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The Role of Causation Analysis in the Insurance Appraisal Process

By Rebecca Goforth Bush

With the recent onslaught of hurricane claims in the aftermath of Hurricane Katrina and the growing number of hurricane claims related to the 2008 phenomena that was Hurricane Ike, the importance of efficient, economical, and accurate resolution of property claims following natural disasters has become increasingly evident to courts, insurers, and policyholders alike. Enter the concept of appraisal and a long-established insurance clause routinely enforced by the tribunals. While insurance appraisal clauses are standard in many homeowners' policies, the manner in which they are utilized by insurers and policyholders ' and the way in which they are interpreted by the courts ' differs based upon the role an appraiser plays in interpreting causation.

Several courts recognize that an appraiser will properly take into account certain causation elements in assessing the loss amount. These courts insist that causation is a matter best left solely to the courts only when an insurer denies coverage. On the other side, several courts have also determined that causation questions never belong in an appraiser's loss determination, whether or not an insurer is denying coverage. Regardless of the outcome of this debate, the appraisal process will continue to be a critical tool in effectively resolving claims of the magnitude that these devastating events precipitate. The question for the courts (and key players such as insurers and policyholders) is the extent to which this tool should be used and the extent to which it will be allowed to cross into the jurisprudential boundaries of the court system.

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