Policy language leads to confirmation of appraisal award over insurer’s objections

A federal district court in Florida has ruled that a first appraisal award was final under the provisions of an insurance policy, rejecting an insurer’s contention that an email trail demonstrated that the first award was preliminary and that a second — and lower — award should be upheld.

The Case

Lazaraly Guzman and Larry Rosado, insureds under a dwelling insurance policy issued by American Security Insurance Company, claimed that their property was damaged by Hurricane Irma.

The parties disputed the amount of the damage and litigation ensued. The parties then agreed to an appraisal as outlined in the insurance policy and the court stayed the case until an appraisal award issued.

The parties’ appraisers — Emery Kunzman and Scott Thomas — failed to agree on a neutral umpire, and the court appointed Lawrence Leiby to serve in that capacity.

The parties’ appraisers and the umpire inspected the property, and the following email exchanges took place:

September 5, 2018:

1:54 p.m. – Mr. Leiby circulated an appraisal award (the “First Award”) in the amount of $121,800.30 that included his electronic signature. His email stated, “See attached for review and comment. If one or both of you find this agreeable, please sign, scan, and return to me. I will then get out the originals.”

2:27 p.m. – Mr. Kunzman expressed his objection to the First Award, asked for a breakdown and itemization of the award amount and a copy of Mr. Thomas’ estimate.

2:35 p.m. – Mr. Thomas emailed Mr. Leiby and Mr. Kunzman a signed copy of the First Award that Mr. Leiby had circulated at 1:54 p.m., stating, “Please see the attached award signed by me.”

3:59 p.m. – Mr. Leiby responded to Mr. Kunzman’s 2:27 p.m. email, requesting Mr. Thomas forward him the missing documents and indicating that he would “hold off on the final until [Mr. Kunzman] gets that.”

September 6, 2018:

9:37 a.m. – Mr. Leiby advised Mr. Kunzman to provide any input based upon Mr. Thomas’ estimate within five days. Mr. Leiby then indicated that the “the award [was] not yet final.”

September 17, 2018:

12:10 p.m. – Mr. Leiby sent the parties’ appraisers a revised appraisal award (the “Revised Award”) in the amount of $90,704.27.

12:59 p.m. – Mr. Kunzman executed the Revised Award and returned it to Mr. Leiby.

American Security paid the insureds $90,704.27, the amount of the Revised Award.

The insureds then asked the court to confirm the First Award in the amount of $121,800.30, executed by Mr. Leiby and the insured’s appraiser, Mr. Thomas, as the binding appraisal award against American Security.

For its part, American Security argued that the insureds’ motion should be denied because the First Award was preliminary. Alternatively, American Security asserted, if the award was final, it was timely modified by Mr. Leiby.

The American Security Policy

The American Security insurance policy provided:

The appraisers will state separately the value of the residential property and the amount of loss. If they fail to agree, they will submit their difference to the umpire. A decision agreed to by any two will be binding.

(Emphasis in original.)

The Court’s Decision

The court granted the insureds’ motion, finding that Mr. Leiby lacked the authority to unilaterally modify the award.

In its decision, the court explained that the express terms of the American Security policy stated that a “decision agreed by any two [appraisers] will be binding.” Here, the court continued, the evidence supported the conclusion that the First Award was indeed final and that there was “a decision agreed to by any two.”

According to the court, “[n]othing within the four corners of the award” reflected that Mr. Leiby believed it to be preliminary in nature or that it was intended to be non-final. The court ruled that once the First Award was forwarded and signed by Mr. Thomas, he complied with the policy requirement and the First Award “became binding by the express and unambiguous terms of the insurance policy.”

The court observed that no party had moved to correct or clarify the award and that there was no basis to modify it.

The court said that although subsequent emails reflected Mr. Leiby’s statement that the First Award was not intended to be final, those later emails “had no effect” on the First Award’s “earlier binding effect under the express terms of the policy.”

The case is Guzman v. American Security Ins. Co., No. 18-cv-61195-BLOOM/Valle (S.D. Fla. March 27, 2019).

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• Fla. decision expands scope of attorney-client privilege for insurers
• Examining the insurance problem in Florida

Steven A. Meyerowitz, Esq., is director of the Insurance Coverage Law Center (formerly FC&S Legal). He can be reached at smeyerowitz@meyerowitzcommunications.com.