North Carolina’s 3rd Party Appraisal Clause

Did you know that insurance companies routinely pay diminished value claims in North Carolina? An argument could be made that North Carolina, along with Georgia, are the best states for receiving diminished value claim settlements! Favorable laws and the NC third party appraisal clause make it a great state for getting your claim paid.

North Carolina has some of the most stringent accident damage disclosure laws in the nation. These laws apply to both individual sellers as well as car dealerships; which contributes to diminished value claims in North Carolina.

It starts with the vehicle title itself. On the backside of a North Carolina motor vehicle title is a section that asks if your vehicle has ever been involved in a collision or other incident where the repair costs exceed 25% of fair market value. If the answer is yes, you must check that box alerting any potential buyer of your car’s accident history. Ouch, checking that box will present some serious challenges when you go to sell your car.

In addition to the title disclosure, North Carolina also has damage disclosure laws that specifically pertain to cars less than five years old. Dealers and private party sellers of vehicles that are less than five years old are required by law to disclose any damage that’s over 25% of fair market value to the buyer IN WRITING. There’s no sweeping the accident under the rug, you’re required by law to tell the truth about it.

For example, if your car has a market value of $30,000, it only needs to suffer $7,5000 of damage to be subject to the disclosure law. Disclosing your vehicle’s damage history will have a negative impact on its value since most buyers would choose a vehicle without an accident history over one that does. The accident history will scare off many potential buyers and those who do remain interested will demand a steep discount to assume the riskiness of a previously damaged vehicle. This loss of value due to the accident history is known as diminished value.

Here’s how the North Carolina third party appraisal clause works

When you and the insurance company fail to agree on the amount of diminished value (the difference in market value before and after the accident) and that difference is greater than $2,000 or 25% of fair market value, either party can invoke the appraisal clause.

The appraisal clause plays out like this:

  1. Either party makes a written demand invoking the appraisal clause.
  2. Each selects a competent and disinterested appraiser. Meaning, you hire your own appraiser, and the insurance company hires their own disinterested third-party appraiser.
  3. The two appraisers then appraise your diminished value and attempt to reach an agreement on what the settlement amount should be. If they agree on a number; the appraisal clause is over, and the insurance company will send you a check for the agreed upon amount.
  4. If the appraisers fail to agree, an umpire is then selected. The umpire and the appraisers must be licensed by the state of North Carolina as a motor vehicle damage appraiser. The umpire will review the claim and prepare a report to decide on the final diminished value amount. The umpire’s decision can’t be any higher or any lower than what the two appraisers stated in their appraisals. It will fall somewhere in between.
  5. The appraisal clause is nonbinding, meaning either you or the insurance company can reject the final outcome within 15 days.

As you can see, the appraisal clause is a consumer-friendly statute that offers an attractive alternative to filing suit. The combination of the title disclosure, 25% damage disclosure, and third-party appraisal clause makes North Carolina a popular state for diminished value claims.