Florida Insurance Law Blog : Florida Insurance Lawyer & Attorney : Mark Nation Law Firm : Orlando, Longwood, Gainesville

In The Florida Insurance Guaranty Association, Inc. v. Shadow Wood Condominium Association, ____ So.3d ____ (Fla. 4th DCA December 2, 2009), FIGA moved for appraisal of a condo claim.  The insured argued that FIGA's predecessor waived its right to demand appraisal by failing to provide the insured notice of the state sponsored mediation program pursuant to 627.7015(2). 

Subsection (2) of 627.7015 requires the insurer to "notify all first-party claimants of their right to participate in the mediation program under" section 627.7015 "[a]t the time a first-party claim within the scope of this section is filed."  Citing subsection (7), the court noted that:  

If an insurer fails to comply with the section 627.7015(2) notice requirement, then the insured shall not be required to submit or participate in any contractual loss appraisal process of the property loss damage as a precondition to legal action for breach of contract against the insurer for its failure to pay the policyholder's claims covered by the policy.

The court then noted that the predecessor insurer did not properly notify its insured of the availability of mediation, and then held:

 Because FIGA is bound by Southern Family's failure to notify Shadow Wood of the availability of mediation, we hold that Shadow Wood was not required to submit to the loss appraisal process sought by FIGA.

The 4th DCA made a similar finding in another case released at the same time.  See, The Florida Insurance Guaranty Association, Inv. v. Devon Neighborhood Association, ____ So.3d ____ (Fla. 4th DCA December 2, 2009). 

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In State Farm Florida Insurance Company v. Nichols, ____ So.3d ____ (Fla. 5th DCA November 6, 2009), the insured homeowners submitted a claim to State Farm for sinkhole damage.  The amount of the loss was settled by appraisal.  Although the appraisal awarded an amount for subsurface sinkhole repairs, State Farm refused to pay for the subsurface repairs until after its insureds' entered into contracts for the performance of the repairs. 

State Farm based its position on Florida Statute Section 627.707(5)(b) which states:

The insurer may limit its payment to the actual cash value of the sinkhole loss, not including underpinning or grouting or any other repair technique performed below the existing foundation of the building, until the policyholder enters into a contract for the performance of building stabilization or foundation repairs. After the policyholder enters into the contract, the insurer shall pay the amounts necessary to begin and perform such repairs as the work is performed and the expenses are incurred. The insurer may not require the policyholder to advance payment for such repairs.

The homeowners argued that, notwithstanding the 627.707(5)(b), State Farm's policy itself required State Farm to pay the full amount of the appraisal award within 60 days after the amount of the loss was settled by the appraisal. 

State Farm's policy stated:

 SECTION I - CONDITIONS. . . .

10. Loss Payment. We will adjust all losses with you. We will pay you unless some other person is named in the policy or is legally entitled to receive payment. Loss will be payable:

a. 20 days after we receive your proof of loss and reach agreement with you; or

b. 60 days after we receive your proof of loss and:

(1) there is an entry of a final judgment; or

(2) there is a filing of an appraisal award with us.

The 5th DCA agreed with the homeowners.  According to the Court, the language of the statute is

permissive, not mandatory.  Because it is permissive, the policy language that requires payment of subsurface repairs within sixty days after the appraisal award is not in conflict with the statute and is binding on the parties to the insurance contract. 

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In State Farm Florida Insurance Company v. Seville Place Condominium Association, Inc., ____ So.3d ____ (Fla. 3rd DCA October 14, 2009) a group of condos was damaged by Hurricane Wilma.  Seville submitted the claim to State Farm.  Seville presented an estimate of damage in excess of $4.6 million.  State Farm initially paid a total of $90,564.62 on the claim.  Thereafter, Seville requested appraisal, which State Farm agreed to if Seville would agree to two conditions: 1) that the appraisal award "must be a line item document, broken down by building and unit number, including the pricing that establishes the award of that item;" and 2) that the insured provided State Farm with a proof of loss form. 

In response, Seville filed suit in Circuit Court for breach of the insurance contract, and declaratory relief regarding coverage and State Farm's waiver of policy defenses.  Seville also requested that the court enforce the appraisal provision without State Farm's required conditions. 

The Court ordered the appraisal without State Farm's conditions.  The Court further ordered that the appraisal be completed in 60 days.  State Farm later moved for an additional 60 days.  The Court granted the extra time, and set a final appraisal hearing for June 28, 2008.  The day before that hearing, State Farm filed an emergency motion seeking removal of the neutral umpire previously appointed by the Court.  State Farm later supplemented this motion with a "request for an 'entirely new panel to conduct a new appraisal,' asserting that otherwise it would "require many weeks, months, and possibly even years to sort through the multiple issues related only to this highly problematic and invalid appraisal gone wrong.'"  State Farm's motion was denied.   

Seville's appraiser and the umpire ultimately agreed on a final appraisal award of $2,960,405.  The trial court confirmed the award, and Seville moved to amend its complaint to add claims for bad faith and punitive damages.  State Farm objected, claiming that Seville could not add bad faith an punitive damage claims until there was a "final judgment" and until all of State Farm's appeals were "finally final."  The Court granted the insured's motion to amend.  State Farm sought cert from the 3rd DCA.

The 3rd totally rejected all of State Farm's arguments holding that the final appraisal award was sufficient basis for the commencement of a bad faith claim, and that there is no requirement for an insured to wait until the exhaustion of all appeals before commencing the bad faith and punitive damages claim.  In conclusion, the 3rd stated:

State Farm originally estimated the Association's covered loss at $324,017.  This is less than eleven percent of the amount determined by the appraisal process.  State Farm will have an opportunity to explain this fact, to explain the extraordinary length of time it has taken to resolve the Association's claim, and to defend State Farm's aggressive legal tactics (including the unfounded imposition of conditions on the contractually-stipulated appraisal provision and the last-minute attempt to remove the neutral umpire).  For now, however, we find no basis in this record to quash the orders below as requested by State Farm. 

Ouch. 

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In Florida Insurance Guaranty Association, Inc. v. Castilla, ____ So.3d. ____, (Fla. 4th DCA September 30, 2009), the insureds submitted a Hurricane Wilma claim to their homeowners insurer.  The insurer paid a portion of the claim, and refused to pay any more.  The insurer then went into liquidation at which point the claim was taken over by FIGA.  

The insureds then submitted the claim to FIGA.  (This was smart because the only way to obtain attorneys fees from FIGA is if FIGA denies a claim through "affirmative action."  See, Fla. Stat. 631.70)  FIGA then refused to pay the claim. 

The insureds filed suit, and in its response FIGA asked for appraisal.  FIGA also requested that the court dismiss/abate the lawsuit and compel appraisal.  The 4th DCA opinion characterized the insured's position as asserting that FIGA waived its right to appraisal by "denying their claim without reserving any rights under the insurance policy."    

The trial court denied the request for appraisal, and the circuit court sitting in its appellate capacity affirmed.  The 4th DCA granted certiorari and reversed, stating: 

FIGA never acted inconsistently with its right to an appraisal, having raised that right at the earliest opportunity in this suit and continued to claim it through its subsequent pleadings.  Asserting that the insured meet all other conditions precedent to claiming a loss is not inconsistent with demanding an appraisal.  Claiming that the loss is not covered is also not inconsistent with a demand for appraisal.

From the opinion, it is unclear if FIGA simply refused to pay more money on a covered claim - thus bringing about a dispute as the amount of the loss; or if FIGA denied coverage for the claim.  Appraisal is appropriate where there is a dispute as to the "amount" of a claim, but is generally not appropriate where there is a denial of coverage. 

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In North Pointe Insurance Company v. Thomas, _____ So.3rd _____ (Fla. 3rd DCA August 26, 2009), the insured homeowners filed a claim with their homeowner's carrier for damage to a tile floor caused when a pot was dropped on the floor.  The insurer denied the claim.  The insureds hired counsel who filed a Petition to Compel Appraisal.  At that point, the insurer withdrew its coverage denial and consented to appraisal.  The appraisal resulted in an award in favor of the insureds in the amount of $115,899.52 (That's some tile floor.  But, when one tile is broken, all contiguous tiles must be replaced by the insurer if they can't be matched with the new tile). 

The insureds then moved to have the appraisal award confirmed, and sought prejudgment interest from the date of the loss.  The insurer claimed that, under its policy, it was only responsible for prejudgment interest if if failed to pay the claim within 60 days of the appraisal award. 

The 3rd DCA recognized that, generally, interest on a loss payable under an insurance policy is recoverable only from the date the payment is due under the terms of the policy.  However, an exception exists where the insurer initially denies coverage and later either acknowledges coverage or coverage is determined by a court.  "Once the insurer denies coverage, it is deemed to have waived its policy provision for deferred payment and, should it pay, becomes responsible for prejudgment interest from the date of loss.  '[I]f the insurer denies liability, interest begins to run from the date of loss, even where the policy provides for payment at a later date.'"  Citing, Independent Fire Insurance Company v. Lugassy, 593 So.2d 570, 572 (Fla. 3rd DCA 1992). 

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In Citizens Property Insurance Corporation v. Cuban-Hebrew Congregation of Miami, Inc., 34 FLW D333 (Fla. 3rd DCA February 11, 2009), the insured property was damaged by wind, and Citizens paid what it believed was the appropriate amount under its policy.  Thereafter, the insured filed suit against Citizens for breach of the insurance contract for underpaying the claim.  The trial court compelled appraisal pursuant to the appraisal clause.  

The appraisal ultimately resulted in an additional payment from Citizens to its insured of $106,646.27.  The trial court granted the insured attorneys fees under Florida Statute Section 627.428.  Citizens appealed the grant of attorneys fees.  The 3rd DCA affirmed the award of attorneys fees stating:

In this case Citizens had underpaid the insured by $106,646.27.  The insured filed suit on the policy.  This was followed by the appraisal and culminated in the judgment in favor of the insured for the additional sum.  We affirm the award of attorney's fees on authority of Travelers Indemnity Insurance Co. of Illinois v. Meadows MRI, LLP, 900 So.2d 676, 679 (Fla. 4th DCA 2005). 

For other cases in this blog on the award of attorney's fees after appraisal, click on the tag, "Attorney's Fees" below. 

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My client, a water extraction and mold remediation company, performed services for a homeowner insured under a State Farm Florida insurance policy. State Farm refused to pay the entire bill, and in accordance with Florida Statute Section 627.7015, Fla. Stat., offered our client the opportunity to participate in the state sponsored mediation program. My client accepted that offer and attended the mediation. The mediation was unsuccessful and our client asked us to file suit on her behalf as assignee of State Farm’s insured.

Both before filing suit and after, State Farm requested appraisal under the homeowner’s policy. However, pursuant to Section 627.7015, Fla. Stat., I asserted that appraisal is not available to an insurer if: 1) the insurer does not notify the insured of their rights to state sponsored mediation at the time a dispute arises; or 2) when the parties participate in an unsuccessful state sponsored mediation. Because my client had participated in an unsuccessful state sponsored mediation, it was my position that State Farm was no longer entitled to ask for appraisal.

The issue was presented to the court on State Farm's Motion to Dismiss/Abate, and the court denied State Farm's motion, holding that State Farm was no longer entitled to ask for appraisal under the policy because it participated in the state sponsored mediation program.

State Farm attempted to avoid the clear application of the statute by arguing that the right to appraisal is only lost when the insurer requests the mediation, but that appraisal remains available when the insured asks for the mediation. I do not believe that the statute makes such a distinction, especially given the fact that the insurer is never allowed to request the mediation. The insurer is required to notify the insured of the insured’s right to state sponsored mediation. It is then up to the insured agree to participate. State Farm’s reading of the statute would result in an absurdity, where the parties would always be required to participate in appraisal after every unsuccessful mediation; something clearly not contemplated by the statute.
 

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The courts continue to award attorneys fees as the result of appraisal, even upon timely payment of the appraisal award by the insurer. 

On November 19, 2008, the Third District Court of Appeal issued its opinion in Holder v. State Farm Insurance Company.    After the insured suffered hurricane damage, the State Farm adjuster offered (and non-binding mediation confirmed) the insured had $9,065.00 in covered losses.  The insured had a $9,000.00 deductible, leaving a net of $65.00 in insurance proceeds for the hurricane loss.

A year later, the insured filed suit, and State Farm invoked the binding arbitration clause of the policy.  The loss was appraised, and resulted in an appraisal award of $50,178.60.  State Farm promply paid the loss.  However, even though the filing of the lawsuit directly resulted in the payment of over 500 times the amount previously offered, the trial judge denied a claim for attorney’s fees.

The Third DCA reversed the trial court's denial of attorney's fees, citing Ajmechet v. United Automobile Ins. Co., 790 So. 2d 575 (Fla. 3d DCA 2001).  Ajmechet states:

When the carrier did not pay Ms. Ajmechet’s claim for her stolen, insured car, she sued the company in the circuit court, where the insurer demanded appraisal. After the appraisers determined the amount of the loss, the carrier paid the award without further ado. Because the payment was obviously effected by the law suit, we hold the insured was entitled to fees under section 627.428, Florida Statutes (2001).

(citation omitted)  It should be clear that when an insurer forces its insured into litigation to recover proceeds that are owed under the policy, the insurer is responsible for attorney's fees.

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On September 26, 2008, the 5th DCA clarified an important point regarding the appraisal process.  In Wroe v. Amica Mutual Insurance Company, the insured owner of a vehicle sued his own insurance company under his collision coverage.  The insured was looking to force the insurance company to pay for repairs to his vehicle after an accident.  The case was referred to appraisal, and the appraisal panel determined the amount of loss.  In a very short opinion, the 5th DCA made clear that the insured is allowed to seek additional money from the insurance company if hidden damage that was not accounted for in the original appraisal is discovered during the course of repairs. 

This is an extremely important decision.  Many times, an insurance company will claim that the insured gets one shot at an appraisal, and that appraisal is a final determination of the entire claim.  The insurance company will then refuse to pay for hidden damage that was not accounted for during the initial appraisal.  This damage is hidden because, in many cases, the full extent of the damage can not be determined until the repairs begin.  The insurance industry is well aware of hidden damage such as this, and routinely provides what are known as "supplements" to the insured if additional damage is discovered during the repair process. 

However, once there is a dispute, and the claim goes to appraisal, the insurance industry often takes the position that the appraisal is final, and there can be no supplements.  In Wroe, the 5th DCA makes clear that if there is further unaccounted for damage discovered after the repairs begin, the insurance company will be responsible. 

There are two takeaways from this opinion.  First, never sign a release after the appraisal.  Such a release may preclude an insured from seeking further money if further damage is discovered.  Second, make sure to alert insureds to contact you immediately if further damage is discovered during the repair process.  This further damage will need to be documented and the insurance company alerted immediately.  

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The court found the insurer did not repudiate the insurance contract because it had partially satisfied the claim under the insurance policy (and in fact paid the undisputed portion of the claim).  The court also noted the dispute involved the "dollar value of covered losses," an issue appropriate for appraisal.  The court found none of the insurer's activities were inconsistent with a demand for appraisal, since it didn't even answer the complaint but instead demanded appraisal.

A significant factor in the opinion is based upon the defendant's status as an "insurer."  Lloyds is comprised of members of a regulated market known as the "London Market," in which individuals offer their personal capital to underwrite insurance risks in exchange for a premium. Specifically, the court noted Lloyds sells only "surplus lines" insurance coverage, a type of insurance which insures risks which are not commonly insurable in the primary commercial market.

Normally, we see that an insurer's failure to comply with Florida Statute Section 627.7015 bars enforcement of the appraisal provision when the insurer fails to notify the insured under the statute.  However, in this case, the court noted that Florida Statute section 627.021(2)(e) specifically states that chapter 627 does not apply to surplus lines insurance.  Additionally, in this case, the Florida Department of Insurance (which is responsible for implementing the mediation program under Florida Statute section 627.7015), advised the court via affidavit and memorandum in evidence, that surplus lines insurers are exempt from the requirements of that statute, but may participate in the program voluntarily.

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When insureds are forced to sue their insurance company in order to receive benefits (not attorneys fees and costs), any payment of insurance policy proceeds by the insurance company should act as a confession of judgment, entitling the insured to properly pled attorney's fees.

In Jerkins v. USF & G Specialty Ins. Co., 2008 WL 678667, 33 Fla. L. Weekly D763 (Fla. 5th DCA March 14, 2008), the insureds sustained damage to their home due to Hurricane Charlie.  The insurance company's claims adjuster determined that the insureds sustained only $715.60 property damage due to the hurricane.  This claim was less than the insurance policy's deductible, and the insurance company made no payment on the claim.

Six months later, the insureds filed a breach of contract action against the insurance company.  The insurance company filed a motion to dismiss or abate the insured's suit in favor of appraisal, in accordance with the insurance policy, which provided, in pertinent part: "If you and we fail to agree on the amount of loss, either may ... Demand an appraisal of the loss...."

After the motion to dismiss was filed, the parties actually went forward with the appraisal process.  The appraisers determined the insureds actual loss was $9,084.29.  The insurance company paid the entire appraisal amount, minus the deductible.

Following payment, the insureds filed a motion for attorney's fee and costs pursuant to Section 627.428, Fla. Stat.  In their motion, the insureds maintained that the insurance company's payment constituted a "confession of judgment," entitling the insureds to attorney's fees.   However, in its opposition to the motion for attorney's fees, the insurance company argued that the insureds were not entitled to attorney's fees because the parties' dispute was resolved through appraisal, not litigation.  After a hearing, the trial court denied the motion for attorney's fees, citing Federated National Insurance Co. v. Esposito, 937 So.2d 199 (Fla. 4th DCA 2006), in support of its decision.

The Fifth DCA determined that generally, payment made after a suit is filed operates as a confession of judgment.  The court claimed it was neither reasonable nor just to allow an insurance company to avoid statutory attorneys fees by simply paying insurance proceeds at some point after suit is filed but before final judgment is entered, likening voluntary payment of the insurer to the equivalent of a confession of judgment.  

The court cited its previous analysis of the confession of judgment doctrine as it relates to section 627.428, in State Farm Florida Insurance Co. v. Lorenzo, 969 So.2d 393, 397-98 (Fla. 5th DCA 2007), where the court determined the confession of judgment doctrine turned on the policy underlying section 627.428: discouraging insurers from contesting valid claims and reimbursing insureds for attorney's fees when they must sue to receive the benefits owed to them.   The court also noted the doctrine is generally not applied where the insureds were not forced to sue the insurance company to receive benefits, because otherwise applying the doctrine would encourage unnecessary litigation by rewarding a race to the courthouse for attorney's fees even where the insurer was complying with its obligations under the policy.

The court further reiterated that while Florida law does hold that payments are treated as confessions of judgment where an insurer first disputes the claim and then settles, "the existence of a bona fide dispute and not the mere possibility of a dispute, is a crucial condition precedent to such a holding."

The court determined the sixth month time lapse between claim and lawsuit, combined with the significant difference in the value of the damages, met the confession of judgment doctrine's standards.

Interestingly, the court commented that if the insurance company's policy contained a mandatory arbitration or appraisal provision, the insureds would not be entitled to attorney's fees under section 627.428.  Since the appraisal clause was permissive, the court did not see appraisal as a condition precedent to filing suit (and therefore recovering attorneys fees under the confession of judgment doctrine).  

Significantly, the court distinguished Federal National Insurance Company v. Esposito, 937 So.2d 199 (Fla. 4th DCA 2006), which the trial court relied upon to deny the insured's motion for attorney's fees and costs.  In Esposito, the insured invoked the appraisal process to settle a dispute she had with her insurance company over the value of hurricane damage to a structure.  Through the appraisal process, the parties agreed upon a value of the damage and the insurer paid the appraisal award in full.  Only after the appraisal process was well underway did the insured file an action seeking to confirm the appraisal award and attorney's fees. The Esposito court held that the trial court erred in confirming the appraisal award and entering judgment in favor of the insured because the parties settled their dispute without litigation.  The court determined the Esposito lawsuit was solely filed to obtain fees, not to settle a dispute. 

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