Over the years, the appraisal process seems to have become more complicated. Appraisal was meant to be an informal way for an insurance company and its insured to resolve claims. In recent years, appraisal has become a big ordeal in California. In order to properly prepare for appraisal, it’s now advisable to have counsel and an appraiser who is an expert. Selecting an umpire experienced in calculating and handling the damages is also important to the appraisal’s outcome. Essentially, appraisal is now like a mini-trial. When an appraisal award is granted, the insured may seek to have the appraisal award vacated if the insured disagrees with the award damages calculations. Appraisal has limitations. It’s good to keep in mind that appraisal is not the only way to resolve a claim without litigation. If an insurance company is amenable, there are other alternatives, one of which is mediation.
Last year I noted that the case The Doan v. State Farm Gen. Ins. Co., 195 Cal. App. 4th 1082, 1094 (2011), addressed appraisal provisions found in first-party property insurance policies. The Appellate Court reaffirmed that while appraisal provisions are mandatory, they do not apply to, or limit, an insured’s right to seek other relief on issues other than the amount of a loss. This decision clearly allows insureds to litigate matters that appraisal could not address.
In 2011, the California Appellate Court also issued the decision of Kirkwood v. California State Auto. Ass’n, 193 Cal. App. 4th 49, 58 (2011). In this decision, the Court wrote that appraisers are "to determine the amount of the damage resulting to various items submitted to their consideration." The decision made it clear that it "is certainly not their [the appraiser’s] function to resolve questions of coverage and interpret provisions of the policy." Kirkwood also made it clear that "appraisers have no power to interpret the insurance contract or the governing statutes."
California Courts recognize that appraisal can be beneficial in limited circumstances, such as when scope of damage is not at issue, and that litigation is still important to determine a breach of a law or contract. Appraisal is no longer truly informal and it can be expensive and time consuming. Mediation may be the preferred and most efficient method of resolving a claim if the parties can work together.
