Understanding the Right to Appraisal in Auto Insurance Policies

In response to increasing disputes over repair costs and total loss values, more vehicle owners are exercising the Right to Appraisal (RTA) clause in their insurance policies. This provision offers a structured mechanism to resolve disagreements regarding the value of a loss. Industry experts gathered at a California Autobody Association (CAA) meeting in Seal Beach, California, to discuss the appraisal process and its implications for the collision repair industry.

Bryan M. Thomas, Esq., a partner at Del Tondo & Thomas LLP, highlighted that the RTA is an informal arbitration method available for first-party claims. This option does not apply to third-party claims, where another driver's insurance company is responsible for repair costs. Thomas emphasized that invoking the RTA allows policyholders to resolve disputes over repair costs and actual cash values (ACV) while retaining decision-making power rather than leaving it solely to the insurer.

Mark Olson, CEO of Vehicle Collision Experts, noted that the language in appraisal clauses varies among policies and across states, urging policyholders to review their terms carefully. Olson explained the contractual nature of the RTA, indicating that while most auto insurance policies include this clause, there are exceptions like policies from State Farm and the Automobile Club of Southern California. In states such as Alaska and Rhode Island, the inclusion of an appraisal clause in auto policies is mandated by law.

The appraisal process involves each party selecting an independent appraiser, and if they cannot agree on the value, an umpire is chosen to make the final decision. This process is considered a form of arbitration under state and federal laws, requiring similar disclosures as neutral arbitration. Once finalized, the appraisal award is binding and typically leads to a resolution of disputes with insurers.

Participants in the CAA meeting discussed strategies to ensure effective utilization of appraisal clauses. Thomas recommended that shops confirm the policyholder is the "Named Insured" to invoke the process, as the right usually does not extend to additional or insured parties.

The cost of engaging in the appraisal process ranges from $500 to $1,500, covering appraisers and umpire fees. Some repair shops choose to absorb these costs to maintain customer satisfaction and loyalty. Peter Vann of Milo Claims noted that although the appraisal process can last from a few hours to several months, its resolution often facilitates quicker and more equitable repair outcomes.

For repair shops and their customers, understanding the nuances of the appraisal clause and potential recourse through litigation in the absence of this provision can significantly influence repair outcomes and satisfaction levels. As disputes over repair costs continue, clarity on the appraisal process remains crucial for industry stakeholders.