.

Thought For The Day

“This country really, really works … this country has six times the per capita GDP growth that it had when I was born … this is a remarkable, remarkable country … I would love to be a baby born in the United States today.”
—Warren Buffett, aka the Oracle of Omaha
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1 Rawlings v. Amco Ins. Co., 438 N.W.2d 769, 771 (Neb. 1989).

  • Scott deLuise, CCIM, SPPA

    We’ve handled some appraisals in Nebraska over the years. The Nebraska State Changes Endorsement includes a modification of standard appraisal language that requires that both parties agree to the appraisal to make it valid. this new Bulletin is interesting in that our prior appraisals with policies including these Nebraska Changes, date back to just after the Rawlings case. There have been a few cases wherein we demanded appraisal and the company refused, so litigation ensued.

    We cannot figure out why the Nebraska Department of Insurance issued this bulletin last week. NAPIA and RMAPIA are discussing this now, and i’ll report back after the board is briefed on it. I am sending the Nebraska Changes in a separate pdf to your office.