How to Invoke an Insurance Appraisal Clause to Challenge a Low Diminished Value Offer

Detailed Answer

When an insurer’s diminished value offer falls short of your vehicle’s true loss in value after repairs, you can trigger the appraisal clause in your New Jersey auto insurance policy. The appraisal process provides an independent determination of your loss. Follow these steps under New Jersey law:

1. Review Your Policy and Locate the Appraisal Clause

Most standard auto policies include an appraisal provision. It typically states: “If you and we disagree on the amount of loss, either may demand an appraisal.” This clause applies to the amount of loss or actual cash value—but not to coverage disputes or liability issues.

2. Send a Written Demand for Appraisal

Prepare a written demand letter. Include:

• Policy number, vehicle year/make/model and VIN.
• Date of loss and repair receipts.
• Statement that you invoke the appraisal clause under your policy.
• Your appointed appraiser’s name, license number and contact details.

Send this demand via certified mail with return receipt to your insurer’s claim department. Keep copies of everything.

3. Insurer Appoints Their Appraiser

Within a reasonable time—typically 20 to 30 days—your insurer must appoint its own appraiser. If they fail to respond or refuse appraisal, that refusal may breach the contract. You can then file a breach of contract suit in New Jersey Superior Court.

4. Appraisers Select an Umpire

Once both appraisers are chosen, they must select a neutral umpire. If they can’t agree on an umpire in 15 days, either party may ask a New Jersey court to appoint one. Under the New Jersey Arbitration Act (N.J.S.A. 2A:23B-1 et seq.), the umpire steps in.

5. Appraisal Award Is Binding

The appraisers and umpire will evaluate your diminished value using market data, comparable sales and depreciation studies. Two of the three must agree on a dollar amount. Their award on the loss amount is binding on both you and your insurer.

6. Insurer Pays the Award

After the award, send it to your insurer. New Jersey law under the Unfair Claims Settlement Practices Act (N.J.S.A. 17:29B-4.1) requires prompt payment of undisputed amounts. If the insurer delays or denies payment, you may file a complaint with the New Jersey Department of Banking and Insurance or pursue a breach of contract action.

Helpful Hints

• Hire a qualified appraiser experienced in diminished value claims.
• Gather pre-loss and post-repair market data—use guides like Kelley Blue Book or NADA.
• Document all communications and deadlines.
• Consider an attorney if the insurer contests appraisal procedure.
• File a DOBI complaint if the insurer ignores appraisal or payment obligations.

Disclaimer: This article is for informational purposes only and does not constitute legal advice. Consult a licensed attorney to discuss your specific situation.