Insurance carriers and policyholders have historically enjoyed the benefits of the appraisal provision included in most property insurance policies. Appraisal tends to be less expensive, time-consuming, and formal compared to traditional litigation. Unfortunately, appraisal is not an option for policyholders in Puerto Rico.
In Berrocales v. Tribunal Superior,1 the Supreme Court of Puerto Rico interpreted the Insurance Code of Puerto Rico as prohibiting all forms of arbitration clauses in insurance policies issued in Puerto Rico. The court concluded that appraisal was akin to arbitration and accordingly was prohibited in insurance policies.
The Puerto Rico Insurance Code inhibits any clause “depriving the insured of its right of access to courts for determination of his rights under the policy in the event of a dispute.”
My reading of the language in the Insurance Code seems to limit only the use of regular arbitration clauses in which a private party will interpret the insurance policy and resolve issues of coverage. An appraisal process, on the other hand, is a contractual right to have the amount of loss decided outside the courts, only when the insurance carrier has acknowledged coverage.
Since Berrocales, appraisal clauses have been prohibited in insurance policies issued in Puerto Rico, which makes a challenge to this court opinion even more unlikely.
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1 Berrocales v. Tribunal Superior, 102 DPR 224, 1974 WL 36882, 2 P.R. Offic. Trans. 281 (P.R. 1974).