And When Is It Proper?
Property insurance policies in California (and often elsewhere) give the insured and the insurer the right to put the claim in appraisal when the amount necessary to repair the damages is in dispute. In the appraisal process, neutrals resolve the dispute. It can be a useful process to address valuation disputes, but impacts the insured’s potential option of further legal action, and can be abused by insurers.
For example, if the insured contends that the insurer violated California Insurance Code section 2051 by unlawfully depreciating property that is not legally subject to depreciation – an issue discussed elsewhere on this site – the insurer cannot respond by invoking appraisal. That is because that issue is a legal one – whether the insurer has the right to do something – as opposed to a dispute over the amount needed to repair. Thus, when an insurance company invokes the appraisal provision, it is important to carefully consider whether it is appropriate or not. It is also important to carefully analyze the issue before the insured invokes it as well.