A common complaint by policyholders is that insurance companies, when invoking the contractually appraisal process, attempt to impose conditions to the appraisal that are not contained in the precise wording of the appraisal clause. One author cited a case where a Virginia Court held that the insurer waived its right to appraisal by imposing conditions on the process that were not contained in the policy.
As I have noted in prior articles, the Supreme Court of Texas has unequivocally held that it cannot envision a circumstance where a party's right to appraisal can be waived, especially when both parties are entitled to invoke the process. In response to the policyholder's complaint that insurers attempt to impose "conditions" on appraisal that are not present in the policy, these perceived "conditions" are usually only a clarification of what the appraisal process was meant to be in the first place.
In most appraisal clauses, there is a requirement that the amount of the loss be itemized (as opposed to a broad form award). However, the insurance policies rarely detail exactly what itemization means. In that regard, and in the correspondence from the insurance carrier invoking the clause, it is not uncommon for the carrier to emphasize that the appraisers are required to itemize the amount of the loss in detail and shall provide a line-by-line itemized breakdown of the amount of the damage (e.g. by room and by construction trade).
Without itemization, the appraisal process can become an exercise in frutility where the insurance carrier, at the conclusion of the process, is unable to discern the amount of the loss for that portion of the damages that is covered (e.g. windstorm causing interior leaks) versus that portion of the damages that is not covered (e.g. wind driven rain or surface water). In other words, the carrier, having properly invoked the contractual appraiser process to determine the disputed amount of the loss, is unable to determine what payment is owes pursuant to the insurance contract.
Again, waiver is a near impossible hurdle to clear in arguing that an insurer has waived its right to appraisal. In Texas, a policyholder's remedy for an appraisal process that goes beyond the appraisal clause or does not go far enough is to contest its enforcement after the fact. If the insurer attempts to enforce an appraisal award based on conditions that are not envisioned by the appraisal clause, then a policyholder should articulate the reason that the perceived conditions are not actually clarifications of the appraisal process itself.
http://www.jonathanallenlaw.com/.
Jonathan C. Allen
Over the years, I have represented a variety of businesses, ranging from the commercial contractor to the large petrochemical plant, in the resolution of insurance coverage and commercial disputes, as well as construction defect claims and general liability suits brought by contractors and employees. At my website, I write a business litigation blog, complete with movie and television references, and I also write an insurance coverage blog. I invite you to read my blogs and comment on any posts that interest you.
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