Citizens Prop. Ins. Corp. v. Mango Hill #6 Condo. Ass’n, Inc., 117 So. 3d 1226 (Fla. 3d DCA 2013)
The Third District Court of Appeal held that the Florida Arbitration Code does not apply to insurance appraisals. A trial court cannot confirm an appraisal award because doing so would overrule an insurer’s affirmative defenses to a property insurance claim. The proper procedure to dispose of such affirmative defenses is either a motion for summary judgment or trial.
Citizens Property Insurance Corporation (“Citizens”) issued a commercial policy that provided coverage for windstorm damage. The insured’s property was damaged by Hurricane Wilma. The insured made an initial claim, which Citizens paid. A year after the initial claim, the insured made a supplemental claim. Citizens made no payment on the supplemental claim. The insured then demanded appraisal. Citizens agreed to an appraisal of the supplemental claim.
However, in the middle of the appraisal, the insured submitted a revised supplemental claim that included new damages. The revised supplemental claim nearly doubled the estimated amount of the loss. Citizens asked for a stay of the appraisal process, requested examinations under oath and a supplemental sworn statement in proof of loss. The appraisal continued and ultimately resulted in an appraisal award for over $1 million.
The insured moved to confirm this appraisal award. Citizens raised numerous defenses to the enforcement of this appraisal award. The insured convinced the trial court that Citizens’ defenses had been subsumed in the appraisal process or waived by Citizens’ agreement to the appraisal process.
The trial court applied the Florida Arbitration Code and confirmed the appraisal award. The trial judge stated on the record that he was not finding that Citizens had breached the contract. Nevertheless, the court entered a final judgment for the insured.
The appellate court addressed the issue of whether an appraisal award can be confirmed pursuant to the Florida Arbitration Code.
The Florida Arbitration Code is not applicable to appraisal awards.
The appellate court analyzed the differences between appraisals and arbitrations. Appraisers do not have to hear evidence or give the parties formal notice of their activities. And appraisers may engage in ex parte investigations, as long as they ultimately meet to resolve individual differences. Moreover, an insurance appraisal resolves the specific issues of actual cash value and the amount of loss. All other issues are reserved for judicial determination.
By contrast, arbitrations are quasi-judicial proceedings. The parties have the right to present evidence and must have notice of each hearing. The arbitrators must meet together in each session, and cannot engage in ex parte investigations. And, most important, an arbitration disposes of the entire controversy between the parties.
Based on these differences, the appellate court stated that the trial court improperly precluded Citizens from presenting its affirmative defenses. The appraisal determined only the amount of the loss, not Citizens’ liability under the policy. The court noted that Citizens’ affirmative defenses could not be decided by a motion to confirm an appraisal under the Florida Arbitration Code. Those affirmative defenses had to be addressed by trial or motion for summary judgment.