The failure to provide a policyholder with statutory notice of mediation prevents an insurer from enforcing appraisal in Florida. In Universal Property and Casualty Insurance Company v. Colosimo, 2011 WL 2031332 (Fla. 3rd DCA May 25, 2011), the Court noted that insurers have statutory and administrative duties to inform policyholders of the alternative mediation process.
Section 627.7015 sets forth an alternative mediation procedure for resolution of disputed property insurance claims and highlights the “particular need for an informal, nonthreatening forum for helping parties … because most homeowner’s … residential insurance policies obligate insureds to participate in a potentially expensive and time-consuming adversarial appraisal process prior to litigation.” § 627.7015(1), Fla. Stat. (2009). The statute specifically provides that “[a]t the time a first-party claim within the scope of this section is filed, the insurer shall notify all first-party claimants of their right to participate in the mediation program under this section.” § 627.7015(2), Fla. Stat. (2009). However,
[i]f 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. § 627.7015(7), Fla. Stat. (2009) (emphasis added).
The statutory requirements are further clarified in rule 69J–166.031 of the Florida Administrative Code, which “implements Section 627.7015, F.S.[,]” and specifies that:
1. Within five days of the insured filing a first-party claim which falls within the scope of this rule, the insurer shall notify the insured of their right to participate in this program.
2. Notification shall be in writing and shall be legible, conspicuous, printed in at least 12–point type, and printed in typeface no smaller than any other text contained in the notice. The first paragraph of the notice shall contain the following statement: “The Chief Financial Officer for the State of Florida has adopted a rule to facilitate the fair and timely handling of residential property insurance claims. The rule gives you the right to attend a mediation conference with your insurer in order to settle any claim you have with your insurer. An independent mediator, who has no connection with your insurer, will be in charge of the mediation….
3. The notice shall also:
a. Include detailed instructions on how the insured is to request mediation, including the address, phone number, and fax number for requesting mediation through the Department;
b. State that the parties have 21 days from the date of the notice within which to settle the claim before the Department will assign a mediator;
Fla. Admin. Code R. 69J–166.031(1) & 4(a) 1–3 (emphasis added).
Interestingly, the policyholders participated in the appraisal process for a period of time before filing a lawsuit. After the lawsuit was filed, the policyholders argued they did not have to complete the appraisal because notice of the alternative mediation procedure was not given. The Court agreed and stated:
Here, although the Insureds initiated the appraisal process, they were unsatisfied with the alleged lack of progress, and decided to pursue litigation instead. There is no language in the statute to indicate that an insured’s commencement or exploration of a contractual appraisal process irrevocably binds that party through the conclusion of the appraisal. Likewise, there is nothing either in the statute, or in case law, demonstrating that the commencement of the appraisal process relieves the insurer of its burden of notification. Were we to follow Universal’s theory of interpretation, we would be contravening the purpose of the statute as an insurance carrier could, by withholding notification, trap an uninformed insured into the very same potentially lengthy and costly appraisal process the statute was meant to guard against.
Insurers should follow Florida statutes and regulations. This decision reaffirms that there are consequences for failing to do so. Without accountability and consequences, laws are meaningless.