Section 3: Must Appraisers Always Consider Causation?

[Trick Question] “An appraisal clause binds the parties to have the extent or amount of loss determined in a particular way.” State Farm Lloyds v. Johnson, 290 S.W.3d 886, 888 (Tex. 2009). See Farmers’ New Endorsement

The answer, as always, depends upon on the terms of the policy’s appraisal clause. For example, Section 8e of Farmers’ Endorsement Amending Conditions, TX 181 2nd Edition states: ‘The appraisers are not authorized to, and shall not decide the cause, or causes, of your claimed loss or any incurred property damage.’ Unlike in a traditional appraisal where the appraisers are to determine damages from a specific occurrence (eg. hail), under Farmers’ policy the appraisers are simply to appraiser the ‘claimed loss’ or ‘incurred property damage.’ A claimed loss is defined as the insured’s ‘claim of direct physical loss or damage to the property.’ Direct physical loss or damage is not an examination of types of damages (hail, wind, fire) but rather claims of damages to physical items of the property — roof, interior or exterior damage — regardless of cause.

One has to wonder, however, how Farmers envisions the appraisal panel determines depreciation (for example damage ’caused’ by wear and tear’) if the “appraisers are not authorized to, and shall not decide the cause, or causes, of your claimed loss or any incurred property damage”

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