what is umpire clause
n umpire clause refers to language in an insurance policy that provides for a means of resolution by an unbiased third party if an insurer and an insured cannot agree on the amount of a claim payment an umpire clause is the same thing as an arbitration clause the arbitration process requires both the insurance company and the policy holder to hire an appraiser of their choosing to assess the damages and the cost to repair them the umpire will agree with one or perhaps both of the resulting appraisals and that amount will be used to satisfy the claim 1 understanding umpire clausethe umpire clause is closely related to the appraisal clause which allows a policyholder to hire an independent appraiser to determine the value of their damages in turn the insurance company will also hire their own appraiser the two appraisers will then get together and select an umpire the umpire is basically the arbitrator 1 these three individuals are known as the appraisal panel the purpose of the appraisal panel is to set or determine the amount of loss or the total dollar amount needed to return the damaged property back to it s original condition by repair or replacement with an appraiser panel in place the policyholder s chosen appraiser and the insurance company s chosen appraiser will review the documents estimates and differences between them they ll then try to resolve their differences in such a scenario the three will discuss the issues and try to reach an agreed settlement of the differences if disagreements between the two appraisers can t be resolved the umpire makes the ultimate decision interestingly not everyone one on the appraiser panel has to agree only two of the three individuals need to agree the umpire and either appraiser or the two appraisers themselves once two of the three individuals on the appraisal panel sign the award the dispute is over the amount on the award is paid to the policyholder example of how an umpire clause worksfor example let s say max has a car accident and his car is totaled he is at fault so he files a first party claim with his own insurance company the insurer determines that the value of his totaled vehicle is 10 000 and offers to pay him the 10 000 minus his 1 000 collision deductible according to his research max believes the value of his car to be closer to 15 000 since they are so far apart max and his insurer agree to invoke the policy s umpire clause and have an umpire and appraisers determine the value of the car 