Insurance companies using appraisal to underpay an insurance claim

Insurance companies have a fiduciary duty to their policyholders, which means that they are legally obligated to act in the best interests of their policyholders when processing claims. However, some insurance companies have been known to use the appraisal process as a tool to underpay claims.

The appraisal process is typically used when there is a disagreement between the policyholder and the insurance company regarding the value of a claim. An independent appraiser is appointed to evaluate the damage and determine the value of the claim. The problem is that insurance companies often select appraisers who are known to be sympathetic to their position and who will provide them with a lower estimate of the value of the claim.

For example, let’s say that a policyholder files a claim for damage to their home caused by a natural disaster. The policyholder believes that the damage is extensive and that the cost to repair the damage will be $100,000. The insurance company, however, believes that the damage is minimal and that the cost to repair the damage will be only $50,000. In this case, the insurance company may appoint an appraiser who is known to be sympathetic to their position and who will provide them with a lower estimate of the value of the claim. The appraiser may then estimate the cost to repair the damage at $60,000, which is less than what the policyholder believes is fair.

Moreover, insurance companies also use a tactic called “low-balling” which is an undervaluation of the claim done by the insurance adjuster. They often provide a low initial offer with the hopes that the policyholder will accept it. If the policyholders does not accept it, insurance company adjusters will sometimes demand appraisal. Insurance companies have a duty to make a good faith effort to settle the claim before invoking appraisal. To do otherwise, in some states, like Washington, is a violation of statutory law.

In conclusion, insurance companies have a legal obligation to act in the best interests of their policyholders when processing claims. However, some insurance companies have been known to use the appraisal process as a tool to underpay claims. Policyholders should be aware of these practices and take steps to protect their rights when filing a claim. They can do this by hiring a public adjuster, or by retaining an attorney who specializes in insurance law. By being aware of these tactics, policyholders can ensure that they receive the full value of their claim and that their rights are protected.

If you have a claim and the insurance company has invoked appraisal, give Property Claim Advocates a call. We are happy to discuss your claim with you and give you unbiased advice free from the solicitation.

Written by Bernie Williams and distributed by the Property Claim Adjustment Team at Claim Adjusters Network, LLC dba: Property Claim Advocates Mr. Williams is a Founding Partner of Claim Adjusters Network and a C.A.N University Master Trained Public Adjuster course instructor. Mr. Williams has been involved in the insurance industry for more than 20 years.