Insurance Appraisal
Insured Who Rushed to Sue Must Submit to Appraisal
Barry Zalma
October 8, 2012
APPRAISAL IS A CONDITION PRECEDENT TO SUIT
In 2010, Patricia Gainey brought a claim under her homeowner’s insurance policy with American Integrity Insurance, claiming that her residence was damaged by a water leak. After an inspection, American issued a check to Gainey for damages in the amount of $16,349.13.
Displeased with the decision of the insurer Counsel for Gainey sent American a letter advising that the payment was “significantly inadequate” to cover the losses. That same month, Gainey filed and served American with a breach of contract complaint. Gainey also served request for admissions and documents in support of her claim for damages. American asserted by letter that its investigation was ongoing and that it reserved the right to demand appraisal. It also requested that Gainey provide a sworn proof of loss statement.
In response to Gainey’s complaint, American filed a motion to dismiss, urging the trial court to abate litigation in favor of appraisal. Once Gainey provided the sworn proof of loss statement, American requested appraisal, advising Gainey that it did not agree with her estimate.
American moved to abate the proceedings in favor of appraisal, and the motion was initially granted. However, Gainey then moved to enjoin the appraisal and lift the stay of litigation, arguing that American had waived its right to appraisal by failing to provide timely notice of mediation under section a Florida statute.
Adopting Gainey’s position, a judge granted Gainey’s motion to enjoin appraisal, and the insurer appealed. The Florida Court of Appeal was called upon to resolve the dispute in American Integrity Insurance v. Patricia Gainey, No. 2D11-5118 (Fla.App. 09/28/2012).
THE ISSUE
The issue to be resolved was whether the notice provision of the state mediation statute applied under these circumstances where the insured sued the insurance company before proof of loss or attempt at mediation.
The appellate court noted that when the language of the statute is clear and unambiguous and conveys a clear and definite meaning, there is no occasion for resorting to the rules of statutory interpretation and construction; the statute must be given its plain and obvious meaning. Enacted in 1993 the statute provides an alternative procedure for resolution of disputed property insurance claims. From its inception, the statute required that when a first-party claim is filed, the homeowner’s residential insurer shall notify the claimant of the right to participate in the mediation program provided in the statute. In 2005, the statute was amended to provide that an insurer “which fails to give the notice of mediation required is barred from insisting that the insured participate in the appraisal process provided in the insurance policy as a precondition to suit.
Gainey sought to enforce the following provision of the statute, section 627.7015(7), to preclude American from proceeding to appraisal:
“If the insurer fails to comply with subsection (2) by failing to notify a first-party claimant of its right to participate in the mediation program under this section or if the insurer requests the mediation, and the mediation results are rejected by either party, the insured shall not be required to submit to or participate in any contractual loss appraisal process of the property loss damage as a precondition to legal action for breach of contract against the insurer for its failure to pay the policyholder’s claims covered by the policy.”
The express language of the statute describes mediation as a viable option before an insured resorts to litigation. It states:
“The procedure set forth in this section is designed to bring the parties together for a mediated claims settlement conference without any of the trappings or drawbacks of an adversarial process. Before resorting to these procedures, insureds and insurers are encouraged to resolve claims as quickly and fairly as possible. This section is available with respect to claims under personal lines and commercial residential policies for all claimants and insurers prior to commencing the appraisal process, or commencing litigation.”
CONCLUSION
The Court of Appeal concluded that Gainey prematurely commenced litigation against American. As a result the appellate court concluded that the notice requirement does not apply. Accordingly, Gainey cannot rely on the statute to avoid appraisal proceedings where her filing of the lawsuit rendered the statute inapplicable.
ZALMA OPINION
Florida enacted the mediation statute to avoid litigation between insureds and insurers. Ms. Gainey, rather than attempting to resolve her dispute with her insurers, raced to the courthouse and filed suit only to then try to use the statute to avoid appraisal. It failed because the Ms. Gainey, the insured, failed to act fairly and in good faith with her insurer, American. Assuming her dispute as to the amount of loss was proper, viable and based in fact, she should have availed herself of the opportunity to mediate the dispute or go to appraisal to obtain a prompt resolution of the difference between her claim and the insurer’s filing.
She preferred to sue and although she convinced a trial court that appraisal had been waived the appellate court properly compelled appraisal.
SOURCE: zalma.com/blog/?p=3264