SAN ANTONIO – A little-known part of many home insurance policies can be considered a feature or a weapon, depending on who you ask.
Shannon Loyd, who represents homeowners, says insurance companies are using the process called appraisal to force a homeowner’s hand and avoid trial.
Here’s how it works: If someone isn’t happy with an insurer’s offer and negotiations don’t lead to a resolution, either side can typically call for an appraisal. The homeowner then hires someone to estimate damages, and the insurer hires an appraiser as well. If their amounts don’t match, the two appraisers select an umpire to decide what’s fair. Both sides pay their half.
Part of the problem, Loyd says, is timing. She’s noticing more insurance companies are invoking appraisal after a lawsuit is filed. Her clients may never be able to make their case before a judge.
“No matter if it’s at the beginning of the claim or a year and a half later on the eve of a trial, if they (insurance companies) pay that appraisal award, they do not have to pay any attorney’s fees, they do not have to pay any 18 percent penalty, they don’t owe any interest,” Loyd said. “They owe nothing more than the policy benefits they should have paid back when the claim first occurred.”
David Kinder, an attorney who represents insurance companies, says he doesn’t know of many cases in which an insurer called for appraisal so close to trial. He points out homeowners can use the appraisal process to their advantage.
“I think it’s a great tool that homeowners can use to try to resolve their differences,” Kinder said, “and you know, we have to keep in mind that once an attorney is hired by the homeowner, that attorney’s going to take at least 33 to 40 percent of any recovery, so it really is a smart thing to do to resolve it before the attorneys get involved.”
“In my experience, oftentimes the lawyers for the homeowners use the appraisal process more than the insurance companies,” he added.
Loyd argues that a homeowner or small business owner who can’t afford to pay an appraiser or half of an umpire’s fee will have no choice but to take the insurance company’s offer.
“The carriers are using it as a get-out-of-jail free card,” she said.
Loyd would like to see a change to state law or a judicial ruling that makes the appraisal process mutually agreeable so that neither side is caught off guard.
Kinder says appraisal is less expensive than filing a lawsuit.
“It’s designed to try to keep matters out of the courthouse and to allow homeowners and insurance companies to resolve their differences,” he said.
Either way, knowing you can choose to call for an appraisal to avoid a lawsuit – or appraisal can be chosen for you to avoid a trial – will make you better prepared to handle a claim.
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