An appraisal clause is a claims-resolution provision that uses independent valuers to settle a disagreement over loss amount.
Insurance mechanics
When a loss valuation dispute reaches the clause, the policy usually requires each side to appoint an appraiser. Those appraisers choose an umpire. The majority valuation is generally binding on the parties for settlement.
Claims workflow
This mechanism avoids long litigation delays and creates a predictable process for:
- choosing qualified appraisers,
- reviewing repair estimates and market values,
- issuing binding valuation decisions.
Regulation and practice
Although clause wording is contractual, courts often enforce the process as written when both parties followed notice and selection procedures.
Example
After roof damage where the insurer proposes a $40,000 payout and the insured claims $65,000, the clause can trigger valuation by appraisers if mediation and informal negotiation cannot bridge the gap.