The appraisal process can be a highly effective and efficient tool for both insurers and insureds in resolving disputes regarding the amount of loss or damage. While there is typically only modest variation among appraisal provisions found in modern property insurance policies, there are significant jurisdictional variations in the way in which such provisions are enforced and construed. Particularly in recent years, with the proliferation of claims arising from major Gulf Coast hurricanes, courts have been confronted with fundamental questions regarding the nature, scope, and purpose of appraisal. The decisions arising out of these cases have, in many instances, clarified the law of appraisal and provided needed guidance to parties seeking to use this important contractual right to resolve loss measurement disputes.
This paper will explore some of the “fundamentals” of appraisal including: (1) how various jurisdictions view the appraisal process (and whether and how they differentiate between “appraisal” and “arbitration”); (2) ways in which a party may waive its appraisal rights; and (3) the scope of issues that may be considered and/or determined by an appraisal panel. By highlighting different approaches to appraisal among various jurisdictions, this paper seeks to increase awareness of these issues and to engender a greater understanding of the legal framework under which appraisals operate.
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