A federal district court in Florida has ruled that a dispute between an insurer and insured should proceed to appraisal notwithstanding that the insurer asserted that it had discovered what it called evidence of fraud.
The Case
In 2017, Hurricane Irma damaged property in Naples, Florida, owned by the Waterford Condominium Association of Collier County, Inc.
Waterford reported the damage to its insurer, Empire Indemnity Insurance Company. Empire's adjustor inspected the property and found the anticipated repair cost to be $551,732.72. After subtracting depreciation and deductibles, Empire paid Waterford $51,817.37.
Waterford then submitted a repair estimate of $2,144,858.31. Empire continued its investigation and commissioned a second estimate of $595,098.00.
Waterford sued Empire a few months later.
Empire admitted the damage was covered by the policy and acknowledged a dispute over the extent and value of the damages.
Waterford then moved to stay the case and compel appraisal under the insurance policy.
The district court granted Waterford's motion over the objections of Empire.
Empire asked the district court to reconsider, asserting that it had discovered what it called evidence of fraud.
The District Court's Decision
The district court ruled that the appraisal should proceed.
In its decision, the district court explained that the Empire policy allowed either party to demand appraisal if they disagreed "on the value of the property or the amount of loss."
In the district court's view, there was no doubt that the parties disagreed on the amount of Waterford's covered loss and, therefore, that appraisal was appropriate.
The district court was not persuaded by Empire's argument that appraisal nevertheless should be denied or stayed while Empire considered whether to assert a fraud defense, deny the claim, and seek to void the policy. According to the district court, "the mere possibility that Empire might raise a fraud defense" did not undermine the rationale for enforcing the policy's appraisal provision.
Moreover, the district court continued, even if Empire decided to reverse course and deny the claim, appraisal was "still appropriate to determine the amount of loss because a fraud defense would address the separate issue of coverage."
In fact, the district court observed, the policy anticipated this situation by stating, "If there is an appraisal, we still retain our right to deny the claim."
Simply put, the district court concluded, Empire's consideration of a fraud defense was "no reason to stop or stay appraisal."
The case is Waterford Condominium Ass'n of Collier County, Inc. v. Empire Indemnity Ins. Co., No.: 2:19-cv-81-FtM-38NPM (M.D. Fla. Oct. 2, 2019).
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].