State Farm insurance office. Photo: Diego M. Radzinschi/ALM

Is an insurance adjuster, who receives a contingency fee, considered "disinterested" when it comes to appraisals?

Define "disinterested."

That was the challenge before the Florida Supreme Court in a case involving a homeowner and State Farm Florida Insurance Co., who were at odds over who should perform the appraisal.

The majority agreed with Florida's Second District Court of Appeal's finding that appraisers cannot be disinterested if they or their firms get "compensated for services as a public adjuster with a contingency fee."

However, in breaking away from his colleagues, Justice Jorge Labarga found "the term 'disinterested' is ambiguous."

"The majority's failure to recognize this ambiguity will result in a financial burden on insureds of limited economic means," Labarga wrote. "I respectfully dissent."

It was not the first time that judges disagreed.

In fact, the issue came before the Florida high court after two lower appellate panels reached conflicting conclusions.

Click here to read the full Florida Supreme Court opinion and Justice Labarga's Dissent

Firm also served as public adjuster

John Parrish, the petitioner, purchased homeowners insurance through State Farm. After damages from Hurricane Irma in 2017, he submitted a claim to the insurance company.

Parrish hired Keys Claims Consultants Inc. to provide public adjusting services, which involved assessing the damage and estimating the cost of repairs. Parrish agreed to pay Keys Claims Consultants a contingency fee equal to 10 percent of whatever amount he eventually recovered from State Farm, according to court documents.

But the insurer and Keys Claims Consultants could not agree on the value of the damages, leading Bobby Sims, a representative of Keys, to send a letter to State Farm.

In that letter, Sims demanded the parties use appraisal to determine the amount of the loss, if they couldn't agree. As part of that process, he said each side would select "a qualified, disinterested appraiser." Sims also noted that Keys Claims Consultants' president, George Keys, would serve as appraiser for Parrish.

State Farm pushed back, requesting that Keys Claims Consultants appoint another appraiser.

"According to State Farm, Mr. Keys could not be considered a disinterested appraiser since his firm was already serving as Mr. Parrish's public adjuster," the majority stated in the Supreme Court opinion.

The high court agreed.

Judge John D. Couriel of Supreme Court of Florida

The opinion's author, Justice John D. Couriel, wrote, "Finding no way around the plain meaning of the word 'disinterested,' we approve the Second District's decision … and hold that an appraiser cannot be 'disinterested' if he or she, or a firm in which he or she has an interest, is to be compensated for services as a public adjuster with a contingency fee."

In a 5-to-1 decision with 1 non-participation, the court stated, "Mr. Parrish and State Farm did not agree to hire "independent" appraisers. They agreed to hire "disinterested" appraisers.

Chief Justice Carlos G. Muñiz concurred, along with Justices Charles Canady, Jamie R. Grosshans and Ricky Polston.

Justice Renatha Francis did not participate, and Labarga dissented.

The four justices in agreement continued, "From the text and structure of the policy, and in light of the Florida Insurance Code, we have no reason to think the parties' agreement was anything other than to require that each select an appraiser without an interest in the outcome of the claim."

'Can't do that'

Christopher T. Kuleba of Reed Smith. Courtesy photo

Insurance litigator Christopher Thomas Kuleba, a partner at Reed Smith in Miami, is not involved in the State Farm litigation, but has had to deal with similar issues.

"When there's a dispute, as long as there's some acknowledgment that there is some coverage, the amount goes to an appraisal process provided for under most policies—all standard policies—as long as one side demands appraisal," Kuleba said, adding that the appraiser has to be qualified and disinterested. "The insured in this case tried to appoint a public adjuster, who was on a contingency fee as its appraiser. State Farm, the insurance company, said, 'No. He's not disinterested, can't do that."

Kara Rockenbach Link and Daniel M. Schwarz of Link & Rockenbach in West Palm Beach teamed with Robert A. Kingsford and Lynn S. Alfano of Alfano Kingsford in Maitland to represent State Farm.

Mark A. Boyle and Gregory L. Evans of Boyle Leonard & Anderson in Fort Myers represented Parish.

None returned calls for comment by press time.

State Farm spokeswoman Roszell Gadson said, "We are pleased that the Florida Supreme Court agreed with our position on this issue and believe it is in the best interest of our customers. The insurance contract requires each side to select someone who has no self-interest, including financial interest, in the appraisal."

Labarga's dissent

In reaching its decision, the high court turned to a familiar source.

"With no evidence within either Mr. Parrish's contract or Florida's Insurance Code indicating that we should do otherwise, we determine and apply the word's plain meaning," the majority wrote. "When Mr. Parrish and State Farm entered into their contract in 2016, Black's Law Dictionary defined 'disinterested' as '[f]ree from bias, prejudice, or partiality and therefore able to judge the situation fairly; not having a pecuniary interest in the matter at hand.'"

Florida Supreme Court Justice Jorge Labarga. Photo: J. Albert Diaz/ALM.

But in his dissent, Labarga said, "The ambiguity of the word 'disinterested' requires that the term be construed in the insured's favor. Because the majority disregards this ambiguity, I dissent."

To bolster his view about the word's ambiguity, Labarga pointed to the conflicting conclusions from the lower courts.

"Although the use of the term 'disinterested' in the appraisal provision could require the appraisers not to have a pecuniary interest in the award, as the Second District held below and the majority holds today, 'disinterested' could also mean that appraisers are required to exercise independent judgment and be unaffiliated with the parties, as other district courts have held," Labarga wrote.

Kuleba said he sees the former chief justice's point.

"I think I agree with (Labarga's) dissent in terms of the ambiguity in the language, and then the reference to the dictionary … definition may have been not premature, but unnecessary, given that other district courts in Florida have interpreted the term disinterested differently," Kuleba said.

'Step in the right direction'

Kansas R. Gooden, a board-certified appellate lawyer with Boyd & Jenerette in Miami, wrote an amicus brief for the Florida Defense Lawyers Association.

She celebrated the majority's findings.

"The Florida Defense Lawyers Association applauds the court's decision that a public adjuster, who has a financial stake in the case, does not qualify as a disinterested appraiser," Gooden said. "This decision will further the purpose of appraisal—to resolve claims without the need for litigation."

"Having a public adjuster, who has a financial interest in the case, act as an appraiser produced skewed and absurd results," Gooden added. "The amount that the public adjuster/appraiser stated is the value of the loss was often not commensurate with the market and reality. Indeed, it was often driven by the desire to achieve the highest amount of loss possible. The higher the value, the more money in the public adjuster's pocket. This is a step in the right direction for the insurance industry."

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