Property Insurance Appraisal in Florida--Has the worm turned?

Property Insurance Appraisal in Florida--Has the worm turned?

I received notice that Citizens, the State run insurance company has proposed some changes to their property policy as it relates to the resolution dispute forum called appraisal. The appraisal process has for years been offered universally by most insurance companies as a cost effective way to resolve disputes with policyholders involving damages to their property from a covered loss.

Following the destruction of Hurricane Andrew in 1992, the appraisal provision in property policies was extensively litigated by attorneys who in my opinion did not like the process, as it effectively cut them out of the insured’s property dispute process and thus the attorney fees. After years of litigation, the appraisal process seemingly drifted back to where it was before Andrew. That is to say that policyholders or the insurance company could demand appraisal and a panel of two appraisers and an umpire, if needed, would make a decision on the scope of the loss and the amount of money to fix the scope.

Things were going well until the 2004/2005 hurricanes.  After the destruction of five hurricanes, the cadre of “representatives” involved in the long trail of property claims (then 5 years) discovered this forum and as they say, all hell broke loose in the form of the run-away appraisal and big appraisal award surprises. Not surprising, the insurance industry soon figured out they did not like “appraisal” and it was removed from many property policies sold in Florida. Some like Citizens Insurance put in language that basically said they would only go to appraisal if they agreed.  So gone were the days when a policyholder could make a unilateral demand for the appraisal.

What happened next was an explosion of legal costs for insurance companies as now all disputes not settled by negotiations or mediation had to be litigated. As a result of some folks pushing for a full disclosure of legal fees being paid to attorneys by the insurance firms, some companies are now coming back to the table and realize that appraisal is a lot cheaper than litigation expenses.

Citizen’s recent notice of change back to a unilateral demand format is welcome news for policyholders. Citizens still has tight control of the process, (which I do not think is a bad thing) so it will likely keep run-away appraisals under control and help the appraisal panel to focus on the real disputed items. 

The following link shows changes in the Citizens Appraisal Clause and shows in red where in the policy you can look to read the appraisal language.

Let’s hope other Florida insurance carriers will follow Citizens lead and add back this very important consumer friendly provision to their policies. Let me know what you think. 

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