A Primer On Appraisal in Florida First-Party Property Damage Claims

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In the wake of Hurricane Irma and other recent natural disasters, Florida courts have weighed in on one of the most important tools for resolution of first-party property damage claims: appraisal. In this post, we will address multiple appraisal issues and how courts have ruled recently on those issues.

Failure to Timely Invoke Appraisal May Constitute Waiver

In Versailles Sur La Mer Condominium Assoc., Inc. v. Lexington Ins. Co., 2018 WL 3827154 (M.D. Fla. Jul. 24, 2018) the insured, a condominium association, submitted a claim for Hurricane Irma windstorm damage. The insurer determined that coverage existed, and made a partial payment. The insurer contended that approximately two weeks later the insured submitted an “entirely new claim”, this time for the policy limits. Based on an engineering investigation which concluded that the alleged damage existed prior to the hurricane, the insurer denied coverage. The insured then filed a civil remedy notice along with a suit in state court.

After the insured’s lawsuit proceeded into discovery, the insured demanded appraisal. The insurer objected on grounds that the demand was untimely and appraisal was inappropriate given the coverage issues. The insured argued that because the insured made a previous claim payment for the property damage, the second claim was only supplemental to the initial claim and thus appropriate for appraisal. The trial court denied the insured’s motion to compel appraisal because the insured waived appraisal of its claim by engaging in substantive discovery in the lawsuit before demanding appraisal and by failing to invoke appraisal when the case initially removed to federal court. The court also agreed with the insurer’s position that coverage issues existed regarding the second claim which could not be submitted to appraisal.

Appraisal Where Multiple Risks Are Insured Under One Policy

In Pernas v. Scottsdale Ins. Co., 2016 WL 47949 (S.D. Fla. Feb. 8, 2016), the insured had two properties insured under one policy, with each listed separately in the policy declarations. The insured alleged water damage to both buildings. The insurer found coverage for one property but not the other, and issued payment for the first property only.

The insured invoked appraisal. When the insurer refused to participate in appraisal, the insured filed a declaratory judgment action seeking a court ruling compelling appraisal.  The court sided with the insurer and held that the mere fact the insurer issued payment for the first property, and that the second property was insured under the same policy, did not make both properties “one property” such that a global appraisal was appropriate. The court considered the second property as a separate risk because it was listed separately in the policy’s declarations. Further, the court held that appraisal was not appropriate for the coverage issues surrounding the second property.

Coverage Not Wholly Denied Where Coverage Issues Exist

In People’s Trust Ins. Co. v. Tracey, 2018 WL 3559914 (Fla. 4th DCA 2018), the insured sustained roof damage from a tornado with ensuing damage to the home’s interior. The insured submitted a claim to the insurer, which confirmed coverage for the interior but not for the roof. Shortly after demanding appraisal, the insured filed suit. The insurer immediately sought appraisal but argued the scope of the appraisal was limited to the interior damage and not to the roof. The trial court denied the motion to compel, on grounds the insurer “predetermined” denial of coverage for the roof. The appellate court reversed, holding that appraisal on coverage issues is inappropriate only where an insurer denies a claim in its entirety. Since the insurer determined there was partial coverage for the claim, the roof coverage issue did not deny them the opportunity for appraisal.

Line-Item Appraisals a Useful Tool in Property Damage Litigation

In McPhillips v. Scottsdale Ins. Co., 2018 WL 3805865 (M.D. Fla. Aug. 10, 2018), the insureds submitted a claim for Hurricane Irma damage. The insurer acknowledged coverage, but disputed the value of the claim. The insureds then filed suit, at which time the insurer moved for appraisal. The insureds objected to appraisal, contending that the 9-month period between the date of loss and when insurer requested appraisal constituted waiver. The court rejected the insureds’ argument and granted the motion for appraisal. The court also granted the insurer’s request for a line-item appraisal, which would provide a breakdown of all proposed repair items relating to both the covered and non-covered portions of the claim. The court reasoned that “[a] detailed line-item appraisal has been found to streamline the litigation process because an appraiser assigns a value for a particular type of damage, which allows the Court to more easily assess coverage disputes.”

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The value of appraisal to the resolution of first-party litigation claims cannot be overstated, and they should be requested pre-suit when possible and if not detrimental to any coverage decision. When demanding appraisal, insurers should state the grounds for the appraisal in a manner consistent with their policy’s appraisal provisions, to include (1) informing the insured as to whether coverage exists; (2) whether any portion of the claim is excluded from coverage; (3) the specific descriptions of those non-covered portions, citing policy language in support; (4) the amount being paid for the claim; and (5) an expressed statement of a dispute between the parties regarding the amount of the loss necessitating appraisal. Where multiple risks exist under one policy, it is important to delineate which damage – both covered and non-covered – pertains to which risk, to avoid any confusion if or when appraisal is requested. Finally, insurers should consider obtaining line-item appraisal awards regardless of whether or not the claim is in litigation so long as it does not jeopardize any existing coverage denial.