Appraisal provisions in insurance policies have been getting some much needed attention in the courts over the last few years. An “appraisal,” as defined in a homeowner’s insurance clause, is different from the common connotation given to the term appraisal in everyday language. It is not the same as a real estate appraisal used for valuing a home, nor is it equivalent to an estimated value for an item, such as a car or antique.
Appraisal, as used in a homeowner’s policy, is a tool used for determining the value of a home repair dispute that arises from a covered insurance loss.
Indeed, most first-party property insurance policies contain an “appraisal” clause whereby each party, insured, and insurer, appoint a “disinterested” or “impartial” appraiser who, in turn, selects an umpire to resolve issues of the amount of loss.
The appraisal process is an alternative dispute resolution intended to resolve disputes without the need for litigation. Indeed, Florida courts have concluded that appraisal clauses are preferred, as they provide a mechanism for prompt resolution of claims and discourage the filing of needless lawsuits.
Recently, however, insurance companies have become much more sophisticated regarding appraisal agreements. Insurance companies often send out elaborate agreements detailing the scope of the appraisal before the appraisal process even begins. Those appraisal agreements are quickly becoming the source of many disputes.
One such case was recently decided by the Third DCA. In Citizens v. Casar, 2012 WL 6741083 (3d 2013), the third DCA held that the insurance company was not required to participate in appraisal given that there was an ongoing dispute over the scope of the appraisal agreement.
In that case, the insured sustained a significant water loss. Citizens denied a portion of the claim, but agreed to open coverage for another portion of the claim. The insureds submitted a written appraisal demand for the entire claim. Citizens, however, only agreed to participate in appraisal for the portion of the claim that they deemed afforded coverage, but not the whole claim. The insured refused to sign Citizen’s proposed appraisal agreement. As a result, the insured filed suit against Citizens seeking to have the entire claim, as opposed to just a portion of the claim, appraised.
The trial court ordered the parties to appraisal, but the third DCA reversed the trial court. In so doing, the third DCA concluded that Citizens had complied with the terms and conditions found in the insurance policy when it agreed to appraise a portion of the claim, but not the whole claim. The third DCA reasoned that appraisal may be required only as to those disputes concerning which the parties have expressly agreed. And in this instance, there was still very much a live dispute as to the scope of damages that could be included in the appraisal.
Appraisal agreements are often tricky. Insurance companies are becoming more sophisticated and aggressive with their insistence on having an insured sign a detailed appraisal agreement. However, if the scope of that agreement does not fully and completely encompass the scope of loss, then the insured may be forever barred from asserting a claim for those additional damages that fall outside the scope of the agreement.
So before one agrees to sign an appraisal agreement, please make sure that the agreement accurately conveys the scope of damages. If not, then litigation may be required to determine the proper scope of the claim for appraisal.
Consequently, a Miami insurance claims lawyer should always be called to handle significant damage claims and to address any concerns you may have regarding an appraisal agreement.