Appraisal vs. Insurance Coverage: What's the Difference?

Amount-of-loss and valuation questions are the types of disputes that appraisal provisions are typically designed to address. These are questions about how much something is worth or how much a loss costs — not questions about whether coverage exists or who is legally responsible.

Examples of amount-of-loss questions that may fall within the scope of an applicable appraisal provision include: the Actual Cash Value of a vehicle declared a total loss, the reasonable cost to repair physical damage, and other quantifiable amount-of-loss issues permitted by the policy.

Coverage questions are different from amount-of-loss questions. A coverage question asks whether the insurance policy covers a particular loss at all — not how much the covered loss is worth. Examples include: whether the policy was in force, whether the loss falls within a covered peril, whether an exclusion applies, and whether the claimant has rights under the policy.

Legal liability questions — such as who caused an accident and to what extent — are also generally outside the scope of appraisal. Appraisal does not determine fault or legal responsibility.

Bad faith, policy interpretation, and other legal questions are similarly outside the scope of what appraisal is designed to resolve. These are legal questions that may require litigation or other legal processes to address.

In practice, the line between an appraisable amount-of-loss question and a non-appraisable coverage or legal question is not always clear. Some disputes involve both types of questions — for example, a disagreement that involves both the scope of covered repairs and the cost of those repairs.

Courts in different jurisdictions have reached different conclusions about where the boundary lies in specific situations. The applicable policy language and the law of the relevant jurisdiction are the controlling authorities.

When there is any question about whether a particular dispute is within the scope of an applicable appraisal provision, consulting with a qualified attorney familiar with insurance law in the applicable jurisdiction is advisable.