by Steven Krieps
As a shop, what do you do if your consumer decides to invoke their Right to Appraisal provision in their insurance policy?
You’re not actually a party to the contract between the insurer and the insured, so the outcome doesn’t affect you then, right? You may be wondering if you are going to receive a reasonable cost to repair as you have written. What if the outcome of the process for your customer is less than you are willing to accept? There’s a few things you may want to know.
Have you started repairs, or are repairs already completed? What are you going to do? Although you have the option to pursue any amounts still owed after the appraisal process, this may be difficult since you’ll be pursuing the consumer directly. Also, since two or three independent appraisers agreed the cost was X, be prepared to explain why you feel Y is a justifiable charge. Yes, as a free market, you can charge whatever you feel is reasonable, but being unable to explain it in this situation could impact your reputation.
So, is it better to use this process before, during or after completion of the repairs? Honestly, too many factors need to be considered for me to give you a clear cut answer. For instance, if the vehicle is completed, what does your state say about holding a completed vehicle for non payment? What does your repair contract (signed and agreed to by the vehicle owner) say? If you invoke the Right to Appraisal before repairs are completed, how will you fare on materials determined by an outdated calculation method used in today’s market? What if there are missed damages? Yes, some appraisers work solely off what is given instead of taking measurements and performing a thorough inspection, and as a result, they often neglect to include a lot of information, simply to complete an assignment more quickly.
What is your role? As you were hired by the vehicle owner/policy holder, the customer or their chosen appraiser will be your point of contact and may request information or action, but you have no obligation to provide anyone else with information or your time. You may (and should) allow reasonable and timely access to the property if the insurer’s appraiser wishes to inspect as the policy holder still has a duty to cooperate. You may be able to charge for storage and other incurred expenses during this process, but whether those costs will be covered is not determined by the appraiser; it’s based on the consumer’s policy and applicable State and local laws.
Let’s take another look at some Appraisal Clause language:
APPRAISAL: If we and the insured do not agree on the amount of loss, either may, after proof of loss is filed, demand an appraisal of the loss. In that event, we and the insured will each select a competent appraiser. The appraisers will select a competent and disinterested umpire. The appraisers will state separately the actual cash value and the amount of the loss. If they fail to agree, they will submit the dispute to the umpire. An award in writing of any two will determine the amount of loss. We and the insured will each pay his chosen appraiser and will bear equally the other expenses of the appraisal and umpire. We will not waive our rights by any of our acts relating to appraisal.
The language seems pretty straightforward. The consumer chooses a appraiser, the insurer does the same, and the two appraisers select an umpire – the table is set. But recently, I’ve been seeing insurers hire the same firms they use for standard appraisals and supplements. These third-party appraisal companies receive assignments that say nothing about the Appraisal Clause and contain the same limiting assignment requirements as the standard process, i.e. rate restrictions, procedure limitations, parts requirements, etc.
To be honest, in no way does this method allow for an independent review. In fact, it explicitly introduces bias!
Some appraisers will tell you they need to run it by the carrier, which is only them confirming with their client…but is it? What if the appraisers cannot agree on an umpire? Now, the process will need to head to the courtroom to choose an umpire. The insurer refusing to participate in the appraisal altogether is another situation that may land your client seeking a judge.
Of course, even the simplest of processes tend to get strangely convoluted in this industry of ours. While Right to Appraisal offers a useful and important method of settling a disagreement between two contracted parties, regarding the amount of loss, there are ways to degrade the process and create confusion. For example, West Virginia does not have a minimum requirement to be considered an auto damage appraiser, and the absence of any form of licensing adds to the large disparity in reasonable blueprints written by body shops compared to insurer estimates, which almost always come in well below the shop’s estimate – typically as low as 40 percent compared to actual damages.
Seeking to address these issues, some states (such as North Carolina) have instituted laws requiring auto damage appraisers to obtain a state-issued license as well as incorporated the appraisal provision into state law. Sadly, not all states have implemented or begun looking into this matter.
Regardless of a few flaws in the system, the Appraisal Clause within insurance policies may be the perfect tool for policyholders to utilize to settle loss disputes with their insurance companies. Lastly, these are often investigated by a carrier, and I promise you if a shop pays for or invokes Right to Appraisal under an assignment you can cause more harm for your customer and business than the short pay may have caused. Remember: This is not your process and has nothing to do with your facility. Educate…but consider staying in your lane.
Want more? Check out the November issue of Hammer & Dolly!