Originally from Alternatives to the High Cost of Litigation

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Mass disasters occur occasionally, but an automobile accident resulting in a personal injury occurs approximately once every 20 seconds somewhere in the U.S., and an accident causing property damage occurs about once every three seconds. Fire is only one kind of peril covered by the standard homeowners form, but a home fire occurs somewhere in the U.S., on average, every 85 seconds. Around once every 12 seconds, an insured home somewhere in the U.S. has some kind of occurrence that produces an insured claim. In other words, the claims processing mechanisms of homeowners and automobile insurance policies issued in the U.S. are invoked tens of millions of times annually. Commercial coverages drive these numbers even higher.

Appraisal provisions have been common in property insurance policies for more than a century, leading Prof. Johnny Parker to claim that the “judicial and legislative scrutiny” during those years “has shaped [appraisal] into an almost perfect method of alternative dispute resolution.” Johnny Parker, “Understanding the Insurance Policy Appraisal Clause: A Four-Step Program,” 37 U. Toledo L. Rev. 931, 957 (2006)(available at http://bit.ly/2p8Zh3x).

Today, appraisal provisions are found in many of the standard Insurance Service Organization (ISO) forms, including the personal and business auto policies, the homeowners’ forms, the business owners’ form, and the standard building and personal property coverage form, all of which are widely used by insurers in the U.S.