What condition provides a means to settle the amount of a loss when the insurer and insured cannot agree?

The appraisal condition is a specific provision commonly found in insurance policies that allows both the insurer and the insured to independently assess the value of a loss when they cannot reach an agreement. This process typically involves both parties hiring their own appraisers, and if those appraisers cannot agree on the loss amount, they then select an umpire to make a final decision. This structured method provides a clear, formal way to resolve disputes regarding loss valuations without resorting to lengthy and potentially contentious legal proceedings.

The rationale behind the appraisal condition is to ensure that both parties have a fair opportunity to present their assessments of the loss, fostering a collaborative yet competitive evaluation process. As a result, this condition helps expedite resolution and allows for a more amicable settlement of claims.

The other options, while relevant to insurance processes, do not specifically address the settlement of loss amounts. The arbitration clause typically involves a broader dispute resolution process that may not solely relate to loss amounts. The subrogation principle deals with the insurer’s right to pursue recovery from a third party after compensating the insured, and the negotiation requirement does not provide a formal method for settling disputes over loss amounts.