Adjustment before appraisal occurs in three typical scenarios. The most common is that the insurance company completes an investigation and the policyholder disagrees with the amounts, creating a demand for appraisal by one party or the other after good faith negotiations fail. Two other adjustment scenarios are becoming much more common and the trend is towards more litigation, as indicated in yesterday’s ruling in Citizens Property Insurance Corporation v.Maytin, No. 3D10-693 (Fla. 3rd DCA December 29, 2010).
The trend is becoming the norm and is creating a litigation mess to follow an adjustment mess:
…Maytin filed suit for breach of contract against Citizens, he moved to compel appraisal. Citizens answered the complaint and asserted that Maytin failed to comply with post-loss conditions and prevented Citizens from fully inspecting his property, thereby, precluding the invocation of the appraisal clause under the insurance policy.
On the authority of Citizens Property Insurance Corp. v. Galeria Villas Condominium Association, No. 3D10-807 (Fla. 3d DCA Nov. 24, 2010), we reverse the trial court’s grant of the motion to compel appraisal and remand for an evidentiary hearing to determine if Maytin complied with the post-loss conditions under the policy… see also Sunshine State Ins. Co. v. Corridori, 34 So. 3d 129, 131 (Fla. 4th DCA 2010) (“[W]here the ‘insured cooperates to some degree or provides an explanation for its noncompliance, a fact question is presented’ regarding the necessity or sufficiency of compliance . . . . Whether appellees’ compliance with the policy terms was necessary or sufficient is a dispute of fact.”)… (emphasis added)
What are two scenarios? One is where insurance companies claim that public adjusters are demanding appraisal before adjustment is complete or any negotiations take place attempting to resolve or adjust the amount of the loss. Many claims executives tell me that their first notice of a problem or disagreement is a demand for appraisal made by a public adjuster or the policyholder naming "an appraiser" who is acting like a public adjuster. This, in part, has lead some insurers to remove the appraisal provision from the property insurance policy.
The other scenario, which is becoming the darling fee generation mechanism for many insurance defense attorneys, is to conduct never ending investigations and multiple examinations under oath. Eventually, after months of delayed interrogation and investigation, the policyholder files suit and demands appraisal. QBE Insurance Company has done this. And now, it seems, so is Citizens Property Insurance Corporation–but with arrogance and impunity. Somebody in Florida’s government needs to conduct a new claims audit of Citizens.
The rule of law works well with the former scenario because public adjusters should adjust the loss. Good public adjusters rarely let a matter go to appraisal or litigation without significant attempts at resolution because they lose control of the loss and cause delay in recovery for their client. While this will never work if the insurer will not engage in good faith negotiation and review of past positions, I appreciate a reputable insurance company’s position that there should be good faith adjustment of a loss before parties seek alternative methods of resolution.
The latter scenario is becoming much more commonplace. Some insurance companies treat their customers horribly, with slow and delayed investigation, because the companies lack a sufficient number of motivated adjusters and investigators who determine losses in good faith. Requests for tens of thousands of documents are made, along with multiple examinations. The attorneys for some of these companies wrongly take months to review documents and make follow up requests for information. It is disgusting treatment if one were to use the "golden rule" as a gauge for fairness.
Since the rule indicates that appraisal can be stalled, the new tactic in the last scenario is to never stop asking for more information and investigation. One new bit of information leads to more requests and questions. The insurer takes the position that the matter is not ripe for appraisal because of an alleged "dispute of fact." They always claim that the insured failed to comply with all conditions precedent.
Appraisal as an alternative dispute resolution procedure is not required in many states. Some states regulate the appraisal procedure. Many states have far stricter standards for the time frames and scope of insurer investigation. Many can expect that these issues will be addressed in regulation or statute in Florida during the next several months. There are claims practice problems concerning appraisal and claim investigation which need to be resolved no matter which side of the fence you may find yourself in this debate.