Can Mitigation Costs Be Subject to Appraisal?

When I first left property insurance defense in 1985 and started exclusively representing policyholders, the number of appraisal cases decided by appellate courts on a national basis were about the same as the number of wins the Tampa Bay Buccaneers had in their first two years in the NFL. With appraisal today as the ever-increasing predominant method of property insurance claim dispute resolution, appraisal cases are the frequent topic of property insurance law and disputes.

One water loss mitigation company recently argued that its bill for services was not subject to appraisal when the insurer disputed the amount it claimed. The court phrased the argument of the mitigation company:¹

Claiming that the appraisal provision’s language is ambiguous, EDR argues that the provision can reasonably be construed as applying only to property damage resulting from a covered loss, and not also to water mitigation services performed in order to prevent further damage to the property.

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EDR suggests that the appraisal provision applies only to dwelling and other structures coverages that also appear as coverages under the first part of the policy’s Section I.

Could you imagine if a policyholder had to appraise all the coverages for real and personal property losses but then had to have a separate court determination of the remaining mitigation costs of those losses? That would be an extraordinarily impractical method of dispute resolution.

The court disagreed with the mitigation company and reasoned:

We simply find no support for this argument in any provision of the policy or in the structure of the policy. Indeed, the language of the appraisal provision and the structure of the policy plainly and unambiguously provide that disputes over valuation of “Reasonable Repairs” performed pursuant to the policy — such as those performed by EDR in this case — are subject to the policy’s appraisal provision.

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The subject appraisal provision provides that either party may demand an appraisal to resolve a “disagreement regarding the amount of the covered loss.” It is not disputed that the water mitigation services performed by EDR are part of the amount of the covered loss. Reading the policy as a whole and giving the appraisal provision its plain meaning, we conclude that the appraisal provision is unambiguous and that the provision applies to the instant claim for water mitigation services.

If appraisal is to remain an effective alternative dispute resolution process that can put an entire property insurance claim controversy finally to rest, it cannot have these partial resolutions which then invite further litigation and further claim payment delay. This decision was correct on the law and correct on the practical application of the law.

Thought For The Day

You can never protect yourself 100%. What you do is protect yourself as much as possible and mitigate risk to an acceptable degree. You can never remove all risk.
—Kevin Mitnick
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¹ Express Damage Restoration v. Citizens Prop. Ins. Corp., No 3D21-141, — So.3d — (Fla. 3rd DCA May 5, 2021).