A comment to my post, Discovery Efficiency: Dynamite Discovery Decisions, Part 21, asking whether a policyholder is entitled to appraisal after an insurer’s flat coverage denial. Preliminarily, this blog presumes that appraisal is available under the insurance contract. In Florida, if appraisal is available under the insurance contract, the answer is “yes” in some jurisdictions and “no” in some jurisdictions.

Before getting into the different jurisdictional viewpoints as to whether appraisal can proceed in the face of a coverage dispute, however, allow me to point out an important baseline the Florida Supreme Court established about eleven years ago:

[W]hen the insurer admits that there is a covered loss, but there is a disagreement on the amount of loss, it is for the appraiser to arrive at the amount to be paid. In that circumstance, the appraisers are to inspect the property and sort out how much is to be paid on account of a covered peril. In doing so, they are to exclude payment for a cause not covered such as normal wear and tear, dry rot, or various other designated excluded causes.1

Where the insurer says that there is no coverage for the claim whatsoever, however, coverage is a judicial question.2

So, where the insurer flatly denies coverage and the policyholder commences litigation to unravel the inappropriate coverage denial, can appraisal occur while the Judge is deciding coverage? Yes, according to Florida’s Third District Court of Appeal.3 In Florida, this is called a dual-track jurisdiction, where the appraisal panel’s damage analysis can proceed contemporaneously with the Judge’s coverage analysis.4 No, according to Florida’s Fourth District Court of Appeal. In Florida, this is a called a one-track or single-track jurisdiction, where the coverage analysis must conclude before damage is analyzed.5, 6

Would you like my opinion regarding which approach is correct?

  1. Appraisal is a form of alternative dispute resolution.
  2. Alternative dispute resolution is aimed at reducing litigation, thereby unclogging court dockets.
  3. It is a good thing to reduce litigation and consequently ease the overload that our understaffed judicial system has to deal with.
  4. More often than not, appraisal keeps insurance matters out of courtrooms; i.e., carriers often settle claims following appraisal.

Can you now predict which jurisdictional approach I believe is best? Well, I will tell you just in case – the dual-track system, hands down.

1 Johnson v. Nationwide Mut. Ins. Co., 828 So. 2d 1021, 1025 (Fla. 2002) (internal citation and emphasis omitted).
2 Id.
3 See, e.g., Sunshine State Ins. Co. v. Rawlins, 34 So. 3d 753 (Fla. 3d DCA 2010).
4 Bear in mind that in some dual-track jurisdictions, however, the decision as to whether to engage in a dual-track is within the discretion of the trial court and policyholders are to sufficiently comply with policy conditions before appraisal is ripe. See, Citizens Prop. Ins. Corp. v. Mango Hill Condo. Ass’n 12, Inc., 54 So. 3d 578 (Fla. 3d DCA 2011).
5 See, e.g., Citizens Prop. Ins. Corp. v. Michigan Condo. Ass’n, 46 So. 3d 177 (Fla. 4th DCA 2010).
6 Click on this link for a Florida appellate court map: http://www.flcourts.org/courts/dca/dca_dist.shtml