Many insurance policies contain an appraisal provision. If you read our blog on a regular basis, you understand that either party may demand appraisal when a dispute over the amount of loss exists. Since the Florida Legislature enacted the neutral evaluation process found in Florida Statute 627.7074, most policies replace the appraisal provision with neutral evaluation.
State Farm Florida Insurance Company chose not to remove its appraisal provision for sinkhole claims. So State Farm Florida policyholders can demand appraisal if they disagree with State Farm’s assessment of damages. Interestingly, State Farm began refusing to allow the subsurface portion of claims into the appraisal process and, even if the subsurface was included, State Farm refused to pay that portion of the appraisal award. State Farm contended the money is not owed until policyholders entered into a contract for subsurface repair pursuant to Florida Statute 627.707(5)(b).
In January, 2013, Circuit Court Judge Richard Tombrink, sitting in the Fifth Judicial Circuit in Hernando County, Florida, held a dispute over subsurface repairs should be included in the appraisal process, and payment for subsurface repairs was due with the rest of the award issued by the appraisal panel.
This order is significant because the State Farm policy at issue contained an additional Loss Settlement provision in its Sinkhole Loss Endorsement that required a contract for subsurface repairs be submitted to the carrier as a condition precedent to payment of benefits to repair the subsurface. Judge Tombrink followed the Fifth District Court of Appeal’s decision in State Farm Florida Ins. Co. v. Nichols, 21 So.3d 904 (Fla. 5th DCA 2009). In Nichols, the Fifth Circuit held that language was permissive and the policyholder could rely on the plain language of the policy’s Loss Settlement provision requiring payment within 60 days after the the appraisal award.
This is a big win for policyholders who want to repair their properties with a remediation plan that they feel comfortable with. Some carriers require a contract based only on the repair protocol it recommends before payment, even if the remediation plan fails to comply with the policy’s requirements to stabilize the land and building and repair the foundation.
Next week, I will discuss policyholders’ options when carriers refuse to pay appraisal awards within the time delineated in their policies.