If you have ever had an issue with your insurance company as a result of damage which you suffered to your property, you may have heard the term “reference” floating around. Reference, sometimes referred to as “Appraisal”, is contained in some homeowner insurance policies and may be something which you are required to do.
The reference procedure is provided for by the standard Massachusetts homeowner insurance policy. It is also provided for under Massachusetts general law chapter 175, section 99 and subsequent sections, including 100A through 100H.
Many Massachusetts homeowner insurance policies contain language providing that, in matters involving property insurance where there is an issue concerning the amount of damage, the insured or a homeowner is required to attempt to resolve the issue of damages through a reference hearing prior to initiating litigation.
In more general terms, reference may arise if, as a result of the inspection and evaluation of damage by the insurance company, you and the insurance company cannot agree on the amount of damage.
A reference hearing is a semi-formal hearing that generally takes place in a conference room or more informal setting than the court room. This hearing allows both the homeowner and the insurance company to present their evaluation of the damage to a panel of three disinterested individuals who will make a decision as to the actual cash value of the damage.
The typical procedure for instituting reference involves a request or demand to the insurance company for reference. Once the parties agree to attend reference, the insurance company selecting one representative to sit on a three person panel. The insured or policy holder also selects a person to sit on this panel. The two selected individuals then select a third person to complete the three person panel. This third person is sometimes referred to as being the umpire.
At the reference hearing, both the insurance company and insured present their opinions, documents, and experts in connection with the damages to the three person panel. Based on this information, the three person panel makes a decision concerning the amount of damages to award, if any.
During the hearing, the homeowner has the right to testify as to the extent of the damage and what the prior condition of the property was before the loss. The homeowner also has the right to introduce documents to the panel concerning the damages and proposed repairs as well as present witnesses to testify as to the cost of the repair. These witnesses can be contractors, experts, or any public insurance adjuster which may have been hired or retained in connection with the evaluation of the damage.
The expense or cost of reference is typically shared between the insurance company and the insured. Typically, each party pays for their own representative and half of the cost of the third referee (umpire). As a general figure, the homeowner should consider budgeting between $1,800.00 to $3,500.00 per day for the reference hearing. Most reference procedures take between one to two days, however, the number of days a hearing may take is generally dependent upon the complexity of the damage, the amounts that are in dispute, and the number of witnesses or experts that may be required to testify.
At the conclusion of their reference hearing, the three person panel will render a decision as to the amount of damage. The decision does not have to be unanimous as the decision only needs to be agreed upon by at least two thirds of the panel. The decision of the panel is binding on all parties in the event that a lawsuit is subsequently filed.
Because of the cost and expense of a reference hearing, the homeowner is generally faced with a somewhat of a difficult decision as to whether to spend the money for a reference hearing or to accept the insurance company’s last and best offer.
In making this decision, the homeowner needs to weigh the cost and expense of a reference hearing against what you may gain in that hearing. As a general rule of thumb, if the difference between you and the insurance company as to the amount of damage that is in dispute is less than $15,000.00, the cost of reference may not be justified. This is a decision that the homeowner needs to make in determining whether reference will, in fact, resolve your dispute as to the damages with the insurance company.
If you are having issues with your insurance policy or are being required to attend a reference hearing, please consult with an attorney who is familiar and experienced with homeowner insurance policies and claims to advise you on your legal rights and offer you alternatives to protect those rights.
DISCLAIMER: This and other segments posted on this website are offered for informational and discussion purposes only and is not offered as legal advice. This office only represents homeowners and property owners. We do not represent insurance companies. The information contained in this segment should not be considered to be legal advice.