The appraisal clause: how to settle a dispute over the amount of loss

What the appraisal clause settles

The appraisal clause is a condition in most homeowners and other property policies. It gives each side a way to set the dollar amount of a covered loss when they do not agree on that number. A new Texas law states the purpose directly. The appraisal provision is intended to provide a type of dispute resolution process solely to determine the amount of loss when that amount is in dispute between the policyholder and the insurer ^[1].

Appraisal settles amount, not coverage. It does not decide whether your policy covers the cause of damage, whether a claim was filed on time, or whether an exclusion applies. Those are coverage questions. A court or the parties settle coverage questions outside the appraisal process.

Under the Texas law, an appraisal award does not change other terms of the policy. The award must substantially follow the wording in the policy's own appraisal clause. An appraisal under the provision required by this chapter does not affect any applicable policy terms, and an appraisal award must be made in substantial compliance with the appraisal clause of the insurance policy ^[1].

Who can invoke appraisal

In most policies, either side can demand appraisal in writing once the policyholder and the insurer fail to agree on the amount of loss. California's standard fire policy form states this directly in its own appraisal condition, which every fire policy issued in the state must carry in substance ^[4].

Texas took this further. As of January 1, 2026, the state requires most personal auto and residential property policies sold in Texas to contain an appraisal provision. An insurance policy described by Section 1813.001(a) must contain an appraisal provision that complies with this chapter ^[1]. The requirement applies to a policy delivered, issued for delivery, or renewed on or after January 1, 2026 ^[1].

The Texas requirement has two carve-outs. It does not apply to a policy from the Texas Windstorm Insurance Association, and it does not apply to a commercial insurance policy. This chapter does not apply to: an insurance policy delivered, issued for delivery, or renewed by the Texas Windstorm Insurance Association; or a commercial insurance policy ^[1].

The same Texas law directs the state insurance commissioner to set the deadline for finishing an appraisal under this chapter, and to require appraisal for a total loss. The commissioner shall adopt rules necessary to implement this chapter, including rules establishing the period in which an appraisal under a provision required by this chapter must be completed, and rules mandating an appraisal for total loss and damage of the property that is the subject of the appraisal ^[1]. Check the Texas Department of Insurance for the current adopted deadline, since the statute leaves the exact number of days to that rulemaking.

Check your own policy's appraisal condition for its exact wording. Some policies set a deadline for demanding appraisal after a denial or a partial payment. Missing that deadline can forfeit the right to invoke the clause.

The steps in an appraisal

Once either side makes a written demand for appraisal, the process follows a set sequence. California's standard fire policy form lays out the sequence this way.

1. Each side selects its own appraiser. Each shall select a competent and disinterested appraiser and notify the other of the appraiser selected within 20 days of the request ^[4].
2. The two appraisers try to agree on the amount of loss. If they agree, that number settles the claim.
3. If the two appraisers cannot agree, they pick a neutral umpire together. The appraisers shall first select a competent and disinterested umpire ^[4].
4. If the appraisers cannot agree on an umpire within 15 days, either side can ask a court to appoint one. Failing for 15 days to agree upon the umpire, then, on request of the insured or this company, the umpire shall be selected by a judge ^[4].
5. The umpire reviews the dispute with the two appraisers. A written award signed by any two of the three, the two appraisers or one appraiser and the umpire, sets the amount of loss. An award in writing, so itemized, of any two when filed with this company shall determine the amount of actual cash value and loss ^[4].

The signed award is binding on both sides, with narrow exceptions. Under the Texas statute, the amount of loss determined by an appraisal under this chapter is binding as to the policyholder and the insurer, except for fraud, accident, or material mistake relevant to the appraisal or an appraisal award made without authority ^[1].

Who pays for appraisal

Under California's standard fire policy appraisal condition, each side pays for its own appraiser. The two sides split the cost of the umpire and other shared appraisal expenses. Each appraiser shall be paid by the party selecting him or her and the expenses of appraisal and umpire shall be paid by the parties equally ^[4].

This cost split is common across state appraisal clauses, though the exact wording depends on your own policy. Ask your insurer, or read your policy's appraisal condition, before you hire an appraiser so you know what you are agreeing to pay.

Appraisal compared with mediation and a lawsuit

Appraisal, mediation, and a lawsuit solve different problems and work in different ways.

Florida runs a separate mediation program for property claim disputes, apart from appraisal. The state's mediation program is non-binding. Mediation is non-binding, which means none of the parties are required to accept the outcome ^[3]. If the two sides reach a settlement at mediation, the policyholder can still back out within 3 business days, unless a check has already been cashed. The policyholder has 3 business days within which the policyholder may rescind the settlement unless the policyholder has cashed or deposited any check or draft disbursed to the policyholder for the disputed matters as a result of the conference ^[2]. A signed settlement that is not rescinded becomes final. A settlement agreement is reached and is not rescinded, it is binding and acts as a release of all specific claims that were presented in that mediation conference ^[2].

Florida law also places a notice duty on the insurer for its mediation program. The insurer shall notify the policyholder of its right to participate in the mediation program under this section ^[2]. A policyholder who wants to understand the program can also read the state's consumer page. Mediation gives you the opportunity to settle claim disputes with your insurance company by allowing you to meet with them in an informal setting with a certified, neutral mediator ^[3].

A lawsuit covers more ground than appraisal or mediation. It can decide coverage questions that appraisal cannot reach, but it takes longer and costs more. Many policyholders try appraisal or mediation first, and keep the right to sue if those steps do not resolve the dispute.

California's standard fire policy form shows how narrow an appraisal award is by its own wording. The signed award settles the amount of actual cash value and loss. An award in writing, so itemized, of any two when filed with this company shall determine the amount of actual cash value and loss ^[4]. The award does not state, and does not need to state, whether the policy covers the claim in the first place.

State rules differ

Appraisal rights and procedures come from state law and from your own policy form, not from one national rule.

• Texas: an appraisal provision is now mandatory in most personal auto and residential property policies issued, delivered, or renewed on or after January 1, 2026 ^[1]. The Texas Windstorm Insurance Association and commercial policies are excluded ^[1].
• Florida: appraisal is a policy condition, and the state also runs a separate, non-binding mediation program with its own notice duty on the insurer ^[2][3].
• California: the appraisal condition is written into the standard fire insurance policy form that state law requires insurers to use ^[4].

Because wording and deadlines differ by state and by policy, read your own appraisal condition. For a question about your state's specific rules, contact your state insurance department.

When appraisal does not fit the dispute

Appraisal only works for one kind of disagreement: the dollar amount of a loss that both sides agree is covered. The Texas statute states this limit directly. The appraisal provision required by this chapter is intended to provide a type of dispute resolution process solely to determine the amount of loss when that amount is in dispute between the policyholder and the insurer ^[1].

Appraisal does not fit a dispute over whether your policy covers the cause of the damage, whether an exclusion applies, whether you filed your claim on time, or whether the insurer acted in bad faith. Those are legal and coverage questions, and an appraisal panel has no power to decide them.

If your insurer denies the claim outright, rather than disputing only the dollar amount, appraisal is usually the wrong tool. A coverage denial calls for a different response, such as a formal appeal, a complaint to your state insurance department, or legal advice.

Questions