How Long Is Too Long To Demand Appraisal?

Appraisal clauses, a common component of property insurance policies, set forth an alternative dispute resolution process by which the parties to an insurance contract can resolve disputes concerning the amount of a covered loss. While most property insurance policies’ appraisal clauses do not expressly set forth a time period to demand appraisal, waiver of the appraisal clause can occur if not timely invoked. Courts tasked with determining whether an appraisal clause was waived focus on whether the demand for appraisal was made within a “reasonable time.”

In a recent case,[1] the Supreme Court of Rhode Island held that an almost two-year delay in demanding appraisal was unreasonable. In that case, the insureds’ home suffered water damage that stemmed from an accumulation of snow on their roof. After the insureds timely made a claim, their homeowners insurer performed an inspection of their home and issued a payment of approximately $15,000.

More than twenty months after receiving the check from their insurer, the insureds requested an appraisal pursuant to the policy’s terms and conditions. The insurer subsequently rejected the appraisal demand, contending it was untimely. The insureds then filed suit against the insurer, alleging the insurer had failed to abide by the terms of the insurance policy concerning appraisal.

Upon appeal following the grant of summary judgment to the insurer, the Supreme Court of Rhode Island held that the insureds’ delay in requesting the appraisal was unreasonable. In holding so, the Court stated that the insureds’ conduct in waiting almost two years before seeking to invoke the appraisal clause of their policy cannot be described as proceeding reasonably in good faith under the policy. Accordingly, the insurer was relieved of its contractual duty to participate in the appraisal process under the policy.

This case illustrates the importance of promptly demanding appraisal when insureds dispute the amount of a covered loss.

[1] Machado v. Narragansett Bay Ins. Co., 2021 WL 2460417 (R.I. June 17, 2021).