Appraisal provisions in property insurance policies are intended to provide an alternative dispute resolution process for resolving property insurance claim disputes involving the amount of loss. The amount awarded by the appraisal panel is, with limited exceptions, binding on both parties under the terms of the policy. While the appraisal process is intended to bring finality to a dispute, what happens when the appraisal panel fails to consider certain items due to limitations or restrictions on the scope of the appraisal or unanticipated factual issues not considered by the panel? Such a situation poses the question of whether Colorado appraisal awards preclude any further breach of contract claims for unanticipated circumstances.
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Following a loss, the issue of replacement with “like kind and quality” often arises whether it be with the replacement of personal property or building materials. The phrase “like kind and quality” is typically not defined in an insurance policy, so whether construction is of “like kind and quality” can easily become a dispute. But is this dispute subject to appraisal?
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The appraisal clause in a typical residential and commercial property insurance policy provides for an appraisal if the parties disagree as to “the amount of loss.”1 That phrase has been the subject of extensive legal debate between insureds and insurers in terms of its meaning and scope. While most courts have concluded that ascertaining the amount of loss does not include interpreting the policy or making coverage determinations, little guidance has been provided as to what coverage means and whether an appraisal can still proceed even if coverage issues exist.
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This is part two of my earlier post, Florida Appellate Court Defines The Meaning Of The Term "Disinterested" As It Relates To Appraisal Provision, concerning the recent opinion in FIGA v. Branco.1 The 5th DCA opinion discussed the scope of appraisal. This is often a common issue that policyholders and insurance carriers have when a claim proceeds to appraisal – does the dispute concern coverage or amount of loss? Often the insurance carrier will assert that the dispute involves a question of coverage which is not appropriate for appraisal. Appraisal deals with an amount of loss question. Well the Branco case has a good discussion and analysis on this topic.


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We frequently field requests from public adjusters and clients concerning appraisal and scope of damages. The situation arises when appraisal is demanded by the insured and the carrier objects, arguing that appraisal is only for issues of price and cannot be invoked unless there is an agreed upon scope of damage. This notion was soundly rejected last month by a federal court in Pennsylvania.1 The court held that the insurer could not refuse appraisal where the dispute was over the extent of damage and stated that it was being “disingenuous” in arguing that the extent of damage was a coverage issue.


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An important aspect of appraisal is determining what damage was caused by the covered peril and what damage was caused by poor maintenance or construction, wear and tear, or other causes generally excluded in the standard property insurance policy. I believe both advocates for insurance carriers and policyholders can agree that this separation is vital to the appraisal process.


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What is the proper scope of appraisal in property insurance claims? This is a common question and the answer is quite different depending on who you ask. Over fourteen years ago the District of Delaware analyzed the scope of appraisal and the opinion is still frequently sighted by parties advocating for the determination of causation in appraisal.


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