September 15, 2026, by Aaron Jacob, Esq.
When your insurance claim is covered under your policy, but you and your insurer disagree on the size/extent of the loss, the appraisal process is an effective way to resolve the dispute without going to court. However, when a loss is only partially covered, some insurers may try to avoid the appraisal process on the parts of the loss that are otherwise covered and ripe for appraisal. New York courts have provided useful examples to help distinguish when appraisal is appropriate or premature for these types of claims.
Appraisal Overview
- Appraisal is a dispute resolution process designed to give policyholders and insurers a neutral way to evaluate and determine the scope of a loss and the extent of damages. In the property insurance context, appraisal is typically used in first-party claims, e.g., claims submitted directly to one’s own insurer for a loss of one’s own property or for related damage.
- Issues that can be resolved through Appraisal: The appraisal process can resolve a wide range of issues, including the scope of damage to real or personal property, the period of restoration, replacement cost value of property, actual cash value of property, demolition costs, the extent of a business interruption loss1, code-upgrade costs, rental income loss, mitigation costs, additional living expenses2, etc. In short, appraisal is an appropriate tool to resolve any dispute between an insurer and a policyholder over the “dollar value of the insurer’s liability” for a covered loss.3 In New York, this can include the value of loss, or the scope of a loss.4
- Valuation vs. Coverage: Appraisals are strictly used to determine the amount or extent of a loss, but they cannot determine whether the underlying claim is covered under your policy in the first place. However, New York case law sometimes has allowed appraisal panels to untangle factual causation questions directly tied to the specific scope of damage.
- Triggering the Clause: Either party can demand an appraisal if there is an unresolved disagreement over the extent of a loss, repair costs, or property values. The demand must usually be made in writing, and the steps are outlined in standard New York fire, property, and auto policies.
- Selecting Appraisers: Both you and the insurance company hire and pay for your own independent, competent appraiser. The two appraisers then select a third neutral umpire. The three-person panel then evaluates the loss and determines a value.
- The Appraisal Award: So long as the panel stayed within the scope of what it was asked to decide, an appraisal award is binding on both a policyholder and the insurer. A court will very rarely modify or vacate the award unless there is a showing of “fraud, bias, or bad faith.”5 This standard has been applied consistently and is a difficult burden to prove.
How Appraisal Works
Triggering a Demand
How to trigger the appraisal process is outlined in your insurance policy and in state law. New York, for example, has codified the appraisal process in Insurance Law § 3408.6 This statute governs the umpire-selection procedure and lets either party apply to court to compel appraisal when the amount of a loss is disputed.
The process almost always requires a written demand, which can be made by either the policyholder or the insurer. After a demand is made, each party selects its own appraiser, and the two appraisers then select a third, neutral and disinterested umpire. The three-person panel “determine[s] the actual cash value, the replacement cost, the extent of the loss or damage and the amount of the loss or damage…”7
Timeliness: Don’t Wait Too Long
The right to demand an appraisal isn’t unlimited in time. Under New York law, it must be exercised within a reasonable period, and what counts as “reasonable” depends on the facts of the case.8 A party can waive its right to an appraisal if it waits too long to demand one. Insurers often claim that an insured waited too long after a loss to demand an appraisal. Another risk of waiting, and another common excuse used by an insurer, is that the damaged property was removed, destroyed, or repaired before it can be inspected, and that appraisal is no longer practical.9
That said, courts have been reluctant to find an appraisal demand untimely just because some repairs had already occurred, particularly where the insurer suffered no real “prejudice.” For example, even a late demand can be proper where an insurer had early notice of the loss and the insurer had an opportunity to inspect and photograph the property shortly after the loss.10 A demand can even be made after litigation has already begun, with courts assessing reasonableness on a case-by-case basis rather than applying a hard cutoff.11 Therefore, a mere delay, standing alone, will not waive the right to appraisal, absent actual prejudice to the insurer.12
The Line Between Valuation and Coverage
Before an insurer will pay for any claim, the loss must be covered under that policy of insurance. Coverage issues are when there is a question or a dispute on whether a given loss is covered under the policy in the first place.
While appraisal is a powerful tool for resolving disputes over the value of a loss, the procedure is only proper when a loss is covered under a policy of insurance. The procedure is not available when there is a genuine question about coverage for the loss itself. That’s because the extent or valuation of damage is a factual question appraisers can decide, while coverage is a legal question that usually requires a court or arbitration panel to resolve. This distinction is made clear in New York Insurance Law § 3408(c).13 So, if a coverage dispute exists for a loss, it generally must be resolved before the loss can go to appraisal.14
Entire Claim Denial
An example of an outright denial and a coverage dispute over an entire loss can be seen in Kawa v. Nationwide Mutual Fire Insurance Co.,15 a case where there was a coverage dispute over what caused the damage to the aluminum siding of an insured’s house. In Kawa, a homeowner’s aluminum siding was damaged after a windstorm hit the property. The homeowner demanded an appraisal to determine how much repair work was needed for aluminum siding. However, the insurer took the position that the damage to the siding was not caused by the windstorm at all, but rather by age, wear and tear, and prior improper maintenance, all excluded causes of loss under that policy.
The Court in Kawa held that because the insurer was disputing whether the storm caused the loss in the first place (i.e., a coverage issue), and not simply how much it would cost to fix the damage from the storm (an issue for appraisal), the dispute went to liability itself, and the appraisal clause didn’t apply until the issue of coverage was resolved.
Notably, Kawa involved a dispute over what caused the entire loss, so appraisal was not appropriate. As discussed below, Kawa is distinguishable from cases where coverage issues exist on only part of a loss or cases where the insurer only claims that there are coverage issues.16
Partial Claim Denials & Pretend Coverage Disputes
The distinction between claims that are ripe for appraisal and those that are not gets murkier still when a loss involves both covered and potentially uncovered damage. Under New York law, when a claim contains both covered and potentially uncovered elements, appraisal generally remains appropriate for the covered portion of the claim. Insurance companies, however, will often try to blur this distinction to refuse or delay appraisal, even where appraisal is otherwise proper for the covered part of a claim. New York courts have repeatedly pushed back on that tactic.
Pottenburgh v. Dryden Mutual Ins. Co.: Claimed Coverage Issues
In Pottenburgh, a homeowner returned from a weekend trip to find the inside and outside of the house spray-painted with vulgarities. He reported the loss to his insurer, and the insurer inspected and photographed the damage within weeks. The homeowner’s public adjuster valued the loss at roughly $81,870 while the insurer’s own estimate came in at about $37,986.17
The homeowner demanded an appraisal to resolve the difference between the two estimates. The insurer refused to participate in appraisal, arguing the dispute wasn’t really about the amount of the loss, but rather about coverage. In this regard, the insurer claimed that the homeowner’s estimate reportedly included items the insurer said weren’t vandalized at all: a fireplace, garage siding, a bathroom, and portions of the plumbing and electrical systems. The homeowner countered that these items were included in the estimate not because they were independently damaged by the vandalism itself, but because properly repairing the indisputably vandalized portions of the house required repairing/replacing these other items too. For example, the homeowner argued that replacing the fireplace was necessary because an exact match for its damaged glass doors couldn’t be found, or that re-siding an entire wall was necessary because replacement siding couldn’t be matched to the weathered, undamaged siding beside it.
The Pottenburgh Court sided with the homeowner. In its decision, the Court held that because the insurer had never actually denied coverage for the vandalism claim itself and never identified any policy language that the Court would need to interpret, the dispute was really about the extent of work needed to fix a loss that was indisputably covered under the policy. The Court held that this is the kind of factual question that falls “squarely within the scope of the policy’s appraisal clause.”
Rivas v. United States Automobile Association: Partially Covered Claims
Rivas,18 a 2025 Supreme Court decision, illustrates that an insurer’s partial denial does not excuse it from appraisal on the covered portions of a loss. In Rivas, a homeowner’s house was damaged when a pipe froze and burst. The insured submitted a claim for approximately $187,000, covering repairs to the bathroom, closets, stairs, bedrooms, and floors, as well as personal property and living expenses. The insurer offered only about $11,000 and issued a partial denial limited to damage to the stairway carpet, a small piece of the overall claim.
The insured demanded appraisal for the covered damage (i.e., everything but the stairway carpet), but the insurer refused, pointing to its partial denial letter. The Rivas Court correctly sided with the policyholder and compelled the insurer to participate in appraisal, noting that the appraisal demand excluded the stairway carpet (the one item with a genuine coverage dispute) and incorporated only the undisputed, covered portions of the loss, which made up the bulk of the claim.
Louati v. State Farm Fire & Casualty Co.: Concurrent Live Coverage Issues
The 2018 decision in Louati19 is a case which shows that appraisal can remain available even alongside a live coverage dispute. There, a policyholder suffered water damage to their property, and the parties disagreed over whether the damage was caused by a burst pipe (a covered cause of loss) or by another, excluded cause. They also disagreed on whether it was necessary to re-tile the entire first floor when the water loss had directly affected only the bathroom.
The policyholder sought appraisal; the insurer opposed it until the causation issue of the loss could be resolved. The First Department agreed that while the issue of causation needed to be resolved first, the separate question of “whether it was necessary to re-tile the entire first floor” presented “factual questions that are properly decided in an appraisal.”
Laxminarayan Lodging v. First Specialty Ins. Corp.: Dressed Up Valuation Dispute as Coverage
A 2023 decision from the SDNY shows just how far some insurers will go to dress up a valuation dispute as a coverage dispute. In Laxminarayan Lodging, LLC v. First Specialty Insurance Corp., the insurer identified six supposed “coverage issues” standing in the way of appraisal: (1) whether physical loss occurred during the policy period, (2) whether the loss was a “prior loss,” (3) whether a wear-and-tear exclusion applied, (4) whether the roof’s age limited any recovery to actual cash value, (5) whether a cosmetic-damage exclusion barred coverage, and (6) whether the roof’s age barred recovery altogether.20
The court wasn’t persuaded. The Court held that because the insurer had already conceded partial coverage, the first issue wasn’t a live dispute at all. Additionally, none of the remaining five actually required the court to interpret any policy language, because the parties agreed on what the exclusions meant and on how old the roofs were. Rather, the policyholder and the insurer’s actual disagreement was which storm caused which damage, and how much that damage was worth. That, the court explained, is a causation dispute, and “apportioning damage causation” is “essentially a factual question” for an appraisal panel, not a legal one for the court.21
What You Need to Compel Appraisal in Court
If your insurer refuses to participate in a properly demanded appraisal, New York courts have identified what a policyholder generally needs to compel the insurer to participate: (1) a policy that contains an appraisal provision; (2) damage to property covered by that policy; (3) submission of a claim arising from the loss; (4) a genuine dispute between the parties over the value of the damages; and (5) a demand for appraisal that the insurer has refused.22
Notably, a policyholder does not need to itemize every specific area of damage underlying the disagreement to get the appraisal process started. Neither the applicable statute, case law, nor the required policy language requires that level of detail up front. Moreover, courts have treated an insurer’s own claims-handling conduct, such as making a partial payment offer during adjustment, as evidence that the real dispute is about amount, not coverage.23
However, greater detail may be recommended in claims where there are genuine issues of coverage on part of a claim. In those cases, your demand should specify that the appraisal is only demanded on the covered portions of the claim and not for the parts of the claim that have coverage issues.
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New Jersey Considerations
In New Jersey, like in New York, the appraisal process is a helpful tool that can be used to resolve disputes between an insured and its insurer in claims for property loss. Briefly,
- New Jersey law requires that all fire insurance policies contain the same or a more favorable appraisal provision that is outlined in N.J. Stat. Ann. § 17:36-5.20. The appraisal process in New Jersey has many of the same rules and restrictions as New York’s appraisal process but also differs in some places.
- The mechanics of the appraisal process in New Jersey are similar to the process in New York. In New Jersey, after an appraisal demand is made in writing, each party selects their own appraiser, and then the two selected appraisers select a third neutral umpire. The umpire then hears both appraisers and reconciles the differences as they see fit.24
- Under New Jersey law, similar to New York (but not identical), appraisal can only be used to resolve a dispute as to the amount of a loss but cannot be used to make legal determinations such as coverage issues or causation.25
- Key Difference in New Jersey: New Jersey courts26 have held that the appraisal process “was not intended to resolve disputes as to the extent of damage, the scope of work required, or the cause of the damage, but rather, only for the amount of the loss.” New Jersey courts therefore differ from New York in that the former have held that “causation” (a legal issue) includes the “extent of damage sustained” from a loss.27
- Stated another way, in New Jersey, the question of what portion of the damage to an insured’s property was caused by a covered cause of loss is ultimately a coverage issue and not appropriately decided during appraisal.28 In New Jersey, appraisal is only appropriate where “there is no dispute as to the extent of damage or the scope of work required.”
- In New Jersey, ongoing coverage issues on part of a claim, or even the entire claim, do not prevent an appraisal from going forward, nor do they preclude either party from invoking the appraisal process.29
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Aboulafia Law Firm LLC works exclusively on behalf of policyholders and has decades of experience fighting insurance companies. Whether you are dealing with a residential or commercial property claim, we are ready to help you. If you are dealing with property damage in New York, don’t navigate the complex claims process alone. For assistance on your insurance claim, please contact us.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
Aaron Jacob is a senior associate at Aboulafia Law Firm LLC. Mr. Jacob is a skilled litigation and coverage attorney and has extensive experience representing commercial and private clients involved in property damage and insurance coverage claims in complex state and federal court matters.
Mr. Jacob focuses his practice on advocating for policyholders in high-exposure property damage cases, insurance recovery claims, coverage disputes, construction-related claims, declaratory judgments, first & third-party claims, business interruption losses, indemnification, additional insured coverage, broker negligence, risk transfer, contractor/subcontractor liability, bad faith claims, contribution claims, breach of contract disputes, and general liability defense, as well as in litigating insurance coverage issues under several policy lines including homeowners, commercial liability, excess/umbrella, businessowners, cargo, freighting, and commercial auto policies.
Footnotes
1. e.g., loss of profit that resulted from another event. ↩
2. See Olson v. E. Mut. Ins. Co., 41 N.Y.S.3d 658, 659 (N.Y. Sup. Ct. 2016) (personal property); Lyden v. Fazio Storage Warehouse Co., 143 N.Y.S.2d 460 (Sup. Ct. 1955) (same); Ram Krishana Inc. d/b/a Motel 6 Sulphur v. Mt. Hawley Insurance Co., 2025 WL 371016, at *3 (S.D.N.Y. 2025) (NY law) (mitigation costs); Woodworth v. Erie Ins. Co., 743 F. Supp. 2d 201, 218 (W.D.N.Y. 2010), on reconsideration in part, 2011 WL 98494 (W.D.N.Y. 2011) (additional living expenses); Duane Reade, Inc. v. St. Paul Fire & Marine Ins. Co., 279 F. Supp. 2d 235, 241–42 (S.D.N.Y. 2003), aff’d as modified, 411 F.3d 384, 399 (2d Cir. 2005) (duration of a business-interruption restoration period, once defined, is a valuation matter). ↩
3. See Schmid v. Allstate Ins. Co., 2017 WL 6994547, at *6 (S.D.N.Y. 2017) citing Zarour v. Pac. Indem. Co., 113 F. Supp. 3d 711, 715 (S.D.N.Y. 2015) (NY law). ↩
4. Pottenburgh v. Dryden Mut. Ins. Co., 55 Misc. 3d 775, 776–778, 48 N.Y.S.3d 885, 886–888 (N.Y. Sup. Ct. 2017). New York differs from New Jersey in this respect. In New Jersey, only value of a loss is appropriate for appraisal, while scope of a loss is not. See, German Auto. of Tinton Falls, Inc. v. Harleysville Ins. Co. of N.J., No. A-2571-13T3, 2014 N.J. Super. Unpub. LEXIS 1952, at *6 (Super. Ct. App. Div. July 29, 2014). ↩
5. Forbes v. Cendant Corp., 205 F.3d 1322 (2d Cir. 2000); Coral Crystal, LLC v. Fed. Ins. Co., No. 17-CV-1007 (LTS)(BCM), 2020 WL 5350306, at *5 (S.D.N.Y. Sept. 3, 2020). ↩
6. See also, Ins. Law § 3404(e); § 3404(g). ↩
7. Ins. Law § 3408(c); see also, Louati v. State Farm Fire & Cas. Co., 161 A.D.3d 701, 702 (1st Dep’t 2018). ↩
8. Chainless Cycle Mfg. Co. v. Security Ins. Co., 169 N.Y. 304, 310 (1901); Peck v. Planet Ins. Co., No. 93-4961 (MBM), 1994 WL 381544, at *3 (S.D.N.Y. July 21, 1994). ↩
9. Chainless Cycle Mfg. Co., 169 N.Y. at 312; Uhrig v. Williamsburgh City Fire Ins. Co., 101 N.Y. 362, 366 (1886); see also Richardson v. Merrimack Mut. Fire Ins. Co., No. 98-5967 (JFK), 2000 WL 297171, at *5 (S.D.N.Y. Mar. 21, 2000). ↩
10. Pottenburgh v. Dryden Mut. Ins. Co., 55 Misc. 3d 775, 48 N.Y.S.3d 885 (N.Y. Sup. Ct. 2017). ↩
11. Amerex Grp., Inc. v. Lexington Ins. Co., 678 F.3d 193, 200 (2d Cir. 2012). ↩
12. Zarour v. Pac. Indem. Co., 113 F. Supp. 3d 711, 716 (S.D.N.Y. 2015). ↩
13. The last sentence of Ins. Law § 3408(c) states that “Notwithstanding the provisions of this subsection, an appraisal shall not determine whether the policy actually provides coverage for any portion of the claimed loss or damage.” ↩
14. Penn Central Corp. v. Consol. Rail Corp., 56 N.Y.2d 120, 127 (1982); In re Delmar Box Co., 309 N.Y. 60, 63 (1955); Lee v. Hamilton, 251 N.Y. 230, 234 (1929); Maimes v. Automobile Ins. Co., 112 Misc. 656, 657, 183 N.Y.S. 690, 691 (Sup. Ct., Monroe Cnty. 1920), aff’d, 196 A.D. 921, 187 N.Y.S. 943 (1921). ↩
15. Kawa v. Nationwide Mut. Fire Ins. Co., 174 Misc. 2d 407, 408, 664 N.Y.S.2d 430, 431 (Sup. Ct. 1997). ↩
16. Pottenburgh, 55 Misc. 3d 775, 778 (N.Y. Sup. Ct. 2017) (distinguishing Kawa). ↩
17. Pottenburgh v. Dryden Mut. Ins. Co., 55 Misc. 3d 775, 776–778, 48 N.Y.S.3d 885, 886–888 (N.Y. Sup. Ct. 2017). ↩
18. Leonel Rivas v. United States Automobile Association, No. 036345/2024 (N.Y. Sup. Ct., Rockland Cnty. Aug. 11, 2025). This case was successfully litigated by the author. ↩
19. Louati v. State Farm Fire & Cas. Co., 161 A.D.3d 701, 702, 77 N.Y.S.3d 51, 52 (1st Dep’t 2018). ↩
20. Laxminarayan Lodging, LLC v. First Specialty Ins. Corp., 2023 WL 3382867, at *3–4 (S.D.N.Y. May 11, 2023) citing Milligan v. CCC Info. Servs., Inc., 920 F.3d 146, 154 (2d Cir. 2019). ↩
21. Zarour, 113 F. Supp. 3d at 715–16 citing Amerex, 678 F.3d at 206. ↩
22. Pottenburgh, 55 Misc. 3d at 777; Hyman v. State Farm Fire & Cas. Co., No. 154703/2016, 2016 WL 5630716 (Sup. Ct., N.Y. Cnty. 2016); Ins. Law § 3408. ↩
23. Olson, 54 Misc. 3d at 579, 41 N.Y.S.3d at 660. ↩
24. See DC Plastic Prods. Corp. v. Westchester Surplus Lines Ins. Co., 2022 WL 3083720, at *5 (D.N.J. Aug. 3, 2022). ↩
25. See Rastelli Bros. v. Netherlands Ins. Co., 68 F. Supp. 2d 440, 446 (D.N.J. 1999) citing Elberon Bathing Co., Inc. v. Ambassador Ins. Co., Inc., 77 N.J. 1, 15, 389 A.2d 439 (NJ 1978). ↩
26. Interpreting the statutory language “If we and you disagree on the amount of loss, either may make written demand for an appraisal of the loss.” N.J. Stat. Ann. § 17:36-5.20. ↩
27. Fox v. State Farm Fire & Cas. Co., 2021 WL 4398740, at *7 (D.N.J. Sept. 24, 2021) (insurer argued that the insured’s estimates for repairs included items that were not damaged during the occurrence); Campbell v. N.J. Ins. Underwriting Ass’n, 2014 WL 10679851, at *3 (N.J. Super. Ct. L. Div. Sep. 11, 2014) (“a significant dispute … as to what portion of the damage to plaintiffs’ property was caused by a peril (i.e., wind)”); see also, German Auto. of Tinton Falls, Inc. v. Harleysville Ins. Co. of N.J., No. A-2571-13T3, 2014 N.J. Super. Unpub. LEXIS 1952, at *6 (Super. Ct. App. Div. July 29, 2014) (holding that the dispute concerned more than the value of the loss, but also the extent of the damage sustained). ↩
28. Id. ↩
29. See DC Plastic Prods. Corp. v. Westchester Surplus Lines Ins. Co., No. CV 17-13092 (SRC), 2021 WL 2018918, at *2 (D.N.J. May 19, 2021) (holding that “even if outstanding liability issues exist, there is no reason to delay determining the amount of the loss in the meantime”); see also, Ward v. Merrimack Mut. Fire Ins. Co., 332 N.J. Super. 515, 528, 753 A.2d 1214, 1221 (App. Div. 2000) citing Hala Cleaners, Inc. v. Sussex Mut. Ins. Co., 115 N.J. Super. 11, 12–13, 277 A.2d 897 (Ch. Div. 1971). ↩