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Florida Appellate Court Rules the Department of Financial Services Exceeded its Rulemaking Authority

February 20, 2013

Subirats v. Fidelity Nat’l Prop., No. 3D12—68, 2013 WL 616602 (Fla. 3d DCA Feb. 20, 2013)


A rule promulgated by the Florida Department of Financial Services—adding a time limitation to a statute requiring an insurer to notify its insured of available mediation when a first-party property insurance claim is filed—was in excess of the Department’s rulemaking authority and, therefore, the insurer’s failure to notify it’s insured within the deadline set in the rule did not result in a waiver of the insurer’s right to appraisal.


The Subiratses made a claim with their residential property insurer, Fidelity, for water damage to their home from a plumbing failure. Fourteen days later, Fidelity notified the Subiratses in writing of their statutory right to participate in mediation. No mediation occurred. Fidelity completed its investigation and tendered a partial payment.

The Subiratses invoked the appraisal process. While the parties’ appraisers agreed on an amount, the Subiratses’ appraiser failed to sign the reward. Fidelity communicated the lack of cooperation to the Subiratses but received no response. Eventually, Fidelity closed its claim file.

The Subiratses sued Fidelity for breach of contract, but the trial court stayed the action until the completion of appraisal. The Subiratses appealed, claiming Fidelity waived its right to appraisal “by failing to notify them of the right to mediation within five days from the date the claim was filed, pursuant to Section 627.7015, Florida Statutes (2009), and Florida Administrative Code Rule 69J—166.031.”


Whether an insurer’s failure to comply with an administrative rule requiring the insurer to notify its insured of its right to participate in mediation within five days of the filing of a first-party property claim operates as a waiver of the insurer’s statutory right to appraisal.


The Florida Department of Financial Services exceeded its rulemaking authority in promulgating the five-day rule. It had no authority to establish a time limitation or create “an invalid, additional instance in which an insurer waives the right to appraisal.” Thus, the insurer’s failure to provide notice to the insured within five days of the filing of the claim did not result in a waiver of the insurer’s right to appraisal. The appellate court affirmed the order staying the proceedings until the parties complete the appraisal process.


An administrative agency obtains rulemaking authority by legislative mandate, and “an administrative rule may not modify, enlarge or contravene a statute.” The enabling statute here, section 627.7015, contained no time limitation for notifying an insured of the right to mediation, nor did it authorize the Department to promulgate a rule establishing any such time limitation. Further, if a violation of this rule results in a waiver of the right to appraisal, the rule “creates an invalid, additional instance in which an insurer waives the right to appraisal” not previously recognized by statute. For both of these reasons, the appellate court held the rule “impermissibly modified and enlarged the scope of the statute.”