Dear David,
Our customer’s insurance carrier is disputing our bill and our customer just wants to pay us on their credit card. We have seen stories about restoration contracts that place the burden of the agreed price on the restorer. Likewise, we have seen stories about having an assignment of benefits. We are confused about the appraisal process and how this can resolve the price dispute with the insurance company?
Dear Appraisal Confusion,
It is normal to be confused by the appraisal process. As hyped as the process has become, not a lot of guidance seems to exist to give people a reasonable expectation about the outcome of the process. Let’s explore three things important to understand about the appraisal process. 1) The appraisal process is born out of the insurance contract; 2) The appraisal process’s procedural problems; 3) The appraisal process problem with concluding.
- The appraisal process is born out of the insurance contract. Formerly, the insurance contract referred to the appraisal process as arbitration, but this changed as laws evolved around alternative dispute resolution mechanisms. The variables are many and guidance is minimal. Here is the tip of the iceberg:
Insurance policies are not commodities which means they are not interchangeable. If you have ever had a situation where all other things being equal one claim is paid and the other denied with the difference being the coverage—then you are familiar with this concept. The range of variance means that an assessment of the appraisal process in a specific policy requires an a trained and knowledgeable eye. For example, if the appraisal process requires mutual agreement between the insured and the insurance company then it may not be possible to evoke the clause to solve the insureds price dispute. The best case is your attorney reviews the situation before you make a commitment.
If one party can evoke the appraisal clause, the other may refuse to voluntarily appoint an appraiser. The evoking party then proceeds to court to compel the appointment or its possible the insurance company takes a position that the insureds failure to appoint an appraiser is a breach of a condition of the insurance policy to cooperate. Cooperation being a condition precedent to coverage applying.
- The appraisal process’s procedural problems. Insurance companies positions on the scope of what applies to the appraisal process can vary. An insurance company can take a position that the appraisal process only applies to price and not to the scope of the work. Additionally, they can take a position the appraisal process does not apply at all because their position on the loss or damage is based on the coverage afforded. Coverage issues being outside of the bounds of the appraisal clause.
Appraisal clauses often have words that are ambiguous or not further defined. For example a clause that requires a competent and impartial umpire does not set forth what it means for an umpire to be competent or impartial. Debates and lawsuits then ensue depending on other factors that may well extend beyond the narrowly perceived issue of having your bill paid.
- The appraisal process’s problem with concluding. After being successful in the appraisal process does not mean that your bill is paid. The losing side could still try to set aside the award for one of a hundred different reasons. Even if the losing side is successful in having the award set aside the landscape is not clear about what happens next.
Keep in mind that the interests of the insurance carrier far exceed those of your interest in having a bill paid in full. If the facts of your situation present an opportunity for the insurance carrier to establish a favorable legal precedent then you could find yourself waging a war well beyond what you thought. The appraisal process is currently a hot topic as monied interests are exploring it to establish boundaries.
One of the best things a restorer can do is join an industry association that seeks to protect the interests of its members. Professional associations tend to have resources and guidance that looks at issues more globally. This comprehensive view is often shaped by larger discussions and thought leaders that are working on the front lines of issues critical to the success of its membership.
If you are interested to learn more about the nuances of the appraisal process then check out “The Law and Procedure of Insurance Appraisal by Jonathan J. Wilkofsky, Esq. Third Edition.”
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