Most homeowners’ insurance contracts contain an appraisal provision wherein either party may compel the other to submit to a binding appraisal process meant to resolve a covered claim. Often, an issue arises as to whether an insurance carrier has waived its right to appraisal, which, like any other contractual right, may be waived under certain circumstances. 

When analyzing whether the right to appraisal has been waived, it is important to understand that Florida courts treat the contractual right to appraisal in much the same way as the contractual right to arbitrate, and have consistently found that there is a strong public policy preference in favor of enforcing appraisal provisions. Prestige Protective Corp. v. Burns International Security Services Corp., 776 So.2d 311 (Fla. 4th DCA 2001); Marine Environmental Partners, Inc. v. Johnson, 863 So.2d 423 (Fla. 4th DCA 2003); and State Farm Fire & Casualty Co. v. Middelton, 648 So.2d 1200 (Fla. 3d DCA 1995).

In order for an insured to establish that a contractual right to appraisal has been waived, it must prove two things:

  1. The insurer is aware of an existing right to appraisal.
  2. The insurer actively participated in litigation or other acts inconsistent with the right to appraisal. Marine at 425.

Furthermore, Florida courts define waiver of the contractual appraisal to appraisal as the “the voluntary and intentional relinquishment of a known right which warrants the inference of relinquishment of that right.” Raymond James Financial Services, Inc. v. Saldukas, 896 So.2d 707, 711 (Fla. 2005); and Marine Environmental Partners, Inc. v. Johnson, 863 So.2d 423 (Fla. 4th DCA 2003). This definition means that an insurer must engage in litigation or other acts that are inconsistent with the contractual appraisal right before a Florida court will find that the contractual right to appraisal has been waived. Thus, the court must consider whether an insurer’s acts are “inconsistent with the contractual right to appraisal.”

Contractual Right of Appraisal

Proving waiver of the right to appraisal is a difficult standard to meet. For example, in Wilson v. Federated, an insurer sought to compel an insured to participate in appraisal. Specifically, four months after the insured’s loss, the property insurer filed an answer to the insured’s complaint asserting the right to appraisal as an affirmative defense and also served discovery on the insured. Thirty days later, the insurer filed a motion to compel appraisal. In arguing against appraisal, the insured took the position that the insurer waived its right to appraisal by engaging in litigation. The court, however, rejected the insured’s argument, and held that the trial court did not abuse its discretion in ordering the parties to appraisal. Wilson v. Federated National Insurance Company, 969 So.2d 1133 (Fla. 2nd DCA 2007). The court reasoned that engaging in minimal discovery was not sufficient enough to support a finding that the insurer had acted inconsistently with its contractual right to appraisal.

Similarly, in Chimerakis v. Sentry, the court enforced a contractual appraisal provision even though the insurer failed to respond to the insured’s request for appraisal within twenty days (the policy required that the insurer appoint its appraiser within 20 days of the insured requesting appraisal). The court held that “an action to compel appraisal by an insured under a homeowner’s insurance policy does not accrue until the homeowner’s policy conditions precedent have been performed or waived, and appraisal is then refused.” Chimerakis v. Sentry Insurance Mutual Company, 804 So.2d 476 (Fla. 3d DCA 2001). 

These cases illustrate just how protected the contractual right of appraisal is, and suggest that so long as a carrier does not reject an appraisal demand, or otherwise act in a manner inconsistent with appraisal, there should not be a finding that the right to appraisal has been waived. These cases also suggest that an insurer must preserve its contractual right to appraisal by asserting that right as an affirmative defense.

While there is a strong policy preference in favor of appraisal provisions, there are limited situations when appraisal may be waived. Specifically, Florida courts have held that if an insurer does not comply with Fla. Stat. § 627.7015(7), then its right to appraisal will be waived.

Fla. Stat. § 627.7015(7) provides that if the insurer fails to notify a first-party claimant of its right to participate in the mediation program under this section or if the insurer requests the mediation, and the mediation results are rejected by either party, then the insured shall not be required to submit to or participate in any contractual loss appraisal process of the property loss damage as a precondition to legal action for breach of contract against the insurer for its failure to pay the policyholder’s claims covered by the policy. In QBE Insurance Corp v. Dome, the Southern District held that the insurer waived its contractual right to appraisal by failing to comply with the mediation notification provisions of Fla. Stat. § 627.7015. QBE Insurance Corp v. Dome Condominium Association, Inc. 577 F.Supp.2d 1256 (S.D. Fla. 2008)

Obviously, each of the factual scenarios wherein an insured may successfully claim that its insurer has waived the contractual right to appraisal have not been addressed; however, the leading cases in Florida make clear that courts are reluctant to find that an insurer has waived its contractual right to appraisal, and will certainly require clear acts that the insurer rejected appraisal or acted in a manner that is inconsistent with that contractual provision.

James M. Shaw, Esq. practices at DeMahy Labrador Drake Victor Payne & Cabeza, P.A., a full service civil trial firm, specializing in property and casualty defense. He may be reached at 305-443-4850; jshaw@dldlawyers.com; www.dldlawyers.com.