A recent decision of the United States District Court for the Middle District of Florida Fort Myers Division affirmed the existing law that the insured’s failure to comply with policy provisions is a bar to demanding appraisal.
In Vintage Bay Condominium Association, Inc. v. Lexington Insurance Company, No. 2:18-cv-729-FtM-99-CM, 2019 WL 211433 (M.D. Fla. Jan. 16, 2019), Lexington Insurance Company (“Lexington”) issued a commercial policy to Vintage Bay Condominium Association, Inc. (“Vintage Bay”) for a condominium complex in Marco Island, Florida (the “Property”). On September 10, 2017, the Property sustained covered damages during Hurricane Irma. Lexington paid for the undisputed damage. The policy’s appraisal provision provided “either [party] may demand an appraisal of the loss, but contained no requirement that the other party must respond to and appraisal demand within a particular time period. The policy also included the post-loss conditions for providing, upon Lexington’s request, complete inventories of the damaged and undamaged property, a signed, sworn proof of loss, and that Lexington may examine any insured under oath … about any matter relating to the insurance or the claim, including the insured’s books and records.
Ultimately, Vintage Bay demanded appraisal. Lexington responded by requesting an examination under oath, various documents, and a sworn statement in proof of loss. Vintage Bay did not attend the examination under oath and did not provide the requested documentation, but did submit a sworn proof of loss. Vintage Bay argued that the matter was ripe for appraisal and filed a Petition to Compel Appraisal along with its breach-of-contract action. Lexington argued that appraisal was premature due to Vintage Bay’s failure to comply with post-loss conditions.
The Middle District acknowledged that appraisal is appropriate when there is a covered loss but there is a dispute about the amount of loss. However, “compliance with the post-loss obligations mandated in the policy raises a question of liability” that the courts have the jurisdiction to hear. Florida law is well established that before a party can invoke appraisal, the party must comply with the policy’s post-loss conditions. “The law in this district is clear and has been for nearly twenty years: the party seeking appraisal must comply with all post-loss obligations before the right to appraisal can be invoked under the contract.” State Farm Florida Ins. Co. v. Hernandez, 172 So. 3d 473, 476-477 (Fla. 3d DCA 2015). If insureds could invoke the right to appraisal without complying with the policy’s duties after loss, insurers would be at a disadvantage because the insureds have not provided them with the means to accurately determine the amount of the loss. Vintage Bay, 2019 WL 211433 at *3 (citing Galindo v. ARI Mut. Ins. Co., 203 F. 3d 771, n. 8 (11th Cir. 2000)). Thus, The Middle District held that Vintage Bay could not compel appraisal until it had complied with its obligations under the policy.
This decision is essential in post-Irma litigation to clarify each party’s duties following a loss and when appraisal is appropriate.