Insurance Appraisal Law and Procedure in New York

Insurance appraisal in New York is a statutory process that lets you or your insurer force a binding decision on the dollar value of a covered loss without filing a lawsuit. It is governed by Insurance Law §§ 3404 and 3408, and it works through a three-person panel: one appraiser chosen by each side, plus a neutral umpire. The panel can decide how much the loss is worth. It cannot decide whether your policy covers the loss in the first place.

That boundary is the single most important thing to understand before you send a demand letter, so it comes first.

What Appraisal Can and Cannot Decide

Appraisal handles disputes about numbers. Actual cash value. Replacement cost. The extent and amount of the loss. If your insurer accepts that you had a covered loss but values the damage at $40,000 while your contractor says $120,000, that is exactly the kind of dispute appraisal exists to resolve.

Insurance Law § 3408(c) is explicit that an appraisal “shall not determine whether the policy actually provides coverage for any portion of the claimed loss or damage.”¹ If your insurer has denied the claim on the ground that the damage falls outside the policy, appraisal cannot help you. That fight belongs in court, or in a complaint to the Department of Financial Services.

Many real disputes sit somewhere in between. An insurer might concede that wind hit the roof but argue that part of what you are claiming is pre-existing wear the policy excludes. New York federal courts have generally treated apportionment between covered and non-covered causes as a factual question appraisers can handle, so long as the underlying disagreement is about what happened to the property rather than what the policy language means.

The statute also makes clear that appraisal is not arbitration. It proceeds under the policy’s appraisal clause, not under CPLR Article 75’s arbitration rules.¹ In practice, that means fewer procedural formalities and a narrower scope.

Although §§ 3404 and 3408 originate in the standard fire policy, most homeowner, commercial property, and business interruption policies sold in New York carry the same appraisal clause or a close cousin of it. The procedure below applies broadly.

How to Demand Appraisal

Either side can invoke appraisal. Under the standard fire policy in Insurance Law § 3404, the trigger is a written demand made when the parties cannot agree on actual cash value or the amount of loss.²

You do not have to exhaust settlement negotiations first. The Department of Financial Services has confirmed that where the policy sets forth a procedure for invoking appraisal, that procedure controls, and there is no separate statutory requirement to keep negotiating before demanding it.³

A useful demand letter does a few things at once. It identifies the property and the claim number. It references the appraisal clause in your policy. It states that you are formally invoking appraisal. And it identifies the specific items or categories where your valuation and the insurer’s diverge. Panels generally limit themselves to items that were actually in dispute before the demand was made, so new categories of damage you never raised during the claim can fall outside the appraisal’s scope.

Send the demand by certified mail or another method that produces proof of delivery, and keep copies of everything. If the insurer later claims it never received the demand, that record is your protection.

New York’s Insurance Law does not set a specific deadline for making the demand, but your policy may. Courts have also found waiver where a party sat on the right too long, particularly after litigation had already begun. Demand appraisal as soon as it becomes clear that valuation is the sticking point.

Choosing an Appraiser

Once a written demand goes out, each side has 20 days to select a “competent and disinterested” appraiser and notify the other side of the selection.²

Both words matter. Competent means real expertise in valuing the type of property and type of damage at issue. Disinterested means no financial stake in the outcome and no relationship with a party that would compromise objectivity. Some policies use the word “impartial” in place of “disinterested”; New York courts have treated the two as functionally the same.

Courts have enforced the disinterestedness requirement with some bite. An appraiser who performed the insurer’s initial inspection and wrote the original estimate has been found to create an appearance of bias that disqualifies him in the same claim. A contractor who derived 79% of his income from one insurer was likewise found not disinterested enough to serve as that insurer’s appraiser. The test looks for “evidentiary proof of actual bias or the appearance of bias,” and if you have it, you can raise it in court and force a replacement.

If the other side simply refuses to name an appraiser inside the 20-day window, you can apply to court under Insurance Law § 3408(c) for an order compelling participation.¹

The Umpire and How the Panel Reaches an Award

The two appraisers first try to agree on an umpire. If they cannot agree within 15 days, either party may ask a judge to appoint one. Under Insurance Law § 3408(a), the application goes to a justice of the supreme court in the county where the damaged property is located, or to the county judge, on five days’ written notice to the other side.¹

The two appraisers then evaluate the loss independently. If they agree, their written award is binding. If they disagree, they submit only their differences to the umpire. An agreement by any two of the three (both appraisers, or one appraiser plus the umpire) sets the actual cash value and the amount of loss.²

The umpire’s authority mirrors the appraisers’: valuation only, no coverage questions. There is no courtroom-style procedure, but the umpire has to base the decision on a rational reading of the evidence. Repair estimates, inspection reports, expert assessments, photographs, and receipts all go into that record. An umpire who shows partiality or decides arbitrarily exposes the award to challenge.

What Appraisal Costs

The standard fire policy splits costs the same way in every case. Each side pays its own appraiser. The umpire’s fee and the general expenses of the appraisal are split equally.²

For a residential property claim, appraiser fees typically run from $250 to $500 or more, depending on the complexity of the loss and the appraiser’s credentials. Umpires generally charge more because they review more material. If the umpire brings in outside experts, those costs are shared equally too. Appraisal is dramatically cheaper than litigation for most property disputes, but it is not free. Budget for it before you send the demand.

When Courts Get Involved

Court involvement in a New York appraisal usually falls into one of three buckets.

Compelling a Reluctant Party

Insurance Law § 3408(c) lets either side apply for an order directing the other to comply with an appraisal demand.¹ When an insurer argues that the real dispute is coverage rather than valuation, courts look at whether the underlying disagreement is factual or legal. If the insurer is genuinely contesting whether the policy covers the loss at all, the court may decline to compel appraisal. If the objection boils down to disagreeing with the numbers, the court will order appraisal to proceed.

Appointing an Umpire

If the appraisers cannot agree on an umpire in 15 days, the applicant files in the supreme court or county court where the property sits, with an affidavit showing the failure to agree and proof of proper notice. The court then appoints a competent and disinterested umpire.¹

Challenging Appraiser or Umpire Qualifications

If you believe the other side’s appraiser or a proposed umpire has a disqualifying conflict, raise it in court with evidence. Prior inspection of the property for the insurer, or heavy financial dependence on one carrier’s referrals, are examples that have succeeded.

Can You Challenge the Award?

Yes, but the bar is high. An award signed by any two of the three panel members is binding once filed with the insurer. The grounds for vacating it under CPLR § 7511 are narrow: corruption, fraud, or misconduct in procuring the award; partiality of a neutral arbitrator or umpire; the panel exceeding its authority (for instance, ruling on coverage it had no power to decide); and procedural failures, unless the complaining party knew about the defect during the process and said nothing.⁴

A party has 90 days after receiving the award to file an application to vacate or modify it. Courts can also modify for narrower reasons like a miscalculation of figures, an award on a matter never submitted to the panel, or a formal defect that does not affect the merits.⁴

Being unhappy with the number is not a ground. Courts consistently refuse to second-guess awards where the process was followed and the panel members were qualified and impartial.

What Your Insurer Still Owes You During the Process

Appraisal does not suspend the insurer’s claims-handling duties. Under Insurance Regulation 216, the insurer must accept or reject a claim in writing within 15 business days of receiving a completed proof of loss and all requested documentation. If more investigation time is needed, the insurer must say so in writing inside that same window and explain why. For unresolved claims, the insurer must send a written status update every 90 days.⁵

Once the parties reach an agreement or the panel issues an award, the insurer must pay the agreed or awarded amount within five business days. And this matters during appraisal: where part of the claim is undisputed, the insurer must pay that portion even while the disputed portion is still in appraisal. The insurer cannot hold the whole payment hostage to the appraisal outcome.⁵

If Your Claim Is Under the National Flood Insurance Program

Flood claims paid through the National Flood Insurance Program follow a separate appraisal clause in the Standard Flood Insurance Policy, not New York’s Insurance Law. The mechanics look familiar: written demand, 20 days to name a competent and impartial appraiser, 15 days for the appraisers to agree on an umpire before a judge steps in, an award by any two of the three, and costs split the same way. The scope is limited to dollar amounts for flood damages the policy covers, and because the SFIP is federal, disputes about the process may end up in federal rather than state court.

Practical Steps

Pick your appraiser with care. This is not an advocate in a courtroom sense, but the person you choose will shape the outcome. Look for real experience with the type of damage you have (fire, water, wind) and real familiarity with New York construction costs. Steer clear of anyone with a heavy business relationship with your insurer; the other side will use it to challenge disinterestedness.

Build the documentation early. Panels lean on physical evidence: photographs, contractor estimates, receipts for emergency repairs, engineering reports. Do not wait for the demand to start assembling this file.

Know what appraisal cannot do. If the denial rests on the policy not covering the type of damage, appraisal will not solve it. Litigation or a DFS complaint is the path.

Watch the calendar. The 20-day clock for appraiser selection starts when the written demand goes out. If the insurer misses the deadline, do not wait. File under Insurance Law § 3408(c) to compel participation.¹ Every week you let slide reduces your leverage.

1
New York State Senate. New York Insurance Law Section 3408 – Fire Insurance; Appraisal of Loss; Procedure for Selection of Umpire on Failure to Agree
2
New York State Senate. New York Insurance Law Section 3404 – Fire Insurance Contracts; Standard Policy Provisions
3
Department of Financial Services. OGC Opinion No. 04-09-06 – Right to Invoke Appraisal
4
New York State Senate. New York Code CVP 7511 – Vacating or Modifying Award
5
Cornell Law Institute. 11 NYCRR 216.6 – Standards for Prompt, Fair and Equitable Settlements