When you read your insurance contract, you will notice your insurer pays a great deal of attention to explicitly defining coverage – when it is effective, what or who is protected and how much coverage is available. While policy language will generally seem clear, life is often messy and the specifics of a loss may look different from your viewpoint and that of the insurer. You should read past these definitions to learn what recourse is available in the event there are disagreements.
There are two areas of disagreement that can commonly arise. One area is about the existence of coverage – was the coverage in effect or was the loss part of coverage. The other area is about the amount of settlement - the amount that should be paid for a loss. The first issue may be resolved through arbitration; the second is often handled by appraisal.
If a claim is rejected, the insured is not satisfied with the explanation for denial of coverage and a compromise cannot be reached, the parties may elect arbitration. Arbitrators act similar to a judge. They make decisions about evidence and give written opinions. Arbitration as a process can be binding or non-binding. While arbitration is occasionally conducted with a single arbitrator, the most common procedure involves a panel of three.
The typical arbitration process allows each party to select their own qualified arbitrator. Once this is done, the two selected arbitrators select a third arbitrator who acts as a judge. The agreement is that consensus among any two of the three parties’ stands as the decision. Each party pays for its own arbitrator and they share the expense of the judge. The arbitrators render a written decision.
In Washington, if you and your insurer agree that coverage exists, but you do not agree on the value of your loss, you can initiate the appraisal clause in your insurance contract. The appraisal process is similar to arbitration in that you and your insurance company each select a competent and impartial appraiser. The appraisers then select an umpire. Each appraiser evaluates the loss independently and determines the value of the item or items in dispute. The umpire settles any disagreement between the two appraisers about the value. You and your insurance company share the cost of this process.
If these processes fail to settle the differences, legal action may be the last resort. While lawsuits are sometimes inevitable, they are also expensive and it is important that insurance consumers be aware of alternatives. You also want to take the time to discuss your insurance coverage and any claims issues with your Washington insurance professional. Our expertise at Homer Smith Insurance can be invaluable in dealing with any insurance situations.