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PENNSYLVANIA INSURANCE CLAIMS HANDLING: INTERPRETING THE APPRAISAL PROVISION CONTAINED IN A TYPICAL PENNSYLVANIA HOMEOWNER'S INSURANCE POLICY TO AVOID BAD FAITH

insurance-policy (1).jpgAn appraisal provision of some sort is contained in most Pennsylvania homeowner's insurance policies and allows for either the homeowner or the insurance company to demand appraisal if the two parties cannot agree on the amount of the loss to the home after a storm or similar covered event.

The majority of disagreements between whether a valid demand for appraisal was requested center on the interpretation of what "amount of loss" means. Recently, two Pennsylvania courts have taken up this issue and addressed what "amount of loss" means within the context of a homeowner's insurance policy. In the first case, the Pennsylvania court held that a disagreement over the extent of damage or whether a peril caused the damage is appropriate for appraisal. In the second Pennsylvania court opinion, the court established that once the insurance company determines that the damage to the home is covered by the insurance policy, the method of repair and what are considered necessary repairs may be determined by an appraiser.

As recently as this past April, the Pennsylvania Federal District Court has held that a disagreement over "the scope of the loss" is not a proper basis to deny appraisal. It is important to note that the Pennsylvania Federal Court's decision is not binding on Pennsylvania state courts. However, it is likely that Pennsylvania state courts adopt the Pennsylvania Federal Court's position that "the scope of the loss" is not a valid basis to deny appraisal.

Based upon the two recent Pennsylvania court decisions and the recent Pennsylvania Federal Court decision, if an insurance company adjuster wants to deny appraisal on some or all of the loss, they will need to issue a denial letter on the areas of the home that they are claiming are not appropriate for appraisal. For further information on Pennsylvania appraisal or an individual case you should contact a lawyer.

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