Appraisal Clause
An appraisal clause is a provision in most property insurance policies that allows either the policyholder or the carrier to invoke a formal, binding appraisal process when they disagree on the value of a covered loss.
The Middle Ground Between Negotiation and Litigation
The appraisal clause is a contractual provision in most homeowner's insurance policies that grants either the policyholder or the carrier the right to demand a formal, independent appraisal when they cannot agree on the value of a loss. The appraisal process is faster and cheaper than filing a lawsuit, and in most states the outcome is binding.
Think of it as the escalation step between a rejected supplement and hiring an attorney. When the carrier's desk adjuster will not budge and you have exhausted your negotiation options, appraisal is the next move.
How the Process Works
Each side appoints an appraiser. The two appraisers independently assess the damage, then attempt to agree on a value. If they cannot agree, they jointly select an umpire. The umpire reviews both positions and issues a binding decision. Agreement between any two of the three - your appraiser and the umpire, or the carrier's appraiser and the umpire - sets the final claim value.
| Step | Who | Cost |
|---|---|---|
| Policyholder's appraiser | Appointed by homeowner | $1,500-$3,000 |
| Carrier's appraiser | Appointed by carrier | Paid by carrier |
| Umpire (if needed) | Selected by both appraisers | Split 50/50, typically $250-$450/hour |
The entire process usually resolves in 30-60 days, compared to 12-18 months for litigation.
When Appraisal Makes Financial Sense
Run the numbers before you invoke. The policyholder is paying their appraiser fee plus half the umpire cost. On a claim where the dispute is $3,000, spending $2,500 on appraisal does not make sense. On a claim where the dispute is $10,000 or more, the math almost always favors appraisal.
The sweet spot is supplement disputes in the $8,000-$50,000 range. Below that, negotiation is cheaper. Above that, an attorney may recover more through bad faith damages and fee-shifting than appraisal alone can deliver.
What Contractors Need to Know
You cannot invoke appraisal yourself unless you have an AOB. The appraisal clause belongs to the policyholder, not the contractor. Your role is to recommend it, explain the process, and connect the homeowner with a qualified appraiser. The appraiser will need the carrier's original scope, your supplement, supporting photos, and any Xactimate files. Having the claim data in an ESX file rather than a PDF makes the appraiser's job significantly faster and strengthens the review.
Frequently asked questions
The appraisal clause is the step between supplement negotiation and litigation. For claims with $10,000+ in dispute, the math usually favors appraisal over accepting the carrier's offer. It is faster and cheaper than suing the carrier.
Invoking appraisal costs the policyholder an appraiser fee ($1,500-$3,000) plus half the umpire fee ($250-$450/hour). The carrier pays their own appraiser and the other half of the umpire fee.
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