On February 1, 2024, the Supreme Court of Florida issued its opinion in American Coastal Ins. Co. v. San Marco Villas Condominium Ass’n, Inc., 2024 WL 369079 (Fla. 2024), to address a persisting conflict on the timing of appraisal. The specific conflict centered around whether a trial court could compel appraisal of an insured’s loss with concurrent coverage and amount-of-loss disputes prior to first resolving the pending coverage issues.
Prior to San Marco, Florida appellate courts were at odds on whether the trial court must resolve all pending coverage issued before compelling appraisal. The Second District held that appraisal could proceed under the “dual track” with the ability to determine coverage issues following completion of appraisal. However, the Fourth District held that all coverage issues shall be resolved prior to compelling a claim to appraisal.
In the instant case, San Marco was insured under a commercial residential insurance policy issued by American Coastal at the time Hurricane Irma caused damage to buildings in the San Marco community. Following an initial extension of coverage and payment by American Coastal, San Marco submitted its own drastically higher estimate and demanded appraisal based on the amount-in-loss dispute. American Coastal rejected the appraisal demand as premature, claiming its investigation was ongoing.
In response, San Marco filed suit to compel appraisal. After suit was filed, American Coastal informed San Marco in writing it was now denying the claim under the policy condition voiding coverage when an insured commits fraud or material misrepresentations. American Coastal argued to the trial court that appraisal was inappropriate as it had denied coverage for the claim as a whole. The trial court disagreed and entered an order compelling appraisal. On initial appeal, the Second District affirmed the trial court’s order compelling appraisal but certified conflict to the Supreme Court.
Upon hearing the case, the Florida Supreme Court affirmed the district court’s opinion, holding that “a trial court has discretion in determining the order in which coverage and amount-of-loss issues are resolved”; thus, rejecting American Coastal’s “coverage-first rule.”
In basing its determination on the appraisal language in the policy, the Supreme Court determined that: (1) there was a dispute as to the amount of a covered loss based on the parties’ competing estimates and Hurricane Irma being a peril covered by the policy, a point not contested by American Coastal; and (2) the appraisal provision in the policy contemplates scenarios in which appraisal is performed prior to resolution of coverage issues through its retained-rights provision. The court found the retained-rights provision gives American Coastal the right to deny the claim even if there is an appraisal.
Thus, the Supreme Court determined that the appraisal language of the policy provided for appraisal as long as there was some dispute as to the amount of loss, and appraisal could proceed even in the face of unresolved coverage issues.
Notably, the Supreme Court refrained from creating any specific test or bright line rule in determining proper operation of appraisal in these “dual track” type claims. Instead, the opinion reinforces that the trial court retains discretion to determine the sequence in which concurrent issues of coverage and amount of loss are determined.
While the lack of a specific test or bright line rule may cause continued divergence in application throughout the state, San Marco will likely serve as a guide, as opposed to strict precedent, for trial courts in future cases. For example, if a policy contains a retained-rights provision, a trial court will likely determine appraisal can proceed as a carrier will still retain its right to assert coverage defenses afterward. However, if there is no retained-rights provision, a court should give significant weight to resolving all coverage issues before compelling appraisal so as to not preclude or prejudice a carrier from asserting legitimate coverage defenses to a claim.
Accordingly, carriers should review the language of all appraisal provisions across all forms to determine whether a retained-rights provision is present. This understanding should guide formulation of approaches to disputes over demanding and compelling appraisal of specific claims based on likely judicial outcomes in light of San Marco.
