This blog previously reviewed a case that found homeowners had engaged in substantial litigation activity that amounted to a waiver of appraisal rights under the insurance policy. The 5th DCA in FIGA v. Reynolds found that the homeowners waived their right to appraisal under the policy because of significant involvement in litigation activity that was inconsistent with exercising the appraisal process. In this blog post, we will consider another case from the 5th DCA that reached the opposite conclusion.
In Reynolds, the court considered the following factors in determining the policyholder waived any rights of appraisal: (1) the duration of time that passed between the acknowledgment of coverage and exercise of appraisal rights; (2) engaging in actions inconsistent with appraisal; and (3) the extent of litigation activity by the party demanding appraisal. The court in finding a waiver in Reynolds focused on the insured’s discovery and motion activity during the year the insured waited to pursue the appraisal process.
By contrast, the 5th DCA in FIGA v. Santos found that litigation activity by the insured did not amount to a waiver of the policyholders right to appraisal. As in the Reynolds case, the homeowners filed a claim with HomeWise for damage allegedly caused by sinkhole activity. The cases also are similar because FIGA became activated after HomeWise declared bankruptcy. The 5th DCA applied the same reasoning and case law it relied on in Reynolds in finding that waiver of the right of appraisal occurs when the party demanding appraisal actively participates in litigation or undertakes actions inconsistent with appraisal rights.
In Santos, the court found that the insurance company only acknowledged coverage after receiving recommendations from a neutral evaluator. Prior to that point, HomeWise consistently denied coverage because of damage from sinkhole activity. The court noted that between the time the insurer acknowledged coverage and the demand for appraisal only three months elapsed. Further, the only litigation activity by the insured during that period involved propounding a single discovery request and responding to court filings made by FIGA.
This case is particularly enlightening because both decisions are from the 5th DCA, which permits a comparison of the fact patterns that constitute an appraisal. The duration of litigation and amount of activity both appear to be important factors in the court’s determination that a waiver of appraisal rights has occurred. This means that policyholders need to be cautious about initiation of litigation if there is a possibility that they will later elect to exercise their right to appraisal under the policy. These two cases also reveal that there is a direct correlation between the amount of litigation activity by an insured and the likelihood a court will later find that the insured’s appraisal rights have been waived.
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