An appraisal clause in a commercial property insurance policy is a contractual process that can help resolve a disagreement between a property owner and an insurance company about the amount of a covered loss. It is particularly important after major property damage, such as a commercial roof leak, hurricane, windstorm, hail event, or other covered loss, when the insurer and building owner disagree about the cost of repairs.
For commercial property owners, understanding the appraisal clause can help prevent a dispute over the value of damage from unnecessarily delaying repairs.
How Does an Appraisal Clause Work?
An appraisal clause is typically found in the conditions section of a commercial property insurance policy. The exact language varies by insurer and policy, so property owners should review their specific policy before requesting appraisal.
Generally, when the insurer and insured disagree about the value or amount of a covered loss, each side selects an independent appraiser. The two appraisers evaluate the damage and attempt to agree on the amount of the loss.
If they cannot agree, an umpire may be selected to resolve the remaining differences. The resulting appraisal award is generally used to establish the amount of the loss according to the terms and procedures of the policy.
Florida law recognizes appraisal as a process for estimating or evaluating the amount of a property loss through an impartial umpire when an appraisal clause is used. Florida law also provides specific standards concerning challenges to an umpire’s impartiality.
What Does Appraisal Decide?
The key distinction is that appraisal generally addresses how much the covered damage is worth, rather than whether the insurance policy covers the loss in the first place.
For example, suppose a commercial building experiences storm damage and the property owner estimates that roof repairs and related building work will cost $450,000. The insurer’s estimate is $275,000. If both sides agree that the relevant damage is covered but disagree about the amount of the loss, the policy’s appraisal procedure may provide a mechanism for resolving that valuation dispute.
Appraisal should not automatically be viewed as a way to force an insurer to pay for damage that the policy excludes. Coverage, exclusions, policy interpretation, deductibles, and other legal questions can involve issues beyond simply determining the dollar value of damage.
Why Is This Important for Commercial Roof Claims?
Roof claims can involve significant differences in scope and pricing. One estimate might include only isolated repairs, while another might conclude that a larger section—or the entire roof system—requires replacement.
A commercial property owner should therefore maintain detailed documentation, including:
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Roof inspection reports
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Photographs and videos of damage
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Contractor estimates
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Repair and maintenance records
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Original roof installation information
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Manufacturer documentation
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Engineering or testing reports when appropriate
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Records of previous insurance claims
Good documentation can help establish the condition of the roof and the reasonable cost of repairing covered damage.
Is Appraisal the Same as a Lawsuit?
No. An appraisal is generally a claim-resolution mechanism contained in the insurance policy, not the same thing as filing a lawsuit. Its purpose is to resolve a disagreement over the amount of loss through the procedure specified by the policy.
Florida’s insurance statutes also recognize appraisal in property insurance and separately address issues involving appraisal awards and insurer disputes.
What Should a Commercial Property Owner Do?
Before invoking an appraisal clause, a building owner should carefully review the policy’s appraisal language, claim deadlines, proof-of-loss requirements, and other conditions. It can also be useful to have qualified insurance and construction professionals review the claim, particularly when a large commercial roof is involved.
For a Florida commercial property owner, the appraisal clause can be an important tool when the insurer and insured agree that a loss is covered but cannot agree on the amount of damage. Understanding how appraisal works—and documenting the roof’s condition and repair requirements—can make the claims process more organized and informed.
Related Questions
- What is the difference between appraisal and litigation?
- How long does the appraisal process typically take?
- Does commercial property insurance cover mold resulting from a roof leak?
- What is coinsurance and how can it reduce a roof claim payout?
- When do carriers apply a wind/hail exclusion in Florida?
- What is an actual cash value roof endorsement?
- What is a loss prevention recommendation and am I obligated to comply?
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