INSURER CAN DEMAND APPRAISAL WHERE IT HAS NOT WHOLLY DENIED COVERAGE

 

Certain property insurance policies provide that if the insurer or insured fail to agree on the quantum of the loss, either party can demand that the quantum be decided by appraisal.  Some policies provide this is a permissible process.  Others provide the process is mandatory provided that a party demands appraisal.  This is something that should be reviewed in a property insurance policy when a dispute arises.

[A]n insurer is entitled to enforce a policy appraisal provision [in a property insurance policy] where it has not wholly denied coverage.”  State Farm Florida Ins. Co. v. Speed Dry, Inc., 45 Fla. L. Weekly D787a (Fla. 5th DCA 2020).

In State Farm Florida Ins. Co., the property insurance policy included a mandatory appraisal provision that provided that either the insured or insurer could demand that the amount of the loss be set by appraisal.  As a result of storm damage to the insured’s house, the issue was whether the insurer could replace missing or damaged shingles with shingles that did not match the other shingles on the roof.   The insured assigned the right to proceeds to Speed Dry which filed an action for declaratory relief that the insured was entitled to either roof replacement or matching roof shingles. The property insurer moved to compel appraisal pursuant to the property insurance policy.

While the trial court denied the insurer’s motion to compel appraisal, the Fifth District Court of Appeal reversed.  The insurer did not dispute there was a covered loss.  Instead, the dispute centered on the amount of the loss – the insurer acknowledged there was a covered loss but disputed the amount associated with the loss.  “Because [the insurer] did not wholly deny coverage for storm damage to the [insured’s] roof, it was entitled to compel appraisal pursuant to the terms of the insurance policy.”  State Farm Florida Ins. Co., supra

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

INSURER’S CONFESSION OF JUDGMENT THROUGH POST-LAWSUIT PAYMENT

The recent opinion in the property insurance coverage dispute, Bryant v. Geovera Specialty Ins. Co., 44 Fla.L.Weekly D1232a (Fla. 4thDCA 2019), discusses the doctrine known as an insurer’s “confession of judgment.”   In this case, an insured suffered water damage from a pipe leak.  The insurer paid the insured $6,000 because of sublimits in the property insurance policy.   There was a $5,000 sublimit for mold and a $1,000 sublimit for water leakage that occurs over a period of 14 days or more.  The insured sued the insurer for covered water damage arguing that the sublimits did not apply.

 

After the lawsuit was filed, an agreed order was entered that stayed the case pending an appraisal.  The appraisal award did not apply the $1,000 sublimit to the water damage from the pipe leak and segregated out damage for mold.  (The insurer already paid the mold sublimit).  The insurer ended up paying the appraisal award for the water damage caused by the pipe leak after deducting its pre-lawsuit sublimit payment.  The insurer paid the award and did NOT challenge the application of the $1,000 sublimit in court, although it could have since coverage issues are decided by courts.

 

An issue became whether the insurer’s post-lawsuit payment of the appraisal award above the $1,000 sublimit constituted an insurer’s confession of judgment.

 

[I]t is well settled that the payment of a previously denied claim following the initiation of an action for recovery, but prior to the issuance of a final judgment, constitutes the functional equivalent of a confession of judgment.” Johnson v. Omega Ins. Co., 200 So. 3d 1207, 1215 (Fla. 2016). The confession-of-judgment doctrine “applies where the insurer has denied benefits the insured was entitled to, forcing the insured to file suit, resulting in the insurer’s change of heart and payment before judgment.” State Farm Fla. Ins. Co. v. Lorenzo, 969 So. 2d 393, 397 (Fla. 5th DCA 2007).

 

The confession-of-judgment doctrine is limited to situations where the filing of the lawsuit “acted as a necessary catalyst to resolve the dispute and force the insurer to satisfy its obligations under the insurance contract.” See, e.g.State Farm Fla. Ins. Co. v. Lime Bay Condo., Inc., 187 So. 3d 932, 935 (Fla. 4th DCA 2016). However, “[i]t is the incorrect denial of benefits, not the presence of some sinister concept of ‘wrongfulness,’ that generates the basic entitlement to the fees if such denial is incorrect.” Ivey v. Allstate Ins. Co., 774 So. 2d 679, 684 (Fla. 2000). Thus, “an incorrect denial of benefits, followed by a judgment or its equivalent of payment in favor of the insured, is sufficient” to constitute a confession of judgment and to allow the insured to recover attorney’s fees.

 

An attorney’s fees award is also appropriate “where, following some dispute as to the amount owed by the insurer, the insured files suit and, thereafter, the insurer invokes its right to an appraisal and, as a consequence of the appraisal, the insured recovers substantial additional sums.” Lewis v. Universal Prop. & Cas. Ins. Co., 13 So. 3d 1079, 1081 (Fla. 4th DCA 2009).

 

Even after Johnson, not all post-suit payments by an insurer will constitute a confession of judgment. We recently held that where an insurer valued a loss, issued payment, and was unaware of the insured’s disagreement with the damage valuation until the filing of the complaint, the insurer’s timely payment of an appraisal award during the litigation did not constitute a confession that the insurer breached the insurance policy. See Goldman v. United Servs. Auto. Ass’n, 244 So. 3d 310, 311-12 (Fla. 4th DCA 2018).

Bryant, supra

 

Here, the appellate court held the insurer’s payment of the post-lawsuit appraisal award constituted a confession of judgment that it incorrectly denied benefits by invoking the $1,000 leakage sublimit.    Once the insurer invoked the sublimits, it raised a coverage issue that only a court could decide and [t]his coverage issue went beyond a mere dispute about the valuation of the loss, so the insureds could not have simply invoked the policy’s appraisal provision before filing suit.”  Bryant, supra.  (“Under Johnson, “[o]nce an insurer has incorrectly denied benefits and the policyholder files an action in dispute of that denial, the insurer cannot then abandon its position without repercussion.” Here, the insurer’s payment of the appraisal award…demonstrated that GeoVera [insurer] had abandoned its pre-suit coverage position that the claim was subject to the $1,000 sublimit for long-term water leakage.”) (internal citation omitted)

 

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

 

INSURED UNDER PROPERTY INSURANCE POLICY SHOULD COMPLY WITH POST-LOSS POLICY CONDITIONS

Your property insurance policy will contain post-loss policy conditions.  Examples include submitting a sworn statement in proof of loss, providing documentation to your insurer, and sitting for an examination under oath.  Insurers will require you, as the insured, to comply with post-loss policy conditions unless they elect to promptly deny coverage.  If you do not comply with such post-loss policy conditions you can forfeit coverage under the policy and/or give the insurer the argument that any lawsuit you filed against the property insurer is premature.  Thus, there really is no upside in refusing to comply with the post-loss policy conditions, which should be done in consult with an attorney or, as the case may be, a public adjuster.   

 

For instance, in Safepoint Ins. Co. v. Sousa, 44 Fla. L. Weekly D994a (Fla. 3d DCA 2019), an insured submitted a property insurance claim for hurricane damage.  The insurer requested the insured submit a sworn statement in proof of loss and provide documentation.  The insured never did although she did submit for an examination under oath.  The insurer ended up tendering insurance proceeds based on its adjustment of the claim.  Thereafter, the insured sued its insurer and moved to compel an appraisal per the terms of the property insurance policy.  In doing so, the insured provided an adjustment / estimate from her public adjuster that was approximately $100,000 more than the proceeds the insured received (which had never been provided to the insurer).  The insurer opposed the motion based on the insured’s failure to comply with post-loss policy conditions (i.e., submitting the sworn statement in proof of loss and documentation).   The appellate court agreed that the insured’s failure to comply with these post-loss policy conditions clearly spelled out in the property insurance policy rendered it PREMATURE for the insured to compel an appraisal.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

 

PROPERTY INSURER INVOKING APPRAISAL UNDER PROPERTY INSURANCE POLICY

shutterstock_398442106Property insurance policies routinely contain an appraisal provision.   The provision may read something to the effect:

 

 

 

If you and we fail to agree on the amount of loss, either may request an appraisal of the loss. However, both parties must agree to the appraisal. In this event, each party will choose a competent and impartial appraiser within 20 days after receiving a written request from the other. . . . If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will set the amount of the loss.

 

Safepoint Insur. Co. v. Gomez, 44 Fla.L.Weekly D239b (Fla. 3d DCA 2019).

 

In Safepoint, the Third District Court of Appeal maintained if the property insurer invokes appraisal, it waives the right to subsequently demand compliance with post-loss conditions in the policy as a condition precedent to that appraisal.  (“‘Appraisal exists for a limited purpose – the determination of the amount of loss.’” By invoking appraisal pursuant to the terms of the insurance policy, Safepoint [insurer] waived the requirement of compliance with post-loss obligations as a condition precedent to that appraisal.”)  Safepoint, supra (internal citation omitted). 

 

In Safepoint, the insured (policyholder) submitted a property insurance claim.  The insurer sent payment for the covered loss, but the amount of payment was disputed.  As a result, the insurer invoked the appraisal process in the property insurance policy, and the insured agreed.  As the appraisal process was underway and an umpire selected, the insurer sent a letter to the insured demanding a sworn statement in proof of loss, examinations under oath, and additional documentation—post-loss requirements of the insured in the insurance policy.  The insured did not comply and the insurer used this non-compliance as an excuse to deny the claim.  This prompted the insured to file a breach of contract lawsuit against the insurer and move to compel the insurer to complete the appraisal process that it invoked. The trial court agreed, as affirmed by the Third District.  The insurer could not refuse to complete the appraisal process that it invoked by thereafter requiring the insured to comply with post-loss conditions in the policy.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.