A recent federal court decision out of Illinois should make every policyholder and public adjuster understand the importance of submitting a proof of loss. 1 It is a case about appraisal, but more importantly, it is a case about how a single number, written on a proof of loss, controls the outcome of an otherwise successful claim.

The policy at issue contained a very unusual appraisal provision. It stated:

Appraisals. If [the insured] and [Foremost] fail to agree on the amount of the loss, then both [the insured] and [Foremost] have the right to select a competent and disinterested appraiser within 20 days from the day of disagreement. The appraisers will determine the amount of the loss. . . . If the amount of loss is determined to equal or exceed the full amount which [the insured] demanded prior to the appraisal, then [Foremost] will pay [the insured’s] appraiser’s fee . . . . Otherwise [the insured] pay[s] [his] appraiser and [Foremost] pay[s] [its] appraiser.

Most appraisal clauses simply allocate costs or split them. This one creates a built-in penalty depending on how the appraisal award compares to the insured’s prior demand. It potentially turns the pre-appraisal demand into a high-stakes benchmark.

In this case, the policyholder suffered a significant fire loss. There was no dispute about coverage. The only disagreement was the value of the loss. The insured submitted a sworn proof of loss and then demanded appraisal. The appraisal panel ultimately awarded approximately $1.3 million.

That sounds like a win for the policyholder. It was not.

The insurer refused to pay the insured’s appraiser’s fee, citing the proof of loss and arguing that the insured had previously “demanded” approximately $1.8 million. Since the appraisal award was less than that amount, the policy language dictated that each party would bear its own appraiser’s fee.

The policyholder argued that he never intended to demand $1.8 million. Instead, he claimed he was seeking policy limits, which was far lower. He also argued that the proof of loss had been rejected by the insurer, so it should not count as a demand at all. There was also an attempt to show that both parties knew the loss exceeded policy limits, suggesting that appraisal should never have been invoked in the first place. The court did not see it that way.

The judge focused on one thing: what the insured submitted. The sworn proof of loss contained a specific line for the “amount claimed,” and that number was approximately $1.8 million. It was signed under oath. It was the only document in the record that clearly stated a monetary demand prior to appraisal.

The court held that the proof of loss represented the insured’s demand, regardless of whether the insurer rejected it for lack of supporting documentation. Rejection did not erase the statement. It simply meant the insurer was not yet obligated to pay it. The number still stood as the insured’s communicated position.

The policyholder tried to fix the problem with later affidavits stating that he only intended to demand policy limits. The court rejected those efforts under the “sham affidavit” rule, noting that a party cannot contradict a prior sworn statement to create a factual dispute.

There are several important lessons here, and they go well beyond this one dispute. First, a proof of loss is not just a formality. It is a legal document with real consequences. Every number placed on that form matters. Courts will treat it as a definitive statement of the insured’s position, especially when it is signed under oath.

Second, intent does not override what is written. It does not matter what the insured meant to say if the document says something else. Courts interpret contracts and sworn statements based on their plain language, not after-the-fact explanations.

Third, rejecting a proof of loss does not make it disappear. Many policyholders and even some practitioners assume that a rejected proof of loss has no continuing effect. This case shows otherwise. The document can still be used as evidence of a demand, even if it was not accepted for payment purposes.

Fourth, this type of appraisal clause creates a trap for the unwary. By tying fee-shifting to the insured’s pre-appraisal demand, the policy effectively penalizes inflated or imprecise claims. It forces the insured to demand enough to fully capture the loss, but not so much that an appraisal award falls short. This is ingenious and unique drafting by the insurer.

Finally, there is a need for precision and strategy in claims handling. If there is any mistake, ambiguity, or misunderstanding in a proof of loss, it must be corrected immediately. In this case, the insurer even invited the submission of a new proof of loss. None was provided.

Insurance adjustment is a detailed business. This case demonstrates that the process of obtaining those benefits can be unforgiving. A single number, written on a single line, can determine who wins and who pays.

Thought For The Day

“The difference between the right word and the almost right word is the difference between lightning and a lightning bug.”
— Mark Twain

1 Lewis v. Foremost Ins. Co., No. 23-cv-02697 (N.D. Il. Mar. 23, 2026). See also, Plaintiff’s Memorandum of Law, and Defendant’s Memorandum of Law.