The Proper Role of Appraisal in Resolving Disputed Homeowners Insurance Claims

While there are a range of alternate dispute resolution methods that can be employed to resolve a dispute between an insurer and its insured, many policyholders do not understand the difference between the appraisal process and arbitration.  Generally, the appraisal process is focused on the narrow issue of the amount of loss rather than whether a particular claim is covered.  Because arbitration is intended to address and resolve all issues through an adversarial process, the cost of engaging in arbitration is usually far more expensive for policyholders.

The case of Citizens Property Ins. Co. v. Mango Hill #6 Condominium Assoc., Inc. from the Florida Third District Court of Appeals clarifies the distinction between appraisal and arbitration.  The case involved a windstorm damage claim filed by Mango Hill for damage to its multiple condominium buildings during Hurricane Wilma.  Mango Hill notified Citizens of its loss, and the insurance carrier paid the insured $39,900 after adjusting the loss. 

Several months later, the insured submitted a supplemental claim with the assistance of a public adjuster for $846,849.  Citizens indicated it needed a sworn proof of loss in support of the supplemental claim, which was provided by the insured but not until about nine months had passed.  The insured exercised appraisal rights under the policy that resulted in an appraisal award following additional supplemental claims of $1,058,122.  The insured sought to enforce the award.

The insurer advanced multiple defenses in response to the enforcement action that amounted to coverage defenses.  Citizens’ defenses included the insured’s failure to comply with post-loss duties under the policy, such as failure to appear for an examination under oath, non-cooperation, refusing to provide an amended sworn proof of loss, denying the opportunity for an inspection of the premises and related allegations.

The Third District Court of Appeals assessed these defenses by emphasizing the difference between arbitration and appraisal.  The court indicated that while arbitration is intended to address and resolve all issues in a case, the appraisal process is only designed to evaluate the amount of the loss.  This means that defenses related to coverage issues are inappropriate since the appraisal process does not involve a determination on coverage.  The question of whether an insured is entitled to receive money for a loss in the first place must be decided by the trial court through summary judgment or trial.  Issues like whether the loss falls within the scope of the coverage clause, whether the cause of the damage is a covered peril and the insured’s compliance with post-claim duties do not impact the sole issue in an appraisal – value of loss.

The limits of the appraisal process can provide significant advantages to the insured.  The expense incurred by the insured is limited by the narrow focus of the appraisal process.  Arbitration is much more like a contested trial in front of a private judge so the cost is far more expensive.  By keeping the issues in an appraisal focused on the extent of loss, the insured is protected from having the cost of the process become prohibitive.

If you have concerns about your agent or coverage, you should consider speaking to an experienced Florida insurance attorney.  My law firm represents policyholders in claims disputes in Miami and throughout Florida.  The Law Firm of J.P. Gonzalez-Sirgo, P.A. offers free case evaluations.  No Recovery, No Lawyer Fees.  Call 305-461-1095 or Toll Free 1-866-71-CLAIM.

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