Is Appraisal Even Mandatory Anymore

Is Appraisal Even Mandatory Anymore? Depends on the Policy.

By: Ian T. Kravitz, Esquire

Casualty insurance policies have long contained provisions requiring appraisal as to disputes. All too often, property owners would being suit to force their insurer to pay for a covered loss, only to have the case dismissed or stayed until the property owner complied with the policy provisions requiring such appraisal. After a while, it simply became assumed that before suit could be filed to determine the amount of the loss, submission to the appraisal process was mandatory. Not so.

This assumption resulted from repeated legal opinions based upon policy language providing that if there was a disagreement between insurer and the insured as to the amount of the loss, "either may make a written demand for an appraisal of the loss. In this event, each party will select a competent and impartial appraiser. The two appraisers will select an umpire." Such provisions were found to require appraisal as to the amount of any disputed loss a condition precedent to any suit to determine the amount of such a loss.

In recent years however, the appraisal provisions of certain policies, including those written by Citizens, changed the language of such provisions. Now, in many of those policies, the appraisal provision provides that if the parties failed to agree on the amount of the loss, "either may request an appraisal of the loss by presenting the other party with a written request for appraisal of the amount of loss. If the other party agrees in writing to participate in appraisal, then appraisal shall proceed pursuant to the terms of a written agreement between the parties." Unlike the provisions quoted above, mandatory appraisal is not triggered simply by one party making such a demand. Instead, a demand must be made, and both parties must actually agree on appraisal and the terms of such appraisal.

This distinction was addressed by the Third District Court of Appeal on two occasions in 2013. First, on January 2, 2013 in the matter of Citizens Property Insurance Corporation v. Casar, and then on May 1, 2013 in Citizens Property Insurance Corporation v. Zunjic. In both instances, the appellate court explained how this revised policy language required both parties to agree to appraisal and to the terms of the appraisal before appraisal could, if ever, be ordered by a court. In fact, in the Zunjic matter, both parties had in fact agreed to appraisal, however, the insured failed to agree to the terms of the appraisal proposed by Citizens, and therefore, the trial court was in error when compelling appraisal at the request of Citizens.

These cases remind us of two important issues. First of all, insurance policies are creatures of contract, and will be analyzed by the terms of that contract, the policy of insurance. Secondly, it is important to know the terms of your policy or that of your client, and to be aware of what steps are required in making a claim, including all conditions precedent to binding the insurer to the appraisal process, if that is the course you prefer to take. Knowing the effect of policy language on your claim can often prove the difference between recovery and further loss. Your Construction Law FirmTM remains committed to assisting you in such analysis throughout the claims process.