Insurance Law Alert

On October 27, 2021, the Second District Court of Appeal reversed a trial court order compelling appraisal that had been issued by Judge Elizabeth Krier of Collier County in American Coastal Insurance Company v. Ironwood, Inc., 2D20-3406. This is an especially exciting result, given that the Second DCA has historically affirmed orders compelling appraisal. It also demonstrates some fine points of statutory and contract interpretation that will benefit carriers seeking to avoid unfair appraisals that can bind a carrier to pay more than even the insured demanded.

The Insured in this case, Ironwood, Inc. (“Ironwood”) initially reported a Hurricane Irma claim as damage only to the roofs at the subject property. That claim was adjusted and coverage issued. Nearly a year after payment was originally issued, Ironwood made a supplemental claim to American Coastal, alleging for the very first time that the doors and windows at the subject property were also damaged as a result of Hurricane Irma. Upon learning of the supplemental claim for doors and windows, American Coastal began its investigation of that portion of the claimed loss. Unfortunately, rather than provide documentation that American Coastal requested, Ironwood opted to demand appraisal and then file suit. After a hearing, Judge Krier ordered the parties to complete appraisal and American Coastal appealed.

American Coastal brought up several issues on appeal, including the failure of Judge Krier to consider the evidence that was presented at the hearing on Ironwood’s motion, which she admitted in her Order. Specifically, she did not make any findings regarding whether Ironwood had complied with all post-loss conditions, as required under Florida law and the policy, in order to be able to take advantage of the appraisal provision. Additionally, American Coastal argued that no coverage determination had been made on the supplemental claim and therefore no appraisal demand could be ripe.

Ironwood tried to argue that coverage had been opened for the roof, which ripened appraisal for the entire claim. American Coastal responded that Florida Statute § 627.70132 (2011) was clear in providing that:

For purposes of this section, the term “supplemental claim” or “reopened claim” means any additional claim for recovery from the insurer for losses from the same hurricane or windstorm which the insurer has previously adjusted pursuant to the initial claim.

Id. In other words, the statute unambiguously prohibits the treatment of a supplemental claim from a hurricane loss as part and parcel of the original claim, which is exactly what Ironwood wanted to do in order to take advantage of the appraisal provision. This language was also incorporated into the policy. Other jurisdictions in Florida have already held that asking for additional recovery from a claim that has already been adjusted is a supplemental claim and cannot “date back” to the original claim. See Goldberg v. Universal Prop. and Cas. Ins. Co., 302 So. 3d 919 (Fla. 4th DCA 2020). The Fourth DCA held that, after an initial adjustment was completed and paid, the insured’s subsequent request for personal property damages fell within the meaning of a supplemental claim under Florida Statute § 627.70132 because it was an “additional claim for recovery” for losses from the same hurricane which the carrier had “previously adjusted.” Id. at 923.

Ultimately, the Second DCA agreed with American Coastal, finding that the testimony and pleadings “evinced a genuine dispute over Ironwood’s compliance with its post[-]loss obligations,” but that the trial court “failed to resolve the dispute before compelling the parties to appraisal.” The Court specifically found that American Coastal’s document requests were reasonable and that Ironwood “is not entitled to an appraisal if it has not adequately responded to them as required by the policy.” The Second DCA also held that the trial court erred in concluding that the windows and doors were a continuation of the initial roof damage claim rather than a supplemental claim. As such, the windows and doors claim was not ripe because no coverage determination had been rendered.

As noted above, this is a great result for the carrier, particularly in a jurisdiction that tends to favor appraisal as a method of dispute resolution. However, allowing claims to go to appraisal when only a portion of it was reported to the carrier initially would actually encourage insureds to “hold back” information about potentially non-covered portions of claims when reporting, so that they can demand appraisal after the carrier opens coverage for the reported portion of the loss. Clearly, even the Second DCA would not stand for such behavior and would reverse an order compelling appraisal in such circumstances.

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