Florida’s Federal Middle District believes it can.1 After Hurricane Irma struck its commercial building in Port Charlotte, Florida, building owners Etcetera, Etc, Inc., filed an insurance claim under their policy with Evanston Insurance Company (“Evanston”). Evanston began its investigation, and as that was underway Charlotte County also inspected the building and issued a “Notice of Unsafe Building” stating the building “was in danger of collapse.”
The County’s notice gave the building owners (“the insureds”) two options: they could either repair or demolish their building. If they chose repairing it, they had to secure all necessary permits and commence the work within 30 days, complying with all applicable building codes. If they opted to demolish the building, they had to secure all permits associated with demolition, including debris removal and complete the demolition within 30 days. If the insureds failed to comply with either option, the County would demolish the building after the 30 days lapsed. The insureds opted to demolish the building.
After receiving a copy of the County’s Notice, Evanston Insurance Company sent a letter to its insureds stating that it did not believe the property needed to be demolished, and that in fact, the County’s notice made it clear that the property could be repaired. Evanston also hired an engineer who agreed the building could be repaired instead of demolished. Evanston further told its insureds that any decision to demolish the property would be voluntary and would not be related to a covered loss. The insureds responded to Evanston acknowledging that although there was some pre-existing damage, Hurricane Irma had caused more damage making it a “total loss.” The letter also notified Evanston that if they wanted to re-inspect the insureds’ building, they needed to do so right away, as the demolition would occur within the next few weeks.
At first, Evanston responded to its insureds by stating it would re-open the claim and schedule a re-inspection to occur. Nonetheless, less than a week before the re-inspection was scheduled, the insureds received correspondence from Evanston Insurance Company that although it acknowledged some covered damage, it was still their position that the property could be repaired (and did not need to be demolished), and for an amount that fell below the windstorm and hail deductible. Accordingly, Evanston did not make payment, but instead told its insureds to submit a repair estimate if it disagreed with Evanston’s position. Instead of awaiting an estimate or continuing to negotiate, Evanston Insurance Company filed a Complaint for Declaratory Judgment against its insureds asking the court to find that,
- The insured property was not a total loss;
- Florida’s Valued Policy Law did not apply to the Policy;
- loss or damage caused by the enforcement of an ordinance or law (1) regulating the construction, use, or repair of any property; or (2) requiring the tearing down of any property, including the cost of removing its debris, was excluded; and
- liability for the loss was limited to any covered damage caused by Hurricane Irma, subject to the Policy deductible and other terms and conditions.
The Defendant-insureds timely answered the complaint. They also sent a request for appraisal to Evanston. The policy here had an appraisal clause similar to many policies; it stated in pertinent part:
If we and you disagree on the value of the property or the amount of loss, either may make written demand for an appraisal of the loss, either may make written demand for an appraisal of the loss. In this event, each party will select a competent and impartial appraiser. The two appraisers will select an umpire. If they cannot agree, either may request that selection be made by a judge of a court having jurisdiction.
Evanston Insurance Company never responded to Defendant-insureds request for appraisal, so the insureds filed a Motion to Compel Appraisal with the court. In determining whether to grant the motion, the court compared situations where insurance carriers deny coverage to those where they acknowledge it,
[While] a dispute regarding a policy’s coverage for a loss is exclusively a judicial question . . . . when an insurer acknowledges that there is a covered loss, any dispute regarding the amount of such loss is appropriate for appraisal. Notably, in evaluating the amount of the loss, an appraiser is necessarily tasked with determining both the extent of covered damage and the amount to be paid for repairs.2
The court found that the question of what repairs are needed to restore a property is a question relating to the amount of loss and not coverage. Evanston acknowledged coverage for the damages relating to Irma, but believed they fell under the deductible, while the insureds believed the damages amounted to a “total loss.” The court found that because both parties agreed there was at least some damage due to a covered cause of loss, the remaining dispute over the scope of damage was appropriate for appraisal.
Evanston Insurance Company argued that the Defendant-insureds waived their right to go to appraisal by demolishing the building, making appraisal impossible. Although there is not much in the way of authority on this issue under Florida law (as the court acknowledged), the court did not find waiver here. The court noted these facts to supports its position:
- Evanston had inspected the condition of the [insureds’] building 30 days prior to Hurricane Irma;
- Evanston’s adjusters and engineers inspected again following the hurricane;
- Evanston was given the opportunity to inspect the building prior to the demolition;
These facts outweighed Evanston’s argument that it would be impossible to appraise the property, especially when reports and estimates generated prior to demolition could be relied upon.
Although Evanston Insurance Company was unsuccessful in fighting off appraisal, the court granted its request to have the appraisal panel prepare a detailed line-itemed appraisal award that should include: 1) the actual cost value of all damages at the property prior to demolition, 2) damages resulting from the enforcement of an ordinance or law regulating construction, use, repair, tear-down or debris removal, 3) the actual cash value of covered damages that existed prior to demolition and are directly attributable to Hurricane Irma, and 4) Damages that predated the policy period, to include damages related to Hurricane Charley.
This is an important case for policyholders because it shows how important cooperating with your insurance company can be. For instance, had the insureds not permitted the initial inspection by the insurance company, the court may have come to a different conclusion, as there may have been insufficient evidence for which to conduct an appraisal without those visits. When in doubt, cooperate with your insurance company. If you aren’t sure what that entails, consult with a public adjuster or an experienced policyholder attorney.
1 Evanston Ins. Co. v. Etcetera, Etc Inc., 2:18CV103FTM99MRM, 2018 WL 3526672 (M.D. Fla. July 23, 2018).
2 Id. at *3 (citations omitted; emphasis in original).