Insurance Claim Coverage Appraisal
Florida’s Second District Holds that Once Coverage is Established a Dispute over the Scope of Necessary Repairs Falls Squarely within the Scope of the Appraisal Process
Traub Lieberman Straus & Shrewsberry LLP
October 28, 2014
In Cincinnati Ins. Co. v. Cannon Ranch Partners, Inc., 2014 Fla. App. LEXIS 17033 (Fla. Dist. Ct. App. 2d Dist. Oct. 17, 2014), the Second District reversed a Hillsborough trial court’s denial of Cincinnati Insurance Company’s motion to compel appraisal and abate litigation. Cincinnati Insurance provided sinkhole coverage on a piece of commercial property owned by Cannon Ranch Partners. Cannon Ranch filed a sinkhole claim with Cincinnati Insurance, who retained AMEC Environmental to investigate the sinkhole claim. AMEC determined that sinkhole activity was a cause of damage to the subject property and recommended perimeter compaction grout and shallow chemical grout to remediate the sinkhole activity.
Cannon Ranch later complained that AMEC should have included underpinning and further accused AMEC of being biased based on the fact that Cincinnati Insurance retained them. In response to these concerns, Cincinnati Insurance provided five separate geotechnical firms and requested Cannon Ranch to select one of the five to perform another inspection. Cannon Ranch selected C.E. Odell & Associates, who ultimately determined that underpinning was necessary in addition to the grouting procedures already recommended by AMEC. Cincinnati Insurance then retained Geohazards, Inc. to conduct a peer review of each report. According to Geohazards, underpinning was not necessary and AMEC’s testing was insufficient to establish the necessity of shallow chemical grout.
Cannon Ranch subsequently entered into a contract with RAB Foundation Repair LLC to perform the remediation protocol outlined by C.E. Odell; however, the contract required Cincinnati Insurance’s approval. Cincinnati Insurance refused to approve the contract and demanded appraisal. Cannon Ranch refused to participate in appraisal and instead filed suit for breach of contract. Cincinnati Insurance then filed its motion to abate litigation and compel appraisal. The trial court denied the motion, finding that appraisal was not mandatory under the terms of the policy. The court also took issue with the retained rights provision in the appraisal clause which allows an insurer to participate in appraisal while maintaining its right to deny coverage.
The Second District reversed the order denying Cincinnati Insurance’s motion, stating that the trail court erred in two significant respects. First, the appellate court stated that an appraisal clause cannot be found unenforceable unless it violated either statutory law or public policy. Further, Florida law permits retained rights provisions and such provisions do not render an appraisal clause unenforceable. Since the subject appraisal clause was not violative of either statutory law or public policy, the appellate court found it to be enforceable. Second, the trial court erred in denying Cincinnati Insurance’s appraisal right because the issue in dispute involved a determination of the amount of loss, not a determination of coverage. The court stated that while issues of coverage are exclusively judicial questions, when coverage is admitted by an insurer, any dispute over the amount of loss is appropriate for appraisal. Since the parties did not dispute the cause of damage to the subject property, the remaining issue concerning the scope of the necessary repairs fell “squarely within the scope of the appraisal process – a function of the insurance policy and not of the judicial system.”
The content of this article is intended to provide general information and as a guide to the subject matter only. Please contact an Advise & Consult, Inc. expert for advice on your specific circumstances.
SOURCE: www.traublieberman.com