Texas Adjuster Practice Test

When an insurer and an insured disagree on the amount of damage, what is the process used to resolve the dispute?

1. Subrogation

2. Material misrepresentation

3. Appraisal

4. Underwriting

The correct answer is: Appraisal

The process used to resolve a dispute between an insurer and an insured over the amount of damage is known as appraisal. This procedure is typically invoked when both parties cannot agree on the value of a loss or the amount of damages that should be compensated. Appraisal is an alternative dispute resolution mechanism that allows each party to select their own independent appraiser. These appraisers evaluate the loss and try to come to an agreement. If they reach a consensus on the loss amount, that figure will guide the settlement. If they cannot reach an agreement, a neutral third party—often referred to as an umpire—is brought in to make a final decision. This process is designed to provide a fair and efficient resolution outside of court, ensuring that both the insurer and insured have a chance to present their perspectives. The other options relate to different aspects of insurance and do not directly pertain to the resolution of disagreement over damage amounts. Subrogation involves the insurer seeking reimbursement from a third party responsible for the loss. Material misrepresentation refers to incorrect or misleading information that could affect the insurance contract. Underwriting is the process insurers use to evaluate risks and determine policy terms, but it does not deal directly with resolving disputes about damage amounts.