After a large loss, insurance companies will often send someone out to create an estimate. Sometime, these estimates are sincere and relatively accurate. However, we often receive calls from insured who have received estimates far below the actual amount of their loss and what any contractor is willing to take the job for. A few companies, in particular, regularly generate radically low estimates to justify underpaying claims. What can you do if you disagree with your insurance company's valuation of your loss (and thus the amount it will pay)?
The answer to that question can be found in a statutorily required policy provision that governs "appraisal." Usually, when people hear the word "appraisal," they think of someone estimating the value of a house in connection with the purchase of a new home. In the insurance context, "appraisal" is a term if art that refers to the process for determining the amount of loss when the insurer and the policyholder disagree.
Chapter 500 of Michigan's Compiled Laws (MCL) pertains to insurance, and section 2833 sets forth mandatory provisions for Michigan fire insurance policies, including homeowners policies. Such policies are not, as the name might imply, typically restricted to coverage for fire losses. Rather, at a minimum they must include coverage for fire and a few other specifically listed events. However, they almost always cover much more, including losses caused by hail, failed water pipes and wind.
If you have a homeowners policy, section 2833 almost certainly applies to it. This statute requires that such policies contain language stating that you have a right to demand appraisal if you disagree with your insurer regarding its assessment of the amount or actual cash value of a loss. Specially, MCL 500.2833 (m) states that
if the insured and insurer fail to agree on the actual cash value or amount of the loss, either party may make a written demand that the amount of the loss or the actual cash value be set by appraisal. If either makes a written demand for appraisal, each party shall select a competent, independent appraiser and notify the other of the appraiser's identity within 20 days after receipt of the written demand. The 2 appraisers shall then select a competent, impartial umpire. If the 2 appraisers are unable to agree upon an umpire within 15 days, the insured or insurer may ask a judge of the circuit court for the county in which the loss occurred or in which the property is located to select an umpire. The appraisers shall then set the amount of the loss and actual cash value as to each item. If the appraisers submit a written report of an agreement to the insurer, the amount agreed upon shall be the amount of the loss. If the appraisers fail to agree within a reasonable time, they shall submit their differences to the umpire. Written agreement signed by any 2 of these 3 shall set the amount of the loss. Each appraiser shall be paid by the party selecting that appraiser. Other expenses of the appraisal and the compensation of the umpire shall be paid equally by the insured and the insurer.
It is best if appraisers have expertise in assessing damage and are familiar with the appraisal process. Public adjusters and contractors are common choices. It is important to make your appraisal demand in writing and send it by a method where you can prove that your insurance company has received it, such as email or mail with tracking, while retaining a copy for your records. The identity of and contact information for the insured's chosen appraiser should be included in the demand letter.
If your insurance company refuses your demand to proceed to appraisal, please call for a free consultation.