Butler has been at the forefront of defending insurers against the tidal wave of assignment of benefit (“AOB”) litigation that has hit Florida over the past four years.
Many insurers have been invoking appraisal in an effort to resolve disputes with assignee claimants to prevent lawsuits. Some assignee claimants have tried to resist the appraisal process. This has raised a number of legal issues for insurers, insureds, and assignee claimants.
On March 23, 2016, the Fourth District Court of Appeal (“4DCA”) issued its opinion in the case of Certified Priority Restoration, aao Molina v. State Farm Fla. Ins. Co., No. 4D15-2658 (Fla. 4th DCA March 23, 2016). The case addresses AOBs and appraisal. In Molina, the insured’s house was damaged by water. The insured hired Certified to extract the water and prevent further damage. In return for Certified’s services, the insured gave Certified an AOB so Certified could seek payment directly from State Farm.
Certified made a claim to State Farm requesting $22,104.74. State Farm determined the reasonable value of Certified’s services was $5,412.34. State Farm issued payment for that amount. Also, State Farm sent the insured a letter, with a copy to Certified, stating that, if there was a dispute as to the amount of money owed for Certified’s services, State Farm requested that such a dispute be resolved by the insurance policy’s appraisal provision. To be clear, State Farm was requesting the insured and State Farm participate in the appraisal process, not Certified.
Certified filed a lawsuit claiming State Farm breached the insurance policy by failing to pay the full $22,104.74. State Farm moved to compel the appraisal it requested with the insured. State Farm argued Certified had no right to participate in the appraisal because the appraisal is an obligation that remains with the insured and is not transferred to the assignee.
Certified responded with four arguments. First, Certified argued that water extraction services are not “losses”, thus they are not subject to appraisal. Second, Certified argued that the AOB divested the insured of any ownership right to the water extraction claim, and, simultaneously, vested Certified with a right to sue for non-payment of its water extraction claim. Third, Certified argued that, because it is not a party to the insurance policy, it cannot be compelled to participate in the insurance policy’s appraisal process. And fourth, Certified argued that, because the insured is not a party to the lawsuit, the Court cannot compel the insured to participate in the appraisal.
The trial court issued an order merely granting State Farm’s motion compelling an appraisal. The order did not say who was required/allowed to participate in the appraisal. Certified appealed. The 4DCA affirmed but wrote that since the trial court did not state who (as between the insured or the assignee) was required/allowed to participate in the appraisal, that issue was not before the 4DCA for consideration. The final sentence of the opinion states “[o]ur affirmance is without prejudice to further proceedings in the trial court if either party refuses to proceed with the appraisal.”
This opinion is noteworthy for a few reasons. First, it appears the 4DCA rejected Certified’s arguments that water extraction services are not “losses” and that assigned claims are not subject to appraisal. That should come as good news to insurers. Second, the opinion appears to leave open the possibility that the only proper participants for the appraisal process – even on assigned claims – are the insurer and the insured, not the assignee.
At this point, we will have to see what, if anything, comes out of the trial court following this opinion. As always, we will continue to keep you informed. Should you have any questions, please contact Timothy Engelbrecht.