The appraisers may not exceed the authority granted to them in the appraisal agreement. It is the insured who states the items claimed, and swears to it in a proof of loss. It is this presentation which forms the claim itself and which logically and legally is to be what is appraised.
The insistence by some carriers that a less inclusive list be the basis of the appraisal is without basis, so long as the item(s) are in dispute as to amount of loss or value.
The parties should agree in advance on the issues to be determined and the relative amount of detail to be contained in the award in order to give life to the appraisal provision. It is most appropriate to do this in an appraisal agreement signed by the parties.
However, when the appraisers discharge their duty and then exceed their authority, the excess exercise of authority may not destroy what was well done within the submission.
An unauthorized portion of an award that does not effect or prejudice the excepting party, should not invalidate the authorized portion of the award.
For example, if an umpire who is appointed in accordance with a clause in a standard insurance policy considers the validity of the insured's title to covered property in his or her decision, the unauthorized or invalid parts of an award can be treated as mere surplusage, unless the opposing party is prejudiced.
Examples of Actions that are Typically Beyond the Authority of the Appraisal Panel
The appraisal team has no authority to reopen or revisit areas of claim already agreed to or paid by the carrier.
It is beyond the scope of the appraisal panel to within the scope of the appraisers’ authority to award less than an undisputed amount previously paid or agreed to by the parties.
the parties did not “disagree on the amount of loss” and the appraisers thus exceeded their authority. The court granted the insured’s petition for an upward modification of the award in such amount
Maiden Creek T.V. & Appliance, Inc. v. General Cas. Ins. Co., 2008 WL 351906 (E.D.Pa. 2008)
In a situation where an undisputed amount has been paid, the appraisers may still appraise the value or loss beyond the undisputed payment, but are without authority to review payments or allowances already made unless they were made with a specific written reservation of rights at the time of payment.
An award for lost rents is invalid, for example, where the premises was vacant at the time of loss and the policy language make it clear that rent coverage only applies when the premises are occupied.
It has been held that appraisers exceeded their authority by resolving such issues as the number and amount of deductibles where this was in dispute or by including an award for interest.
Hanson v. Commercial Union Ins. Co., 150 Ariz. 283, 723 P.2d 101 (Ct. App. Div. 1 1986).