Advice from a Louisiana Property Insurance Attorney
Many people are familiar with the term “appraisal.” Most of us likely believe it means to set a value. In the world of property insurance, the term “appraisal” has a very different meaning. Appraisal is a dispute resolution procedure that is contained in many homeowner’s policies issued in Louisiana. The purpose of appraisal is to provide a way to determine the value of your claim. It is a legal and contractual process that has several potential pitfalls that you need to be award of.
How Does Appraisal Work?
La. R.S. 22:691 provides the standard language for appraisal provisions that should be included in a homeowner’s policy. It reads as follows:
In case the insured and this Company shall fail to agree as to the actual cash value or the amount of loss, then, on the written demand of either, each shall select a competent and disinterested appraiser and notify the other of the appraiser selected within twenty days of such demand. The appraisers shall first select a competent and disinterested umpire; and failing for fifteen days to agree upon such umpire, then on request of the insured or this Company such umpire shall be selected by a judge of a court of record in the state in which the property covered is located. The appraisers shall then appraise the loss, stating separately actual cash value and loss to each item; and failing to agree, shall submit their differences, only, to the umpire. An award in writing, so itemized, of any two when filed with this Company shall determine the amount of actual cash value and loss. Each appraiser shall be paid by the party selecting him and the expenses of appraisal and umpire shall be paid by the parties equally.
La. R.S. 22:691
To start out, appraisal needs to be demanded by one of the parties in writing.
There needs to be a dispute about what is owed under the policy. This typically means there needs to be disagreement about the cost of repair or replacement of your damaged property. Appraisal is typically used regarding dwellings and structures. However, it can also be used for damaged personal property, automobiles, and more.
To go to appraisal, both the insurance company and the insured need to hire an appraiser. The appraiser will estimate the loss, consult with the other side’s appraiser, and attempt to work out an agreement about the value of the claim.
When the appraisers cannot come to an agreement, a person called an umpire must be appointed to provide a third opinion. If an agreement emerges between one of the appraisers and the umpire, an appraisal award is issued setting the value of the loss.
The appraiser a person hires needs to be “disinterested.” This issue has been explored by courts in Louisiana. The fact that an appraiser mostly works with insurance companies or people making claims will not get an appraiser disqualified. However, courts have ruled that a person’s public adjuster cannot serve as an appraiser because they have a financial interest in the outcome of the claim.
What is the Benefit of Property Appraisal in Louisiana?
The biggest benefit to appraisal is that it can sometimes be a little quicker than taking a case to court. However, it is not always less costly. The cost of hiring an appraiser and paying an umpire fee normally begins at a few thousand dollars and increases from there.
What Are the Drawbacks of Appraisal in Louisiana?
There are several big drawbacks to appraisal.
- Disappointing Awards
One of the bigger drawbacks is it is difficult to have it set aside. The purpose of appraisal is to provide a quicker process to resolve disputes in value. With this comes a good bit of risk. Appraisers and umpires are individuals with their own opinions and points of view. While we often have a good idea about a claim’s value when going to appraisal, occasionally, an appraisal panel will come back with a disappointing outcome. However, even disappointing appraisal awards tend to generate new money for the client that the insurance company was not willing to pay prior to our involvement.
2. You Lose Some Control
When you go to appraisal, you don’t control the amount of the award. This differs from filing a lawsuit or simply negotiating a settlement because in those situations you have ultimate control over what you are willing to accept.
When going the litigation route, we typically make claims for bad faith insurance adjuster and prompt payment violations under La. R.S. 22:1973 and 22:1892. This typically gives us some leverage in negotiating a better settlement because you have filed a claim seeking penalties and attorney’s fees due to the insurance company’s failure to pay what was owed in the first place.
3. It May Weaken Bad Faith Claims
If you go to appraisal, you are not prevented from seeking additional damages for insurance bad faith once the appraisal is completed. However, in many cases, bad faith may not be a realistic option if the insurance company promptly pays the appraisal award, and the insurance company can rationalize its initial payment and adjustment on the claim.
For example, if you go to appraisal and recovery 8 times what the insurance company originally paid, you probably have a good bad faith claim for penalties and attorney’s fees. However, if your appraisal award is only 25% more than your original payment, it will be more difficult to show that the insurance company’s original payment was in bad faith.
We stress that each case is unique. We take the time to determine the best strategy for maximizing your recovery. This includes seeking additional damages for bad faith following the appraisal process.
Potential Problems With Appraisal in Louisiana
The selling point for appraisal is that it is sometimes quicker than going to court. This is not always reality. We have seen more and more insurance companies acting improper in the appraisal process, which often leads to litigation and significant delays.
Here are some examples of common tactics employed by insurance companies to undermine the purpose of appraisal.
- Hiring appraisers who are not qualified or who are not disinterested.
- Insisting that a person with close ties to the insurance industry is used as the umpire.
- Refusing to estimate the damage in good faith.
- Raising coverage issues during the appraisal process.
- Engaging in private conversations with the umpire to influence their decisions.
- Changing the date of loss an appraisal award.
- Refusing to communicate with the opposing
When there is evidence that an appraiser or umpire has acted improperly, the appraisal award may be vacated. Evidence that an insurance company has engaged in improper behavior in the conduct of an appraiser can provide a basis to seek damages for breach of contract and for insurance bad faith.
Having a qualified attorney guide you through he appraisal process can help avoid many of these pitfalls. For example, we require insurance companies to agree to all coverage issues prior to going to appraisal. When an insurance company refuses to agree to a qualified umpire, we will petition the court to appoint an umpire who understand the actual cost to repair your property. Having a qualified attorney also provides a legitimate threat of litigation in the event the insurance company does not act in good faith.
When Is Appraisal Appropriate?
There are two recurring issues that we see concerning when appraisal is appropriate. The first issue is if the dispute is something that should be resolved through appraisal. In Louisiana, an appraisal panel cannot make coverage determinations. For example, if your foundation collapsed during a severe storm, the insurance company need to decide if it will cover that damage before asking the appraisal panel to determine the cost of repair. While this may seem obvious, what we have seen in many claims involving severe damage is that an insurance company will hope that the appraisal panel will overlook portions of a claim leading to a severe underpayment.
When we handle a claim through appraisal, we first make sure there is agreement on the scope of coverage. The insurance company needs to specify if certain items claimed by the insured will not be covered. This allows us to limit the items that the appraisal panel will consider in appraisal. Going back to our prior example, if the insurance company refused to cover the collapsed foundation but agreed to cover roof damage, we would proceed to appraisal to determine the cost to repair the roof.
A second issue that comes up in appraisal is when an insurance company has waited until the case is in court to demand to go to appraisal. Courts typically will allow a case to go to appraisal after a lawsuit has been filed. However, an insurance company can waive its right to go to appraisal if it doesn’t demand it promptly.
How Can a Louisiana Attorney Help You Get the Best Appraisal Award?
The appraisal process is a legal and contractual process that has many potential pitfalls. An attorney can guide you through the appraisal process to avoid these pitfalls. One of the things we do when going to appraisal is first retain necessary experts to ensure that you have presented the best claim possible. From there, if the insurance company intends to proceed to appraisal, we ensure there is agreement as to coverage issues and that the insurance company does not misbehave or act in a manner to undermine the appraisal process. Often, we petition the court to appoint an umpire or to even question the competency of the insurance company’s appraiser.
We can also ensure that the award complies with the agreement made prior to appraisal and that the claim is then promptly paid.
For many clients, we will seek additional compensation at the conclusion of the appraisal process due to evidence of bad faith by the insurance company.
It is important for any policyholder to understand that there are many trouble spots in the appraisal process that having a team of qualified professionals can help you avoid.
Conclusion
Property insurance appraisals are common in Louisiana. It is important if your claim is going to appraisal to ensure the insurance company is acting in accordance with both the law and the policy. Having an attorney guide you through this important process can be helpful. If you have a question regarding property insurance appraisals for claims made in the State of Louisiana, please contact us at (866) 970-0977. We have guided many clients through successful appraisal results.