In the property insurance world, appraisal is a commonly used procedure to resolve disagreements over the amount of a loss. However, in Massachusetts, in claims under fire insurance policies, it is referred to as a “reference proceeding.” The “reference procedure” provides that a panel of 3 arbitrators, or “referees,” determines the amount of loss or damage.1

Here are some additional points to know about the reference procedure:

  • The insured submits a written demand for reference of the amount of loss to the insurer. The insurer must, within ten days after receiving the written demand, submit in writing the names and addresses of three potential referees to the insured. The insured must, within ten days, notify the insurer in writing of his or her choice of one of those people to act as referee.2
  • The insured also submits to the insurer the names and addresses of three potential referees. The insurer must notify the insured in writing within ten days of its choice of one of those persons to act as referee.3
  • The two referees chosen have ten days to agree upon and select a third referee. If they fail to do so, then either of them or the parties may make written application to the commissioner of insurance for the appointment of the third referee. The commissioner then appoints a third referee.4
  • A referee must be disinterested, a resident of the commonwealth, and willing to act as referee. No referee may have served as a referee for either party within four months prior to the date of nomination for appointment, unless the other party gives written consent, or, in the case of the third referee, both parties give written consent.5
  • Within ten days of the appointment or selection of the third referee, the referees must meet to hear evidence in the case. Although they may adjourn the hearing from time to time, no more than one week may elapse between hearings except by unanimous consent.6
  • A reference proceeding does not waive any of the insurer’s legal defenses to the claim. The reference proceeding determines only the amount of the loss sustained or the sound value of the property, unless both parties agree in writing that the reference shall be held and shall proceed under the provisions of Mass. Gen. Laws ch. 251, which discusses generally written agreements to arbitrate a dispute.7
  • The referees must reduce their award to writing. The third referee must deliver the award to the insured and to the insurer.8
  • The award by the majority of referees is conclusive and binding on the parties as to the amount of loss or damage.9
  • The proceeding is a condition precedent to any right of action to recover for the loss; but the parties may waive that provision.10
  • If an award is rendered by the referees in favor of the insured, the insurer and the insured are each liable to the third referee for one half of his or her charges for compensation and expenses. However, the third referee’s charges are paid by the insurer, who deducts from any award the insured’s share of such charges. If the award is rendered in favor of the insurer or if no award is rendered, the insurer is liable to the third referee for his or her charges, but may deduct one half of the charges from any payment it makes to the insured.11

The reference procedure is to determine questions of value, not questions of coverage.

1 Mass. Gen. Laws ch. 175 §99 (Eleventh).
2 Mass. Gen. Laws ch. 175 § 100.
3 Id.
4 Id.
5 Mass. Gen. Laws ch. 175 § 99 (Eleventh); Mass. Gen. Laws ch. 175 § 100B.
6 Mass. Gen. Laws ch. 175 § 101.
7 Mass. Gen. Laws ch. 175 § 101E.
8 Mass. Gen. Laws ch. 175 § 101A.
9 Mass. Gen. Laws ch. 175 §99 (Eleventh).
10 Id.
11 Mass. Gen. Laws ch. 175 §§ 101B, 101C.