What is appraisal in homeowners insurance in California?

Home is where the heart is

-Proverb

Homeowners policies may require “appraisal.” Here’s what it is and what it means.

An appraisal is an informal hearing and is an example of ADR, or alternative dispute resolution. The insured (you) is generally responsible for showing the actual cash value (“ACV”) of the damaged property. If the insurer (your insurance company) disputes the ACV, then an appraisal may be used to resolve that dispute. Appraisals are generally subject to arbitration rules. So although there’s informality, there are still rules to follow.

California Insurance Code § 2071 provides that, if there’s a dispute, then either the insured or the insurer can request appraisal to determine the ACV. Once requested, the insured and the insurer select their own appraisers, whose only responsibility is to determine the ACV of items submitted to them. Remember, they cannot determine questions of coverage.

Both appraisers then select an umpire. Next, there’s a hearing where the insurer and insured put forward their experts or consultants before the two appraisers and the umpire. Once the hearing is concluded, two of the three decision-makers (the appraisers and umpire) agree on the ACV. Then the insurer must pay the insured that ACV.

If your insurance company refuses to pay you ACV and requests appraisal, you’re forced to incur expenses and likely hire a lawyer to go through the appraisal process and obtain what arguably you should have been paid in the first place.

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