Appraisal Provisions: A Small but Crucial Part of Property Insurance



By: Seth Schmeeckle

According to recent news reports, New Orleans’ rising population and growing workforce needs are expected to result in much higher demand for housing and commercial property throughout the next decade.

As the metropolitan area rises to meet this demand, it is important to understand the intricacies surrounding appraisal provisions, a small but crucial aspect of property insurance coverage.

When property damage occurs, it is not uncommon for a policyholder and the insurance company to disagree on the value of the loss. When this happens, either party can invoke an appraisal provision as a way to reach a resolution without entering into litigation.

Each side chooses an appraiser to determine the value of the property and the amount of the loss. The losses can include damage to a dwelling, structures like a fence or a storage shed, or the contents inside a business or home. If the appraisers cannot agree on a value, an umpire is appointed. When the umpire and either appraiser agree to a figure, the amount of the loss is set. 

Appraisal provisions should not be invoked until both the policyholder and the insurer agree on the scope of damage, though in practice that is not always the case. Also, appraisals are not just limited to damage to property. Appraisals can be used to determine the amount of a financial loss as well. 

Appraisals are not meant to decide questions over coverage or causation – the circumstances that lead to the damage. But some courts have acknowledged that, as a practical matter, appraisers must sometimes make a judgment call on causation to determine the value of the loss.

What happens if an appraisal involves a judgment call and one side isn’t happy with the outcome? The appraisal figure can be challenged to a point, though once set, it is presumed to be accurate. Even so, the appraisers’ determination of causation is not binding in Louisiana. Both the policyholder and insurer should still have the right to challenge causation determined in an appraisal.

The complexity of property-loss-causation-and-valuation issues like this leads many insurance companies to seek the advice of knowledgeable legal counsel. At Lugenbuhl, our Insurance Practice provides analysis of commercial and homeowners’ property insurance coverage to many of the nation’s largest insurers. Our attorneys have unique experience and a broad base of knowledge in this area.


Lugenbuhl shareholder Seth Schmeeckle has dedicated his entire legal career to counseling and representing insurance companies in disputes involving liability and property coverages. View his profile to learn more about his extensive experience and professional credentials or call 504-568-1990.

The content of this article is not intended to serve as an exhaustive review of the laws, statutes or insurance policy provisions applicable to appraisal issues and is not intended to provide legal advice. The opinions expressed through this article may not reflect the opinions of the firm, individual attorneys or clients.

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