As Chip Merlin wrote in his June 3, 2011, post Mediation Notice Lapse Prevents Appraisal Process, “insurers should follow Florida statutes and regulations. . . . Without accountability and consequences, laws are meaningless.” Florida’s Fourth District Court of Appeal recently held State Farm accountable for failing to comply with its statutory and administrative duties to inform its policyholder of an alternative mediation process. The consequence for State Farm was that it could not force its policyholder into the appraisal process. Gassman v. State Farm Florida Ins. Co., No. 4D11–360 (Fla. 4th DCA November 2, 2011).
The statute and administrative code section from this case provides a mechanism through which insurers are obligated to notify their policyholders of their right to participate in a mediation program designed to encourage resolution of claims. The plain language of the statute and administrative code provide that if an insurer does not give written notice of the right to mediate, the policyholder is not required to engage in the appraisal process as a prerequisite to litigation.
Gassman filed a lawsuit against State Farm for damages sustained to her property as a result of Hurricane Wilma. They could not agree on the extent of damage and cost of repairs. State Farm demanded appraisal and filed a motion to stay the lawsuit pending the completion of the appraisal process, which the trial court granted. The question on appeal was whether State Farm complied with Florida Statute §627.7015 by notifying Mrs. Gassman of her right to participate in the alternative mediation program when she filed the claim with State Farm. State Farm did not provide its policyholder with the notice of the mediation program. State Farm argued that it did not violate §627.7015 because there was never a “dispute between an insurer and an insured relating to a material issue of fact.” §627 .7015(9).
State Farm argued that because there was no “dispute” between it and the policyholder, it did not have to give the notice of mediation. The question for the Fourth District was whether one of the exceptions to the requirement of notice applied. Section 627.7015(9) lists the exceptions:
(9) For purposes of this section, the term “claim” refers to any dispute between an insurer and an insured relating to a material issue of fact other than a dispute:
(a) With respect to which the insurer has a reasonable basis to suspect fraud;
(b) Where, based on agreed-upon facts as to the cause of loss, there is no coverage under the policy;
(c) With respect to which the insurer has a reasonable basis to believe that the claimant has intentionally made a material misrepresentation of fact which is relevant to the claim, and the entire request for payment of a loss has been denied on the basis of the material misrepresentation; or
(d) With respect to which the amount in controversy is less than $500, unless the parties agree to mediate a dispute involving a lesser amount.
The Court held that the claim did not fit any of the exceptions. As a result, the policyholder was not required to submit to the appraisal process, and the Court overturned the trial court order granting State Farm’s motion to stay litigation and complete the appraisal process.
Our society is based on a principle that rules and laws guide us in establishing norms and minimum standards to be followed. Failure to follow those rules and laws has, and must have, consequences. Albert Einstein once said:
You have to learn the rules of the game. And then you have to play better than anyone else.