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Recently, the Second District Court of Appeal analyzed the unique issue surrounding an insurance policy’s appraisal provision. In Villagio At Estero Condo. Ass’n, Inc. v. American Capital Assurance Corp. Case No. 2D20-141 (Fla. 2nd DCA 2021), the Court reversed the trial court’s order denying Appellant, Villagio At Estero Condominium’s (“Villagio”) motion to stay and compel appraisal to the extent that the determination of coverage is decided prior to appraisal and remanded back to the trial court on the issue to allow appraisal to go forward on a dual track basis.

American Capital Assurance Corporation (“American Capital”) issued Villagio a commercial property insurance policy. Villagio, after suffering damages during Hurricane Irma, filed a claim with American Capital under its insurance policy. American Capital initially estimated the amount of the loss to be $1,736,048.15 and, after the deductible and depreciation were calculated, paid Villagio $263,465.11. Later, American Capital increased its initial estimate of damages to $1,963,996.36 and made an additional payment to Villagio of $70,913.33.

After payment was issued, Villagio filed a sworn proof of loss totaling $28,374,754.40. After deductible, Villagio claimed it was owed $24,237,262.30 in damages. American Capital determined the sworn proof of loss to be grossly inflated and was “an intentional misrepresentation and/or concealment of material fact” deeming the entire claim void and subsequently denied coverage. Villagio filed suit for breach of contract and declaratory judgment and sought appraisal as a remedy. The trial court found that “the issue of coverage has to be determined before the appraisal provision in the contract will apply and that the parties must continue litigation the issue of coverage.”Id. Villagio appealed.

The trial court, when issuing an order compelling appraisal under an insurance policy “must make a preliminary determination as to whether the demand for appraisal is ripe.” Id.; (quoting Citizens Prop. Ins. Corp. v. Admiralty House, Inc., 66 So. 3d 342, 344 (Fla. 2d DCA 2011). An appraisal “demand is ripe where post loss conditions are met and the insurer has a reasonable opportunity to investigate and adjust the claim and there is a disagreement regarding the value of the property of the amount of loss.” Id.; See Leeward Bay, 45 Fla. L. Weekly at D2463; (quoting Admiralty House, 66 So. 3d at 344); (see also State Farm Fla. Ins. Co. v. Hernandez, 172 So. 3d 473, 477 (Fla. 3d DCA 2015). When an insurer admits that there is a covered loss, any dispute on the amount of loss suffered is appropriate for appraisal. Cincinnati Ins. Co. v. Cannon Ranch Partners, Inc. 162 So. 3d 140, 143 (Fla. 2d DCA 2014).

Here, the Court opined that American Capital was attempting to avoid appraisal by claiming that Villagio fraudulently overinflated its claim after American Capital issued coverage. The Court held that “American Capital initially made payment under the policy, thereby admitting coverage” and finding that the issues of coverage and amount of loss were intertwined. Thus the Court reversed the trial court’s decision that the issue of coverage has to be determined before the appraisal provision in the contract will apply. American Capital, upon issuing coverage, could not avoid the interworking of the law by attempting to avoid the appraisal process.

By:  Nikolaos M. Hernandez, Esquire