Have you ever gone through a tornado, hurricane, fire, or water-related event? After catastrophic loss events such as these, residential and commercial property owners often find themselves grappling with insurance claims, hoping for a smooth and fair resolution Understanding the various alternative dispute resolution (ADR) options available can significantly impact the outcome of your property insurance claim. After reading this blog, you will understand more about the differences between appraisal, mediation, litigation, and arbitration.
Appraisal: A Swift and Objective Evaluation
Appraisal is quickly becoming a favorite nationwide. It’s intended to be the fastest and most amicable way to resolve a dispute in a property insurance claim. Appraisal involves a neutral* panel of two appraisers and an umpire. Both the policyholder and the insurance company select an appraiser, and these two appraisers then choose an umpire to settle any potential disagreements between the two appraisers. The appraisers then assess the value of the property damage, and try to come to an agreement over the claim’s valuation.
*Food For Thought: When the insurance company is paying their appraiser, and the policyholder is paying theirs, can the panel really be “neutral”?
When Is Appraisal Right For Your Insurance Claim:
- Dispute over Property Value: If there’s a significant disagreement between the policyholder and the insurance company regarding the value of the property damage. The classic example is when your insurance company opens coverage on your claim and you are not able to reach an agreement on the dollar amount the claim is worth.
- Scope of Damages: Appraisal is effective when the primary point of contention revolves around the extent and cost of the damages.
Mediation: Finding Common Ground Through Negotiation
Mediation is a collaborative process where a neutral mediator facilitates communication between the policyholder and the insurer. The goal is to reach a mutually acceptable settlement. Unlike a judge or arbitrator, a mediator can’t influence or make decisions, but the mediator can try to help the parties understand each other’s perspectives.
When Is Mediation Right For Your Property Insurance Claim:
- Communication Breakdown: If there is a breakdown in communication or in understanding between the policyholder and the insurance company.
- Policy Interpretation Disputes: Mediation is effective when the disagreement stems from the interpretation of specific policy clauses or terms, it can involve disputes in coverage as well.
Litigation: When All Else Fails, Seek Legal Advice
If other methods fail, litigation involves taking the dispute to court. While it is the most formal and time-consuming option, it provides a legal resolution through a judge or jury. Because of the expenses and lengthy time frame, litigation is typically the last resort for property owners looking to get their claim resolved.
When Is Litigation Right For A Property Insurance Claim:
- Bad Faith Claims: If there is evidence of the insurance company acting in bad faith, such refusing to fulfill their contractual obligations.
- Complex Legal Issues: When the dispute involves complex legal matters that require a judicial decision.
Arbitration: A Quicker Alternative to Litigation
Arbitration is a more formal alternative to mediation, where an arbitrator, or a panel of arbitrators, makes a final and binding decision after hearing both parties’ arguments. While it is less time-consuming than litigation, it still provides a legally enforceable resolution.
When is Arbitration Right For A Property Insurance Claim:
- Desire for Speed: If a quick resolution is essential, as arbitration typically has a more expedited timeline compared to litigation.
- Enforceable Decision: When both parties agree to a binding decision without the need for a lengthy court process.
Navigating the complexities of property insurance claims can be challenging, but you have plenty of options when it comes to settling a claim with your insurance companies. These alternative dispute resolution options should empower you to make informed decisions.
Remember, consulting with a public adjusting firm can provide invaluable assistance throughout the entire claims process, helping property owners make the right choices for their unique situations. If you have any questions about your property insurance claim, give us call today.