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Understanding the Insurance Appraisal Process

Has your insurance company forced you into the Appraisal Process?

Many homeowners and business owners find themselves disagreeing with their insurance company’s analysis of their insurance claim. However, most are unaware that they can dispute the insurance company’s findings via the Insurance Appraisal Process! Even though the policyholder (you) submits a contractor’s estimate, receipts for repairs or materials, or even photos showing damages that the insurance company did not include for repairs… they still won’t budge. Most policyholders are unaware of how to dispute and resolve their claim with the insurance company. Policyholders have a choice and a voice within their policy for this very purpose. It’s called The Appraisal Clause – also known as The Appraisal Provision. Now, don’t let this scare you. It may seem like a fancy clause that would take a law degree to understand. However, a simple way to understand it is that it’s the insurance industry’s version of arbitration. Although similar, the Appraisal Process is NOT an arbitration or mediation and the umpire is not an arbitrator, mediator, or judge. Insurance Appraisal, Mediation, and Arbitration are separate things. In short; Arbitration requires attorneys and a legal process, where Insurance Appraisal does not require attorney’s or a legal process.

Most Policies Have the Insurance Appraisal Clause

If you feel you’re at a dead end with your insurance company and want to resolve your claim, you’ll need to check your policy for the Appraisal Clause. Most policies will have the provision listed under the “What to do after a loss,” section or the “Conditions” section of the policy. Below, you will find a sample of a typical Insurance Appraisal Clause included in most policies. Keep in mind that policies can be different in each state. Therefore, you should read your own policy to see if this clause exists. It will say something similar to the following ;

APPRAISAL – If you and we fail to agree on the amount of loss, either one can demand that the amount of the loss be set by appraisal.  If either makes a written demand for appraisal, each shall select a competent, independent appraiser.  Each shall notify the other of the appraiser’s identity within 20 days of receipt of the written demand.  The two appraisers shall then select a competent, impartial umpire.  If the two appraisers are unable to agree upon an umpire within 15 days, you or we can ask a judge of a court of record in the state where the residence premises is located to select an umpire.  The appraisers shall then set 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 two of these three shall set the amount of the loss.

OK, But How Does the Insurance Appraisal Process Work?

The Appraisal Provision allows the policyholder (you) to hire an independent appraiser to determine the value of their damages. In turn, the insurance company will also hire their own independent appraiser. The two appraisers will then get together and select an umpire. The umpire is basically the arbitrator, or what you might call the judge. If a disagreement between the two appraisers arises, they can present their differences to the umpire who will make a ruling.

OK; so far so good, the basics of the insurance appraisal process are beginning to come together. We have an independent appraiser for the policyholder. We have an independent appraiser for the insurance company. Finally, there is an Umpire. These three individuals are known as The Appraisal Panel. The object of the Appraisal Panel is to set or determine The Amount of Loss. The Amount of Loss is the total dollar amount needed to return the damaged property back to its original condition, either by repair or replacement.

Once the Appraisal Panel is set, the policyholder’s chosen appraiser and the insurance company’s chosen appraiser will review the documents, estimates, and differences between them. The two independent appraisers will try to discuss and resolve the differences in damage and in cost. For example; the insurance company may determine that brick on a home does not need to be replaced. Whereas, the contractor or appraiser for the policyholder says that it does have to be replaced. The two appraisers will discuss their reasons for their position and try to come to an agreement, first if it should be repaired or replaced, and secondly the cost to return the brick back to it’s original condition prior to the loss.

One benefit of the Insurance Appraisal Process is that the two independent appraisers have not been subject to the bickering and anger between the policyholder and the insurance company. Basically, it’s the hope that cooler heads will prevail. All the appraisers really have is the amount of the damage and the difference between the two estimate numbers. They do not have the previous baggage or anger that led up to the Appraisal. The process was designed so that these two individuals, who have no interest in the outcome, could discuss a settlement based on the facts presented to them.

Sometimes issues arise where the two independent appraisers can’t agree on certain items. In this event, the two appraisers will submit their differences to the chosen umpire. The three will discuss the issues and try to reach an agreed settlement of the differences. As stated above; the settlement or final number is called The Amount of Loss. The final amount is known as the Appraisal Award. The Award is signed by the individuals who agree on The Amount of Loss. However, only TWO of the three individuals need to agree. (An agreement between the two independent appraisers, or the umpire and either appraiser) Once any TWO of the three individuals on the Appraisal Panel sign the award… the dispute is over! The amount on the Award is binding and is paid by the insurance company, to the policyholder.

Can I Use An Insurance Attorney To Dispute My Claim?

The Appraisal Clause was initiated to lower the number of lawsuits filed against insurance companies. The courts found that many lawsuits were entering the legal system where the cost to repair or replace damaged property was being disputed. In many cases the suits were being resolved when professional engineers and contractors could address the issues. The Appraisal Process was created to get such individuals together and keep these disputes out of the courtroom. Assuming you acquired an estimate of repair to your property for $100,000, from a contractor or insurance claims expert. Your insurance company has created an estimate for $30,000. This would be a clear dispute between the amounts of damage. This type of dispute is exactly what the Appraisal Clause was developed to resolve.

The clause allows parties on both sides of the insurance policy to dispute their differences using this less costly provision. Let’s face it; the courts are filled with lawsuits. The Insurance Appraisal Process allows for the dispute to be settled out of court. Using Insurance Attorneys and lawsuits can have insurance claims tied up in court for years. The Appraisal Provision was designed to keep these disputes out of court for a less costly and timelier resolution.

Insurance Claim Attorneys will usually represent policyholders for bad faith practices. Bad Faith is a whole other issue and sometimes happens after the Appraisal Process has been completed. Bad Faith claims are for much larger suites against insurance companies when it is alleged that they did not act with good faith of the policy they sold to the policyholder. In summary; disputes between the amount of damages and repairs will follow the Appraisal Process before entering into the legal system. Many Insurance Attorneys will also advise the policyholder to engage in the Appraisal Process before any lawsuits will begin.

How Do I know if the Insurance Appraisal Process is a Good Option for My Claim?

If the Appraisal Clause is in your policy then it is always an option. However, it’s wise to point out that Appraisal is usually an option when there is a substantial difference in the amount between the two estimate totals. For example; let’s say a fire completely destroys a house and the homeowner’s personal property within it (Known as the Contents). The differences between what the insurance company wants to pay and what you wish to receive is $5,000. In this situation, the Appraisal Process is not the best idea. After paying the fees involved for the appraisal, you may not end up with much of the $5,000 being disputed.

Now, if we take the same fire that destroys the property and the dispute between the policyholder and the insurance company is $40,000, appraisal should be considered. The policyholder now has a chance to recover substantially more money than originally offered.

Also, the Appraisal Clause is only applicable if a dispute arises from a covered loss. If the insurance company denied the claim as something not covered then this is not a dispute on the amount to repair, but rather a dispute on coverage. For example; homeowners and business policies due not cover floods. Flood policies are purchased separately. So, if there is no coverage for the flood damages then the Appraisal Process is not an option.

Simply put, the Insurance Appraisal Process is to determine the “amount of loss,” to property only. The Appraisal Panel is not to determine coverage, policy provisions, deductibles, how much was previously paid on the claim, etc. Let’s say there was an appraisal for a grand piano that fell off a delivery truck on the highway. The Appraisal Panel’s job is not to determine who’s at fault, the policy coverage limit, if the truck had a registration, or anything other than “How Much is the Piano Worth.”

As with our example earlier, if the insurance company offers a settlement of $10,000 to repair a roof and the policyholder has contractor bids for $15,000, then the Appraisal Process may not be the best option. The Appraisal Process may cost more than the $5,000 that’s being disputed. Unfortunately, the differences in repair/replacement costs are usually much greater. When an insurance company generates an estimate for a claim of $75,000 and the policyholder has acquired professional bids from several contractors of $200,000 or more, its time to invoke the appraisal clause.

Beginning the Insurance Appraisal Process

Either party associated with the policy can invoke the Appraisal Process. However, such a request must be made in writing. Each policy will have a time limit of when this can take place. Even if a claim has been closed for many years, either party can still dispute the claim and reopen for review. It’s recommended that the request to invoke appraisal be sent via certified mail. Once the request to invoke the Appraisal Clause has been initiated, as explained earlier, each party, the insurance company and policyholder, appoints an Independent Appraiser. (If you wish to invoke the appraisal clause in your policy you need to submit a letter to your insurance company. Helping Hands Restorations, LLC can assist you with this process. Contact us today for assistance).

Choosing An Independent Appraiser

It’s important to select an Independent Appraiser that has experience with the damages being disputed in the claim. A person with expert knowledge of insurance claims handling and firsthand knowledge of the damaged property and its replacement cost. For example; a person with expert knowledge of insurance claims handling and with expert knowledge of the Appraisal Process, but with little experience on the costs to replace an antique grand piano may not be the best choice. In the case of a home or building fire; a good Appraiser is someone who can generate their own line-item detailed estimate to repair or replace the damaged property, can secure multiple bids from reputable contractors to back up their findings, knows building codes, and can articulate unforeseen costs of repairs. If a building has historic features with materials like solid Adler doors, large detailed moldings, and custom cabinets, a great amount of research with a salvager may be needed. The Appraiser should have experience with building procedures, materials and the cost of such terms to create an accurate “amount of loss,” to return the property to its pre-claim condition. See, the policy provides coverage to replace the damaged property with those of like kind and quality. An Independent Appraiser that is not familiar with that does not have experienced contractors, engineers, and other experts to consult with about mold, demolition, cost associated with contents, and in some cases, additional living expenses. You should choose your Independent Appraiser wisely. Look and interview someone with experience of the type of damage you have and with the type of property damaged, as well as a specialist when it comes to the Insurance Appraisal Process and also Insurance Claims Handling.

Many people confuse the words Independent Appraiser with that of a real estate appraiser. As you can see, a real estate appraiser is far from what is needed for an Insurance Appraisal. An Independent “Insurance,” Appraiser is an insurance claims expert on costs and processes to repair or replace damaged property. 

 The next question is, “Who will have such knowledge?” People requesting assistance in the past have asked if the following experts with the following backgrounds are good choices ;

Structural Engineers: This person may be a structural expert and could probably provide a good estimate to replace a building, but what about the contents (furniture, food, etc.) damage? Do they know anything about the insurance policy, the claims process, the software used by insurance companies, the Appraisal Process?

Construction Attorney: A Construction Attorney most likely has knowledge of construction contracts and issues that building contractors have. Do they know anything about the insurance policy, the claims process, the software used by insurance companies, the Appraisal Process, the contents damaged? (NOTE: If you retain an attorney as Appraiser, remember, there is NO attorney/client privilege because the attorney is being hired as an Appraiser, not as an attorney.)

Construction Superintendent or General Contractor: Again, excellent choice for generating a structural estimate, but is most likely not familiar with insurance claims… and even more importantly, the Insurance Appraisal Process.

Insurance Claim Attorney / Lawyer: Keep in mind that the process was designed to keep these types of disputes out of court. You can surely use an attorney as your appraiser; however, the fees can exhaust your reward. Attorney’s fees range between 30% and 40% of the amount collected. This will dig deep into the net amount you receive. An Insurance Attorney will also have expert knowledge of the policy. However, the Appraisal Provision clearly notes that no policy provisions will apply. Has the attorney represented their clients in many appraisals or mostly in court cases? How familiar are they with the Appraisal Process, building costs, construction practices, the contents damaged? Does the attorney know anything about the software used by insurance companies? (NOTE: If you retain an attorney as Appraiser, remember, there is NO attorney/client privilege because the attorney is being hired as an Appraiser, not as an attorney.)

Independent Insurance Appraiser: Doesn’t it make sense to hire an individual who is an expert of the process in which you are about to engage? You’ve heard the expression, “Would you go to your auto mechanic if you needed brain surgery?” It is highly recommended to use a qualified, professional, Insurance Appraiser. This professional will already know the Insurance Appraisal Process. They will also have qualified professionals (engineers, contractors, inspectors, etc.) at there disposal to back up their analysis.

Regardless of background, an Independent Appraiser will also require good communication skills and agree with the position they are defending. They should know about the insurance policy, the claims process, the software used by insurance companies, the Appraisal Process, contents damage, structural damages, building costs and processes, as well as materials and building codes. Makes sense, right?

Advantages to the Appraisal Process

There are several advantages to the Insurance Appraisal Process. The most obvious is costs. Insurance Attorney’s will usually charge 30% to 45% of the total award. On a $200,000 claim, the attorney’s fee would be in the range of Sixty to Ninety-thousand dollars ($60,000 to $90,000). That can hurt a policyholder trying to rebuild their life. Remember, the Insurance Appraisal Process was designed to keep these disputes out of the courtroom.

The advantage of invoking appraisal allows for a less formal or non-legal proceeding. An Independent Appraiser usually charges in the range of $125 to $200 per hour. Using the same example above with an award of $200,000; if the dispute took 25 to 50 hours, the cost would be in the range of Five Thousand to Ten Thousand dollars ($5,000 to $10,000). This can be a significant difference.

Another advantage is time. The courtroom can delay an insurance claim dispute for years, where the Appraisal Process usually only takes a few months. Sometimes it can last longer depending on the complexity of the claim. However, the courtroom will most certainly be longer. The result of less time and less cost becomes a less of a burden for both sides of the dispute.

Once an award is signed the insurance company has 30 to 60-days (depending on state) to settle the award.

Should I Demand Appraisal?

When the dispute is real and the damages are real, the policyholder usually see’s a greater return at the end of the appraisal. If the policyholder’s claim is supported by an Insurance Claims Expert, building or repair contractors, or an engineer – and the amount of money between the two estimates is large, the Appraisal Process is a no-brainer. However, if a contractor or Public Adjuster is trying to beef-up the damages for their own benefit, then it’s the policyholder that pays dearly for it. If you’re considering invoking appraisal on your claim you should consult an insurance claim expert to see if it’s worth your time and effort.

Being that the Appraisal Award is binding, the policyholder should be sure before they cost themselves unwanted anguish. If the outcome of your Appraisal Award is not what was to be expected, both parties must live with the result. As stated, the Appraisal Award is binding on “both parties.”

At the end of the day nothing is risk free. There are no promises or guarantees with the outcome of any Appraisal. However, if you have a dispute over $20,000 you’re more than likely to have a result you can live with. Do your homework and remember to choose an Independent Appraiser that is educated and experienced with the type of damages you have, what caused the damage, and the type of property damaged. Keep in mind that this is “YOUR” property and “YOUR” insurance policy. Your policy protects you with the Insurance Appraisal Process, so that…

The Playing Field Remains Level, and The Process Works Fairly For Both Parties… Not Just The Insurance Companies!

Why A Homeowner Needs A Contractor in Dayton, OH

So why does a homeowner need a contractor in Dayton, OH? Why our role is so important.

When a homeowner files a claim for roof damage, the insurance company assigns an “adjuster” who represents the insurance company to come inspect the property to decide whether or not it is damage that is covered by the policy, and also to discern what amount of money will be allowed to repair the damages. Like any field, there are people who are good at their jobs and people who are not so good. It’s like waitresses at a restaurant; sometimes you get a real doll, sometimes you don’t. The problem is, if an inexperienced, unknowledgeable, lazy, or cranky adjuster is assigned to your claim, do you really get a fair assessment of the damages? Probably not. Large hail and wind storms affect thousands and thousands of homes, and there are only so many adjusters available to process all of the claims. Even the greatest and fairest adjusters are dealing with up to or 12 claims per day, seven days a week for months on end, and when they are that busy, it’s hard for them to be as thorough as they should be.

This can result in overlooked damages, missing items on estimates, mis-measurements, and other mistakes that lead to an inaccurate or unfair assessment for the homeowner’s claim. Let’s say a homeowner files a claim, and their insurance adjuster comes out and says there’s no damage on their roof. How does the homeowner know that’s correct? Your average homeowner is not going to get on their roof to double check, and even if they did climb up on the roof, they have no idea what they’re looking for.

Let’s say the adjuster does approve the roof to be replaced, and writes a check to the homeowner to get their roof repaired. The homeowner is happy, but how do they know that everything that was supposed to be paid for was actually paid for? What if the check is not enough? So what’s the solution? If the adjuster is there in the best interest of the insurance company, and there’s no second professional opinion, the homeowner is really at a disadvantage, and is in a position where they can only hope they get a fair and accurate assessment from their insurance adjuster.

Who represents the homeowner? You would never go to court without a lawyer, right? If the adjuster is there on behalf of the insurance company, then a contractor should be there on behalf of the homeowner. Insurance companies are businesses, and like any business, they exist to make money.

Therefore, does an insurance company want to pay as much money as possible on claims, or as little money as possible on claims? Obviously they want to minimize their losses, and it is in their best interest financially to pay out less money in claims. On the other hand, contractors would love for estimates to be as large as possible, because it is in their best interest financially. So if the adjuster is present on behalf of the insurance company who would rather pay zero dollars, and the contractor is present on behalf of the homeowner who would rather have a ten-thousand-dollar claim, they can meet in the middle and negotiate a fair and accurate settlement that is fair for all parties involved. That way the insurance company upholds their contract with the homeowner, the homeowner gets enough money to get the repairs done, and the contractor gets paid what they are deserved for the work that they do.

If your Insurance Company is giving you the runaround, or you are getting ready to file a claim, call Helping Hands Restorations, LLC today to schedule your FREE inspection and let our experienced team go to work for you!

 

Xactimate: Are You Leaving Money On The Table?

The beauty of spring in Dayton, OH is often tempered by powerful storms, with heavy rains, strong winds and destructive hail. Through it all, your home protects you from the elements, but unfortunately your roof and building exteriors are susceptible to storm damage. Your roof might be the area of your home most vulnerable to damage in a storm, because so many things can impact it.

If you have experienced storm damage, it’s important to identify the damages quickly and determine if an Insurance Claim is necessary. If you decide to move forward with an Insurance Claim, make sure you hire a local Dayton, Ohio Insurance Restoration Contractor willing to help with the claims process, such as Helping Hands Restorations, LLC. The cost for repairs for your home is then determined through multiple negotiations between Helping Hands Restorations, LLC and the Insurance Company using a software called Xactimate.

What is Xactimate?

Xactimate is the software most commonly used by property adjusters to write their estimates, which are key components in the claims process. Xactimate is able to generate a cost-estimate to accurately depict what is required to return property to the pre-damage condition. It uses a sophisticated Sketch function to accurately determine all dimensions of your property’s interior and exterior. Xactimate then pulls pricing from local sources to accurately identify the amount and cost of each material required and the cost of labor to properly complete your project. More Insurance Companies require Xactimate be used by their property adjusters than any other software on the market.

Xactimate and Contractors

Contractors and builders generally do not use Xactimate – they base their cost estimates on sub-contractor bids and their general knowledge about the costs and time involved in a potential job. Many contractors/builders are unfamiliar with Xactimate. So if your contractor/builder is participating in settlement discussions with you and the Insurance Company’s Adjuster, he or she may be at a disadvantage. In addition, it is hard to compare an Xactimate estimate “apples to apples” with a more traditional contractor/builder estimate based on sub-bids.

This is where hiring Helping Hands Restorations, LLC can put you in an advantageous situation when dealing with your Insurance Adjuster. Unlike most Contractors in the Dayton, OH area, Helping Hands Restorations, LLC has over 15-years of experience using Xactimate to negotiate with Insurance Companies on our customer’s behalf. Because we use the same software, we are able to ensure that the fair market value in the Dayton, OH area reflects up-to-date market conditions. We are also able to ensure your Adjuster did not miss any necessary line items, and we compare our Xactimate estimate with the Insurance Adjuster’s Xactimate numbers to make sure they are sufficient to reimburse you for the actual cost of repairing and replacing the damage done to your home during the recent storm.

Beware of contractors who claim they can repair your roof for less than the insurance estimate.

When storms hit, your home and life can be turned upside down. You’re eager to get your home repaired, but be careful because some contractors aren’t really there to help. Xactimate pricing determines the fair market value for each line item. Fair market value insurance coverage is the price a willing buyer would have paid the seller in a free market. The pricing isn’t something the Contractor makes up; it is the same as what the insurance company utilizes. So, assuming the Adjuster agrees the damages are valid as an insurance claim and they agree with the components/process laid out in your Xactimate estimate for the repair process, the rate/charges are pretty much established. So, if you have a contractor offering to repair or replace your roof for less than the recoverable cash value for your claim, then most likely they are using inferior materials or performing shoddy work that is not up to code in order to make profit from the project. Leaving you with an improperly installed roof, a voided warranty because they didn’t install the necessary components and a headache down the road because their substandard work won’t hold up.

How do you know that you will have an accurate estimate for the repair or replacement of your roof or building exteriors?

Proper training is essential with Xactimate®, and if your adjuster and/or the contractor you have hired to create an Xactimate® estimate for your property does not know how to use the software properly, the result will probably be inaccurate. Generally, it will be on the low side.

Xactimate®’s pricing is often too low and too generic. The pricing is based on a median survey that does not always reflect up-to-date market conditions. Your insurance company is likely to turn an Xactimate® estimate into the settlement offer they make to you. That means that if the basis of that estimate was inadequate or incomplete, the resulting settlement offer will leave you short of what you need to return your property back to pre-damage condition.

The best approach to getting a fair claim settlement is for a property owner or their representative to get an independent estimate for repairing or replacing damaged or destroyed property from a reputable local construction professional who is trained in Xactimate. This will level the negotiation playing field for the property owner.

If your estimate cannot be compared apples to apples with an Xactimate® format, you will have a hard time convincing an insurance company to pay what you are owed. If you authorize Helping Hands Restorations, LLC to advocate on your behalf, we will make sure that you don’t leave money on the table. We will ensure that you receive the repairs or replacement that you are entitled to under your Insurance policy.

What is a Supplement?

Xactimate® estimates look impressive because they are well-organized, professional-looking and lengthy, but as stated above, they are often inaccurate. A computer cannot replace the knowledge of a local, experienced construction professional as to the materials, time and labor costs associated with a job. Not only that, but many times hidden damages are discovered once the repairs have begun. A competent contractor will supplement an Xactimate® estimate with items the Insurance Adjuster missed in the scope of work to be completed. The Insurance Company will not tell you the claims process, but Helping Hands Restorations, LLC will. Since we use Xactimate, it is easy for us to price any additional damages found during the repair process and justify any additional increase in cost to your Insurance Company. We can almost always work something out with the Insurance Adjuster. We will submit the supplement with documentation in the form of pictures, measurements and paperwork. The Insurance Company will review the supplement and upon approval, send a check for the additional monies needed to make the necessary repairs.

Don’t leave hundreds or even thousands of dollars on the table

Involving Helping Hands Restorations, LLC prevents you from getting stuck with a settlement that won’t cover your costs, or even worse, getting denied. With Helping Hands Restorations, LLC you pay no out-of-pocket expense other than your insurance deductible. We agree to accept what your Insurance Company will pay for the claim, including your deductible, and ensure the highest quality repair or replacement. You will also benefit from upgrades that we typically include in all of our projects, such as upgrading your roof from 3-tab shingles to architectural shingles, adding to your home’s curb appeal and property value, at no additional charge.

Hire Helping Hands Restorations, LLC today as your authorized contractor, and we will make sure that you are properly funded and that the best products in the industry are installed on your home. Call us today at (937) 215-8663 or schedule your Free Roof Inspection HERE.