LOSS TO A PAIR OR SET

This condition gives the insurer two alternatives in the event of a loss to a pair or set of personal property items. The insurer may: 1. repair or replace any part to replace the pair or set to its preloss value or 2. pay the difference between the actual cash value of the property before and after the loss. APPRAISAL Appraisal can be invoked to determine the amount of loss. Such disputes might involve the valuation of items of damaged or destroyed personal property or involve the dispute over what constitutes like or equivalent construction. Either the insurer or the insured may demand appraisal of a loss. If appraisal is demanded, each party chooses an appraiser—who the policy says should be competent and impartial—within twenty days after receiving a written request from the other party to submit the claim to appraisal. The two party-designated appraisers are to choose an umpire. If the party appraisers cannot agree on the umpire, either party may apply to a judge in a court of record in the state where the residence premises are located to choose the umpire. The party appraisers then state the amount of the loss. If, on comparison of the party appraisers’ respective loss valuation, they are in agreement, that is the amount of loss payable. If the appraisers differ as to their respective valuations of the amount of loss, they are to submit their differences to the umpire. A loss valuation agreed to by the umpire and one of the two party appraisers will determine the amount of loss. The appraisal condition provides that each party will: ◆ pay its own appraiser and ◆ share the expenses of the appraisal and the umpire equally. (This can result in significant costs to the insured in certain circumstances.) The appraisal condition is designed to be quick, relatively informal, relatively inexpensive, and self-executing (i.e., without the need for lawyers or court proceedings). As a practical matter, insurers rarely demand appraisal unless they are very confident in their evaluation of the amount of the loss. One of the reasons insurers will consider demanding appraisal in a case is when they believe the insured is considering suing for bad faith (i.e., that the insured contends the insurer is low-balling the claim). If the outcome of the appraisal is at or very near the insurer’s valuation of the amount of loss, then the appraisal demonstrates that the insurer’s position was reasonable. It also then largely, if not completely, provides a defense if the insured nevertheless sues for bad faith. If the outcome is the opposite, that is, the appraisal award is significantly greater than the insurer’s valuation of the loss, the insured’s potential bad faith suit may have a greater likelihood of success, since the insured is then in the position of being able to argue that the insurer unreasonably undervalued the claim

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