One of the most cost-effective tools for resolving disputed claims with insurance companies is the insurance “appraisal” process. Appraisal is an alternative dispute resolution mechanism in most Colorado insurance policies. It is designed to resolve claims outside of court, and consists of an appraisal panel reviewing and resolving a disputed claim amount. The appraisal panel is made up of one appraiser for the policyholder, one appraiser for the insurance company, and an umpire. Until just now, the two appraisers were generally on the “side” of either the insurance company or policyholder, while the umpire is a true “neutral.” That all changed in the Dakota Station v. Owners Ins. Co. case.

In Dakota Station, the Colorado Supreme Court interpreted an insurance appraisal provision in connection with a disputed hail claim. The Supreme Court held that the appraisal provision requires each party to “select a[n]…impartial appraiser” one that is unbiased, disinterested, and unswayed by personal interest (essentially the same level of impartiality as that expected of an arbitrator). The appraisers must not favor one side more than another, so they may not advocate for either party. That means that even the appointed appraisers for each side cannot “take a side,” a stark change from how the system has historically operated.

Moving forward, policyholders must be very careful when naming an appraiser. Naming the wrong appraiser or an inexperienced appraiser could subject an appraisal award to being overturned in Court. If you find yourself dealing with a disputed insurance claim and have questions about whether appraisal is appropriate, contact Smith Jadin Johnson, PLLC.


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