When Can Policyholders Demand Appraisal?

Recently, I have noticed a trend of insurance carriers attempting to avoid the appraisal process. Why? One can only speculate, but it likely has something to do with money. When appraisal is premature, carriers rightfully refuse to participate in the appraisal process. The two most common instances include a denial of any and all benefits under the terms of the insurance policy and when an insured fails to comply with certain conditions under the policy.

The Florida Supreme Court summarizes this position as follows:

In Florida, it appears that when partial coverage is admitted, the policyholder’s right to appraisal vests.

Some jurisdictions, including Michigan, find an absolute right to appraisal regardless of coverage issues. The practical logic of compelling an appraisal to proceed even when issues of liability have been raised is explained in the case of Masonic Temple Association of Grand Rapids v. Michigan Fire and Marine Insurance Company. The Supreme Court of Michigan affirmed a trial court’s decision to permit an appraisal proceeding despite the carrier’s denial of liability, stating: “[t]he judge also expressed his opinion that if there was an appraisal the parties might adjust their differences and end the litigation.”

The appraisal process helps resolve claims and restore insureds to their pre-loss state. Another benefit of appraisal is saving money and resources for both of the parties as well as for an already overcrowded judicial system. Once a disagreement regarding the amount of benefits owed occurs, the appraisal process tends to be the most time efficient and user-friendly process available to the parties to resolve their issues.

1 State Farm Fire & Cas. Co. v. Licea, 685 So.2d 1285 (Fla. 1996).
2 Masonic Temple Association of Grand Rapids v. Michigan Fire and Marine Ins. Co., 323 Mich. 662, 36 N.W.2d 317 (1949).
3 The Law and Procedure of Insurance Appraisal, Jonathan J. Wilkofsky, Ditmas Park Legal Publishing (2002, 2003).