What is an umpire clause?
An umpire clause is a condition in an insurance policy that offers a third party to mediate the dispute if the insurer and the insured cannot agree on the amount of a claim payment. An arbitration clause is the same as an umpire clause. The insurance company and the policyholder must engage an appraiser of their choice to evaluate the damages and repair costs in order to participate in the arbitration procedure. The sum will fulfill the claim if the umpire accepts one or both of the ensuing evaluations.
Recognizing Umpire Clauses
The appraisal provision, which permits a policyholder to engage an impartial appraiser to estimate the extent of their losses, is closely associated with the umpire clause. The insurance provider will then appoint an appraiser of their own. Next, the two appraisers will convene and choose an umpire. In essence, the umpire acts as the judge.
The group of these three people is referred to as the evaluation panel. The appraiser panel’s job is to establish or calculate the loss or total cost required to replace or repair damaged property to restore it to its pre-damage state.
The policyholder’s selected appraiser and the insurance company’s selected appraiser will examine the supporting documentation, estimates, and discrepancies after establishing an appraiser panel. Next, they’ll attempt to work out their disagreements. In such a case, the three will discuss the problems and attempt a mutually acceptable resolution. The umpire has the last say in disputes that cannot be settled between the two appraisers.
Remarkably, consensus is optional among all members of the appraiser panel. Just two of the three parties—the umpire and one of the appraisers, or the two appraisers together—need to concur. The disagreement ends when two of the three members of the evaluation panel sign the award. The policyholder receives payment of the award amount.
An Example of How to Use an Umpire Clause
Let’s take the scenario where Max gets into a car accident, and his vehicle is wrecked. After realizing he is at fault, he makes a first-party claim with his insurance carrier. After calculating the overall worth of his damaged car, the insurance company offers to give him $10,000 less his $1,000 collision deductible. Max thinks his automobile is worth closer to $15,000 based on his investigation. Max and his insurer decide to utilize the policy’s umpire provision to have an umpire and appraisers establish the car’s worth since they live so far away.
Conclusion
- The umpire clause, which resolves disputes between insurance companies and the insured, is comparable to an arbitration clause.
- To settle disagreements on the claim, each side appoints a separate appraiser who collaborates with the umpire.
- Two of the panel’s three members must concur to determine the matter.
