Recently, Florida’s Fifth District Court of Appeal (“5th DCA”) interpreted an appraisal provision of an insurance policy which stated that a party must select a “competent and disinterested appraiser.”1 Some other things were discussed in the opinion which I will discuss in further posts, but this part is instructive on what it means for a party’s appraiser to be “disinterested” if the policy appraisal provision requires.

The Brancos’ home sustained suspected sinkhole damage in April 2010. They reported the loss to their homeowner’s insurer, HomeWise Preferred Insurance Company a few days later. In response, HomeWise retained an engineering firm to perform a limited structural assessment. Following receipt of the engineer’s report, HomeWise denied the Brancos’ claim, asserting that a “sinkhole loss,” as defined in the policy, had not occurred. Several months later, the Brancos sued HomeWise for breach of contract. HomeWise filed its answer in May 2011, denying that it had breached the insurance contract because the Brancos’ property had not sustained a covered loss.

In November 2011, HomeWise was declared insolvent and FIGA stepped in to deal with the “covered claims” within the scope of the enabling statutes. As a result, the Brancos’ case was automatically stayed. In August 2012, after the stay expired, the Brancos filed an amended complaint, substituting FIGA as the named defendant due to HomeWise’s insolvency. FIGA then asked the court for an additional stay to allow further investigation of the claim. The court extended the stay, and FIGA completed its additional testing in early March 2013. On April 8, 2013, FIGA answered the Brancos’ amended complaint, admitting, for the first time, “that sinkhole activity was identified as a contributing cause of damage to the [Brancos’] property,” and that the Brancos “are entitled to the amount payable for the actual repair of the loss/actual repairs to the property, not to exceed policy limits. . . .”

The Brancos demanded appraisal in a letter to FIGA on April 30, 2013. On May 23, 2013, the Brancos moved the court to compel appraisal. The appraisal provision of the policy stated:

6. If you and we fail to agree on the amount of loss either may
b. Demand an appraisal of the loss. In this event each party will choose a competent and disinterested appraiser within twenty (20) days after the receipt of a written request from the other

(1) The two appraisers will choose a competent and independent umpire

(2) The appraisers will separately set the amount of the loss and assign the amount of loss attributable to each specific policy coverage

(3) If the appraisers submit a written report of an agreement to us, the amount agreed upon will be the amount of the loss

(4) If they fail to agree, they will submit their difference to the umpire
(5) A decision by any two must assign the amount of loss attributable to each specific policy coverage

FIGA argued that the trial court was wrong in ordering appraisal after the Brancos nominated one of their own attorneys as an appraiser, violating the policy’s requirement of “disinterested” appraisers. The Brancos concede that their policy requires disinterested appraisers, and admit that their attorney is “a partner in the law firm representing them.” Further, the attorney represented them below, as his name appeared on several documents filed on their behalf. The 5th DCA reviewed whether the attorney was “disinterested” and noted that parties to a contract are free to contract for the qualifications of the decision makers in their preferred form of alternative dispute resolution. The court noted that no Florida case has squarely addressed whether a party’s attorney may serve as a “disinterested appraiser.”

The court stated that:

The policy provision, which requires a “disinterested appraiser,” expresses the parties’ clear intention to restrict appraisers to people who are, in fact, disinterested. Given the duty of loyalty owed by an attorney to a client, we conclude that attorneys may not serve as their clients’ arbitrators or appraisers when “disinterested” arbitrators or appraisers are bargained for.

The 5th DCA held:

“Disinterested” is defined as “[f]ree from bias, prejudice, or partiality; not having a pecuniary interest; a disinterested witness>,” Black’s Law Dictionary 536 (9th ed.2009), and “not having the mind or feelings engaged: not interested … free from selfish motive or interest: unbiased,” Merriam–Webster’s Collegiate Dictionary 333 (10th ed.2000). The latter also defines “disinterestedness” as “the quality of being objective or impartial.” (defining “disinterested” as “lacking or revealing lack of interest,” “not influenced by regard to personal advantage,” “free from selfish motive,” or “not biased or prejudiced”).

The court reversed the part of the order that allowed the policyholders’ attorney to serve as their appraiser.

This case contains defining words for the term “disinterested” as used in the appraisal provision. The opinion also contains many other interesting parts for discussion we will address in the next post. So stay tuned, as those involved in appraisals may be interested in what the other part of the Court’s opinion says.

1 FIGA v. Branco, 5D13-2929, 2014 WL 4648208 (Fla. 5th DCA Sept. 19, 2014).