Detailed Answer
An appraisal clause is a contractual mechanism in most property and casualty insurance policies that lets a policyholder and insurer resolve disagreements over the value of a loss outside of court. In Alabama, property insurance policies must include an appraisal provision that binds both parties to an independent valuation process.
Diminished value represents the difference between your vehicle’s market value immediately before and after covered repairs. If your insurer’s diminished value settlement seems too low, invoking the appraisal clause can produce an objective award based on market data, repair records, and expert opinions.
Statutory Basis in Alabama: Alabama law mandates the inclusion of an appraisal clause in standard fire and allied lines policies. See Ala. Code § 27-12-2 (2023).
How to Invoke the Appraisal Clause:
- Review Your Policy: Locate the “Appraisal” or “Disagreement on Value” section. Note any deadlines (often 60 days after you receive the insurer’s final offer).
- Serve a Written Demand: Send a written notice to your insurer stating that you invoke the appraisal clause to determine the diminished value. Send via certified mail or another verifiable method.
- Appraiser Selection: Appoint an independent, licensed appraiser experienced in diminished value claims. Pay any deposit required by your policy and promptly notify the insurer of your appraiser’s name and contact information.
- Insurer Appraiser: The insurer has the same number of days (per policy) to designate its appraiser and share contact details with you.
- Umpire Appointment: If the two appraisers cannot agree on diminished value, they must select a neutral umpire. If they fail to agree on an umpire, either party can ask a judge to appoint one.
- Valuation and Award: The appraisers and umpire gather market data (e.g., comparable sales, trade guides) and agree on the diminished value. A majority decision binds both you and the insurer.
- Binding Effect: After the award, the insurer must pay the agreed amount promptly. If the insurer refuses, you may sue for breach of contract and, where justified, bad faith.
Documentation: Gather repair estimates, invoices, photographic evidence of damage, pre-accident value data (Kelley Blue Book or local listings), and expert statements.
Time and Cost Considerations: You typically pay your appraiser’s fee and half the umpire’s fee. The insurer covers its appraiser’s fee. Ensure you meet all policy deadlines to avoid forfeiture of your rights.
Limitations of Appraisal: The appraisal clause only determines the value of a covered loss; it does not resolve coverage disputes or liability issues. If the insurer denies coverage for diminished value, appraisal will not override that denial.
Disclaimer: This article is for educational purposes only and does not constitute legal advice. Consult a licensed attorney in Alabama for advice on your specific situation.
Helpful Hints
- Review your policy’s appraisal clause promptly to note any strict time limits.
- Document your vehicle’s pre-loss value with market comparables and trade-in guides.
- Keep detailed records of repair work, bills, and photographs.
- Choose a certified appraiser who specializes in diminished value assessments.
- Send all communications in writing and keep copies for your records.
- Understand appraisal costs and how they are shared under your policy.
- If coverage is disputed, consider consulting an attorney before invoking appraisal.