Your first reaction to the question in the heading of this article might be an easy and obvious “Yes.” But you might want to reconsider after reading a recent case from Florida’s Fourth District Court of Appeal.1

The case involves a claim from Hurricane Wilma in October 2005. State Farm had paid under $10,000 for roof repairs following its investigation and the policyholder claimed that the roof needed to be replaced. The policyholder filed a civil remedy notice, and stated to State Farm in 2007 it would sue over the damages. State Farm demanded appraisal. The policyholder demanded proof that State Farm had complied with the Florida statutory mediation notification statute before it would participate in the appraisal. The policyholder then filed suit against State Farm for breach of contract without first participating in the appraisal process.

The trial court ordered the case abated pending completion of the appraisal process. The appraisal concluded and resulted in an additional payment of over $600,000 by State Farm for the Hurricane Wilma damages. Litigation then picked up over confirmation of the award and attorneys’ fees and costs. The policyholder argued that it was entitled to a final judgment and fees and costs. State Farm argued that the policyholder was not entitled to have it reduced to a final judgment and there should be no award of fees and costs since the claim was resolved via the contractual process of appraisal. State Farm argued that it did not breach the policy.

Part of the issue interesting to whether you have to complete the appraisal process before filing a lawsuit is the court’s holding that states:

On appeal, State Farm argues that Lime Bay breached the insurance contract by filing suit after State Farm invoked the appraisal provision of the contract policy. ..

State Farm argues that the appraisal provision and the section explaining the prerequisites for legal action should be interpreted together. Specifically, once State Farm made a written demand for appraisal, Lime Bay was required to participate in the appraisal process before filing suit. We disagree with this interpretation of the contract. The contract does not clearly require the parties to complete appraisal as a condition precedent to filing suit. (Emphasis added).

The issue the court highlighted that supported this conclusion is that State Farm failed to prove to the policyholder before the suit was filed that State Farm had complied with Florida law requiring it to timely notify the policyholder of its right to participate in a Department of Financial Services mediation process. Since State Farm failed to comply with Florida law of the mediation notification, it could not state that the policyholder was obligated to complete the appraisal process before filing suit over the claim—this is because the Florida law says that if the insurance carrier fails to comply with the mediation notice requirement in these claims, then it cannot force the policyholder into the appraisal process.2

So I guess the true answer to the question in the heading of this article is what it so often is in law—“It depends.” I know how much the public loves receiving this type of answer from lawyers!


1 State Farm Florida Ins. Co. v. Lime Bay Condo., Inc., 2015 WL 7273414 (Fla. 4th DCA November 18, 2015).
2 F.S.A. 627.7015(2).

 

  • Dale Dobuler

    This outcome is consistent with Florida law holding that an insurer’s failure to provide the statutorily-required notice of the right to free mediation (enacted to provide a first alternative to the expense of appraisal) will operate as a waiver of the insurer’s right to later enforce the policy’s appraisal provision.