Articles

The Appraisal Process: How Does it Work?

The Statutory Conditions form part of every property insurance policy that is sold in Canada. There is a mandatory statutory condition that triggers “Appraisal” in the event of a dispute on the amount of loss. This alternate dispute mechanism has been part of the policy conditions for decades however there are misunderstandings about how the process works.
The original legislators intended to have the Statutory Conditions guide both the insured and insurer through the claims process. Policyholders pay premiums for protection so that in the event of a loss they can be properly compensated in accordance with the terms of the contract. The Appraisal condition was contemplated to provide an inexpensive, effective way to resolve issues in dispute that relate to the amount of the loss. This article will demonstrate how the ‘Appraisal’ process works, provide suggestions on how the process can work effectively, and highlight key legal judgments that help frame and direct the appraisal process.

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Example of how the Appraisal Process and Procedures can go off the rails.

In a highly complex case from Ottawa, a company (Ashcroft Homes) was constructing a development when fire struck. The insurance company, Northbridge General Insurance, did insure the development against fire and other damages. Each party hired their own appraiser to assess the value of the cleanup and reconstruction. Eventually, an insurance umpire was hired, and both parties retained outside legal counsel. What followed was what the judge referred to as a ‘Saga of a Procedural shipwreck’. Read how despite a lot of time and energy (and money) being expended, if the conditions are too broken that parties can turn on an insurance umpire and make his lengthy work even more difficult.

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Judges Decision Appoints George Milnes as Umpire

An insurance company and its client could not agree on their respective lists of potential umpires to resolve their dispute. The court was required to determine who could satisfy both parties, as an experienced, neutral third party with a vast history in the insurance and valuation fields. The judge outlined George’s impressive credentials as an Insurance Umpire in Alternative Dispute Resolution, and determined that he would generate the most professional and fair outcome to the dispute.

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The Independence of Appraisers is Crucial to Both Parties Agreeing to Dispute Resolution

Three families in Ottawa, whose homes were all insured by the same insurance company, Desjardins. A significant tornado rips through the community, demolishing two of the houses and severely damaging the third. Disagreement to the rebuilding cost of the homes leads both parties to appoint their own appraisers. A neutral insurance umpire is hired to facilitate the process. What follows is a complex legal battle that illustrates the need for and purpose of an independent insurance umpire.

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Appointing of Appraisers and Umpire in Residential ‘Replacement Cost’ Dispute

A customer’s house in Nova Scotia was a total loss due to a fire. They didn’t believe it was necessary to appoint an appraiser, as they believed ‘Replacement Cost’ meant exactly that. The insurance company believed that the process of each party appointing an appraiser to be followed by the appointment of an umpire serves as the necessary alternate dispute resolution mechanism. Disagreement persisted around what the appraisal process and an umpire with some legal knowledge could actually resolve and what elements might need to be resolved in a Court.

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Iiwidm5fZXF1YWwiOiIiLCJpY29uX2NsYXNzIjoiIiwiaWNvbl9zaXplIjoiIiwiaWNvbl9jb2xvciI6IiIsInRlcm1zIjoiIn0seyJic19jbGFzc19pZCI6IjYiLCJuYW1lIjoiZi1yZWNhcHRjaGEiLCJsYWJlbCI6IiIsImh0bWwiOiJyZWNhcHRjaGEiLCJ0ZXJtcyI6IiIsInJlY2FwLXRoZW1lIjoibGlnaHQiLCJyZWNhcC10eXBlIjoiYXVkaW8iLCJyZWNhcC1zaXplIjoibm9ybWFsIn0seyJic19jbGFzc19pZCI6IjYiLCJuYW1lIjoic3VibWl0IiwibGFiZWwiOiJTdWJtaXQiLCJodG1sIjoic3VibWl0IiwiYWRkX2NsYXNzZXMiOiIiLCJhZGRfc3R5bGVzIjoiIiwiYWRkX2F0dHIiOiIiLCJpY29uX2NsYXNzIjoiIiwiaWNvbl9zaXplIjoiIiwiaWNvbl9jb2xvciI6IiIsInRlcm1zIjoiIn1dLCJvcHRzX2F0dHJzIjp7ImJnX251bWJlciI6IjQifX0sImltZ19wcmV2aWV3IjoiYmFzZS1jb250YWN0LmpwZyIsInZpZXdzIjoiNDczIiwidW5pcXVlX3ZpZXdzIjoiMTI1IiwiYWN0aW9ucyI6IjUiLCJzb3J0X29yZGVyIjoiMSIsImlzX3BybyI6IjAiLCJhYl9pZCI6IjAiLCJkYXRlX2NyZWF0ZWQiOiIyMDIxLTA1LTI5IDEzOjI4OjIyIiwiaW1nX3ByZXZpZXdfdXJsIjoiaHR0cHM6XC9cL3N0YXQxMS5jYVwvd3AtY29udGVudFwvcGx1Z2luc1wvY29udGFjdC1mb3JtLWJ5LXN1cHN5c3RpY1wvYXNzZXRzXC9mb3Jtc1wvaW1nXC9wcmV2aWV3XC9iYXNlLWNvbnRhY3QuanBnIiwidmlld19pZCI6IjE1XzQ2MDgxNiIsInZpZXdfaHRtbF9pZCI6ImNzcEZvcm1TaGVsbF8xNV80NjA4MTYiLCJjb25uZWN0X2hhc2giOiI4YTI3MzU3YmM3MDcxMmQ1M2FhZTRlZGVhNzY2MWIyZSJ9