Umpire Process in Property Damage Claims

What do you do when the insurance estimate doesn’t match up with your estimate of repairs?

Many insurance policies offer a “construction dispute resolution” clause, called an Umpire process, as an alternative to a more expensive trial or arbitration.

The Umpire process is a binding dispute resolution method used when a policyholder’s appraiser and the insurer’s appraiser cannot agree on the scope or cost of a loss. An impartial Umpire is chosen to review the differing estimates, inspect the damage, and make a final decision, as part of what is often dubbed an “appraisal panel.”

The process is designed to be collaborative, not adversarial, and when conducted appropriately, appraisers are not “opposing” forces but rather professionals working toward a fair resolution of valuation disputes, based on several variables that require the proper knowledge, skills, and demeanor.

The Umpire is a neutral party, often an expert in construction or damage valuation. Depending on the claim or the subject of the dispute, the Umpire can be a construction expert, contractor, architect/engineer, or adjuster. The Umpire should be someone who is appropriately experienced and whose decision both parties agree to be bound by.

The Umpire clause is closely related to the appraisal clause, which allows a policyholder to hire an independent appraiser to determine the value of the damages. In turn, the insurance company will also hire its own appraiser. The two appraisers will then get together and select an Umpire. The Umpire is basically the arbitrator.

These three individuals are known as the appraisal panel. The purpose of the appraisal panel is to set or determine the amount of loss, or the total dollar amount needed to return the damaged property to its original condition by repair or replacement.

With an appraisal panel in place, the policyholder’s chosen appraiser and the insurance company’s chosen appraiser will review the documents, estimates, and differences between them. They’ll then try to resolve their differences. In such a scenario, the three will discuss the issues and try to reach an agreed settlement of the differences.

If the Umpire agrees with one side’s appraiser/expert on one part of the scope or price, that issue is “won” with a 2-1 vote, and then the next issue is discussed until all the issues have been decided. The Umpire makes the final decision if the appraisers/experts can’t agree.

The Umpire’s reputation, demeanor, and ethical standards matter. Selecting a professional, competent, and impartial expert is a strategic decision that can resolve claims effectively, both fairly and efficiently.

At J2, Jens Johanson specializes in appraisals, umpiring, and expert construction-based testimony (as an expert witness), as well as large or complex damage or dispute assessments for property owners, law firms, and insurance carriers. Jens has over 35 years of experience in construction, including building envelope failures, water damage assessments, insurance restoration, the design, pricing, and oversight of repairs, and construction defect or management claims. Jens provides consulting and expert services for clients in WA, OR, UT, and the surrounding states.