Recent Third District Court Of Appeal Ruling Regarding Entitlement To Prejudgment Interest Following An Appraisal Award In Florida

Florida’s Third District Court of Appeal just released an opinion related to a policyholder’s claim for prejudgment interest after an appraisal award. In Alberto Jugo v. American Security Insurance Company, No. 3D09-3246 (Fla. 3d DCA 2011), the Third District held that a policyholder was not entitled to prejudgment interest on the supplemental amount of the appraisal award from the date of loss, despite the insurer’s denial of the “supplemental” claim.

In November 2006, Alberto Jugo’s residence was damaged by a fire. He filed a claim under his homeowner’s policy issued by American Security Insurance Co. After numerous inspections, the insurer issued a payment of just under $47,000 in April 2007 for damages sustained in the fire loss. Mr. Jugo asserted the amount of that payment was inadequate and requested the insurer re-evaluate its position. The Third District Court of Appeal refers to this as a “supplemental” claim. The insurer denied the “supplemental” claim on the grounds that the property had been gutted since the time the claim was initially investigated. Mr. Jugo filed a lawsuit against the insurer in June 2008.

In the litigation, the insurer invoked the appraisal provision of the policy, which resulted in an appraisal award in favor of Mr. Jugo for an additional $71,307.44 in damages related to the fire loss. The insurer paid that amount within thirty days from the date of the appraisal award (presumably within the Loss Payment period of the policy). Mr. Jugo then filed a motion for prejudgment interest (as measured from the date of the 2006 loss) on the $71,307.44 amount of the appraisal award. The trial court denied Mr. Jugo’s motion for prejudgment interest and he appealed that denial to the Third District Court of Appeal.

On appeal, Mr. Jugo cited North Pointe Ins. Co. v. Tomas, 16 So.3d 977 (Fla. 3d DCA 2009), and argued the trial court should have followed that case’s reasoning in support of his position. In North Pointe, an insurer denied coverage of a homeowner’s claim (for the complete replacement of a marble kitchen floor) from the outset, maintaining that the loss was excluded under the policy. Only after the policyholder filed a petition to compel appraisal, did the insurer admit coverage and eventually pay the appraisal award. The Third District Court of Appeal in North Pointe held that prejudgment interest from the date of the loss was applicable because the insurer denied coverage for the claim in its entirety.

The Third District Court of Appeal characterized the dispute between Mr. Jugo and his insurer as one involving a disagreement between the parties over quantification of the covered loss, rather than one involving a disagreement between parties over whether the loss is covered under the policy. However, the insurer had issued a denial letter to Mr. Jugo for the “supplemental” claim.

In Jugo, the Court stated:

In the absence of some contract provision or statute to the contrary—and none is apparent on this record—the insured is not entitled to pre-judgment interest on the supplemental amount of the appraisal award as computed from the date of the insured loss.

The Court affirmed the trial court’s denial of Mr. Jugo’s motion for prejudgment interest. Interestingly enough, there is no discussion or acknowledgement of Florida Statute §627.70131(5)(a), which provides:

Insurer’s duty to acknowledge communications regarding claims; investigation.

(5) (a) Within 90 days after an insurer receives notice of a property insurance claim from a policyholder, the insurer shall pay or deny such claim or a portion of the claim unless the failure to pay such claim or a portion of the claim is caused by factors beyond the control of the insurer which reasonably prevent such payment. Any payment of a claim or portion of a claim paid 90 days after the insurer receives notice of the claim, or paid more than 15 days after there are no longer factors beyond the control of the insurer which reasonably prevented such payment, whichever is later, shall bear interest at the rate set forth in s. 55.03. Interest begins to accrue from the date the insurer receives notice of the claim. The provisions of this subsection may not be waived, voided, or nullified by the terms of the insurance policy. If there is a right to prejudgment interest, the insured shall select whether to receive prejudgment interest or interest under this subsection. Interest is payable when the claim or portion of the claim is paid. Failure to comply with this subsection constitutes a violation of this code. However, failure to comply with this subsection shall not form the sole basis for a private cause of action.

This statute took effect in July 2007, which may have been before the insurer reached its decision on Mr. Jugo’s “supplemental” claim, and it is surprising that this statutory provision was not discussed in the Court’s analysis in the opinion.