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Disclaimer: This article provides general information about New Mexico law and does not constitute legal advice. Always consult a licensed attorney or review your insurance policy for advice tailored to your situation.

Understanding the Appraisal Clause

An appraisal clause is a provision in many property and auto insurance policies. It allows you and your insurer to resolve a dispute over the amount of loss—such as the diminished value of your vehicle—without full litigation. Both you and the insurer hire independent appraisers. If those appraisers differ on value, they select a neutral umpire. The appraisal award, once issued, generally binds both parties solely on the amount of loss.

Step-by-Step Process to Invoke the Appraisal Clause

1. Locate the Clause: Review your declarations page and policy sections. The appraisal clause usually appears under “Loss Settlement” or “Conditions.”
2. Provide Timely Written Notice: Send a written demand to your insurer invoking appraisal. Include:
   – A statement that you dispute the insurer’s diminished value offer.
   – A request to initiate appraisal under the policy.
   – Your contact information and vehicle details (make, model, VIN).
3. Method of Delivery: Deliver your demand via certified mail, email with read receipt, or as specified in your policy. Keep proof of delivery.
4. Hire Your Appraiser: Engage a qualified appraiser experienced in collision diminished value. Charge agreements vary—confirm whether you pay your appraiser’s fee upfront or share costs with the insurer.
5. Insurer’s Appraiser: Upon receiving your demand, the insurer must appoint its appraiser. If it doesn’t within the policy timeframe (often 20–30 days), note this in writing and consider seeking a court-appointed umpire.
6. Selecting an Umpire: If appraisers cannot agree on a single value, they select an umpire. If they cannot agree on an umpire within a reasonable period, either party may ask a New Mexico district court to appoint one.
7. Appraisal Hearing and Award: Appraisers and the umpire review vehicle condition, repair records, sales data, and expert reports. They issue a written award stating the diminished value. Submit the award to your insurer.
8. Binding Effect: Under most policy terms, the award fixes only the amount of loss—not coverage disputes. The insurer must pay the award amount minus your deductible.

Statutory Framework in New Mexico

While appraisal clauses arise from contract law, New Mexico regulates insurer conduct under the Unfair Insurance Practices Act. See NMSA 1978, § 59A-16-20 (Unfair Claims Settlement Practices). This statute prohibits insurers from:

• Failing to promptly affirm or deny coverage.
• Unreasonably delaying claim payments.
• Refusing appraisal demands without a reasonable basis.

A court may penalize an insurer for bad-faith settlement tactics or unfair claim practices, including ignoring a valid appraisal demand.

Enforcement and Next Steps

Once you receive the appraisal award, send it with a payment demand. If the insurer still withholds payment, you may:

• File a complaint with the New Mexico Office of Superintendent of Insurance (OSI).
• Pursue a civil action in district court to enforce the appraisal award and seek penalties or attorneys’ fees under NMSA 1978, § 39-2-1 (the Insurance Bad Faith Act).

Helpful Hints

• Review policy deadlines carefully; missing timelines may forfeit appraisal rights.
• Hire a certified, independent appraiser familiar with diminished value methodology.
• Keep detailed repair estimates, photos, and mileage records to support your claim.
• Use certified mail or tracked email to document all communications.
• Consider consulting an attorney if the insurer refuses appraisal or payment after the award.