Calusa Bay N. Condo. Ass'n v. Empire Indem. Ins. Co.

Calusa Bay North Condominium Association, Inc. and Calusa Bay South Condominium Association, Inc., Plaintiffs, v. Empire Indemnity Insurance Company, Defendant.

No. 2:21-cv-540-JLB-NPM

United States District Court, M.D. Florida, Fort Myers Division

September 30, 2022

ORDER

NICHOLAS P. MIZELL UNITED STATES MAGISTRATE JUDGE

Before the court is plaintiffs' amended motion to compel appraisal (Doc. 12) and a joint motion for extension of case management deadlines (Doc. 35). Defendant Empire Indemnity Insurance Company seeks to avoid appraisal by claiming that appraisal is a remedy in form of specific performance that must be sufficiently pleaded and proved. (Doc. 18 at 2-8). This challenge fails because appraisal is not a remedy. Appraisal is an alternative dispute resolution mechanism. Moreover, Empire goes a step further and suggests that a court should never order specific performance of a contract's appraisal provision because a monetary award for any breach of the contract will always suffice. (Doc. 33 at 4). In sum, Empire's circular argument (an appraisal may only be compelled by way of a judgment for specific performance, but such a judgment would never be proper because there's an adequate remedy at law) seeks to rewrite the bargained-for contract between the parties by essentially striking the appraisal provision altogether. Such an outcome would be entirely improper. Instead, for the reasons discussed below the motion to compel appraisal is granted, and the joint motion for extension of deadlines is denied as moot.

I. Background

This case concerns an insurance dispute for losses allegedly caused by Hurricane Irma on or about September 10, 2017. (Doc. 26 ¶ 7). Plaintiffs Calusa Bay North Condominium Association, Inc. and Calusa Bay South Condominium Association, Inc. (collectively, “Calusa Bay”)^[1]administer at least 42 buildings in its condominium complex in Collier County, Florida, which were impacted by the storm. (Doc. 26 ¶¶ 2-6, 14; Doc. 26-1 at 11-13, 20-26; Doc. 26-5 at 11-13, 20-27). At the time of the loss, Calusa Bay's buildings were insured by Empire under two insurance policies (for Calusa Bay North and Calusa Bay South). (Doc. 26 ¶¶ 4, 6 7; Doc. 32 ¶ 6).

Both policies contain a unilateral appraisal provision whereby either party may demand that the amount of loss be determined by a three-member panel composed of two competent and impartial appraisers and an umpire. The policies contain the following appraisal provision:

If we and you:

B. Disagree on the value of the property or the amount of loss, either may request an appraisal of the loss, in writing. In this event, each party will select a competent and impartial appraiser. The two appraisers will select an umpire. If they cannot agree, either may request that selection be made by a judge of a court having jurisdiction. The appraisers will state separately the value of the property and amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will be binding. Each party will:

1. Pay its chosen appraiser; and

2. Bear the other expenses of the appraisal and umpire equally.

If there is an appraisal, we will still retain our right to deny the claim. (Doc. 26-1 at 51; Doc. 26-5 at 52).

Within roughly three weeks of the storm, Calusa Bay reported the loss to Empire and made claims for policy benefits. Empire assigned claim number 5630011138 to Calusa Bay North and claim number 5630010744 to Calusa Bay South. (Doc. 26 ¶¶ 15-16, 24-25; Doc. 32 ¶¶ 15-16, 24-25). After conducting its investigation of the claims, Empire admitted coverage for the loss caused by the hurricane. (Doc. 26 ¶¶ 10, 17-20, 26-29; Doc. 32 ¶¶ 10, 17-20, 26-29).

A. Calusa Bay North

For Calusa Bay North, Empire evaluated the Replacement Cost Value at $3,132,579.73, and issued a check on January 16, 2018, for $2,607,595.33.^[2](Doc. 26-2). On December 18, 2018, Calusa Bay North submitted a sworn proof of loss, requesting payment in the amount of $13,931,783.47 ($14,456,767.87 minus deductibles). (Doc. 18-1). Calusa Bay North then demanded appraisal under the policy on December 19, 2018, February 19, 2019, October 30, 2019, and June 5, 2020. (Doc. 26-4 at 2-9).

On October 27, 2020, Calusa Bay North submitted an updated sworn proof of loss for Replacement Cost Value, requesting a significantly lesser payment in the amount of $8,639,063.17 ($9,164,047.57 minus depreciation and deductibles). (Docs. 18-2, 26-3). Calusa Bay North then demanded appraisal again on November 16, 2020, and April 14, 2021. (Doc. 26-4 at 10-14). Empire has consistently refused to submit the claim to appraisal.

B. Calusa Bay South

For Calusa Bay South, Empire evaluated the Replacement Cost Value at $5,096,058.75, and issued a check on January 16, 2018, for $4,211,455.71.^[3](Doc. 26-6). On December 18, 2018, Calusa Bay South submitted a sworn proof of loss, requesting payment in the amount of $22,541,317.33 ($23,425,920.37 minus deductibles). (Doc. 18-3). Calusa Bay South then demanded appraisal under the policy on December 19, 2018, February 19, 2019, October 30, 2019, and June 5, 2020. (Doc. 26-8 at 2-9).

On October 27, 2020, Calusa Bay South submitted an updated sworn proof of loss for Replacement Cost Value, requesting a significantly lesser payment in the amount of $13,755,290.54 ($14,639,893.58 minus depreciation and deductibles). (Docs. 18-4, 26-7). Calusa Bay South then demanded appraisal again on November 16, 2020, and April 14, 2021. (Doc. 26-8 at 10-14). Empire has consistently refused to submit the claim to appraisal.

II. Law and Analysis

“Appraisal is a form of alternative dispute resolution that sets a disputed loss amount.” CMR Constr. & Roofing, LLC v. Empire Indem. Ins. Co., 843 Fed.Appx. 189, 193 (11th Cir. 2021) (citing State Farm Fla. Ins. Co. v. Crispin, 290 So.3d 150, 151 (Fla. 5th DCA 2020)); see also Merrick Preserve Condo. Ass'n, Inc. v. Cypress Prop. & Cas. Ins. Co., 315 So.3d 45, 49 (Fla. 4th DCA 2021) (“Appraisal clauses provide a mechanism for prompt resolution of claims ....”). Thus, like an arbitration agreement, an appraisal provision is a stipulation to the forum in which certain areas of dispute should be decided. See Webb Roofing & Constr., LLC v. Fednat Ins., 320 So.3d 803, 805-806 (Fla. 2d DCA 2021); accord Fla. Ins. Guar. Ass'n v. Castilla, 18 So.3d 703, 704 (Fla. 4th DCA 2009) (reasoning that motions to compel appraisal or arbitration are subject to the same standard of review).

“The appraisers determine the amount of the loss, which includes calculating the cost of repair or replacement of property damaged, and ascertaining how much of the damage was caused by a covered peril as opposed to things such as ‘normal wear and tear, dry rot, or various other designated, excluded causes.'” Citizens Prop. Ins. Corp. v. River Manor Condo. Ass'n, 125 So.3d 846, 854 (Fla. 4th DCA 2013) (quoting Johnson v. Nationwide Mut. Ins. Co., 828 So.2d 1021, 1025 (Fla. 2002)).

Given the “overwhelming preference in Florida for the resolution of conflicts through any extra-judicial means ... for which the parties have themselves contracted,” resort to the appraisal process is strongly preferred. McGowan v. First Acceptance Ins. Co., Inc., 411 F.Supp.3d 1293, 1296 (M.D. Fla. 2019) (quoting State Farm Fire & Cas. Co. v. Middleton, 648 So.2d 1200, 1201-1202 (Fla. 3d DCA 1995)); see also Preferred Mut. Ins. Co. v. Martinez, 643 So.2d 1101, 1103 (Fla. 3d DCA 1994) (reversing denial of motion to compel appraisal because such motions “should be granted” whenever the insurance policy includes an appraisal provision). Indeed, when an insurance policy contains an appraisal provision, “the right to appraisal is not permissive but is instead mandatory, so once a demand for appraisal is made, ‘neither party has the right to deny that demand.'” McGowan, 411 F.Supp.3d at 1296 (quoting United Cmty. Ins. Co. v. Lewis, 642 So.2d 59, 60 (Fla. 3d DCA 1994)).

And so, legions of Florida cases regularly refer amount-of-loss determinations to an appraisal panel by non-dispositive order whenever a party properly invokes the contractual right. See, e.g., Breakwater Commons Ass'n, Inc. v. Empire Indem. Ins. Co., No. 2:20-cv-31-JLB-NPM (M.D. Fla. Feb. 1, 2022) (Doc. 76) (order overruling objections to order compelling appraisal) (“Appraisal is ... a non-dispositive matter because it does not dispose of either party's claims or defenses.”); Webb Roofing, 320 So.3d at 804-807 (affirming interlocutory order granting insurer's motion to compel appraisal in breach-of-contract suit brought by insured's assignee); State Farm Fla. Ins. v. Speed Dry, Inc., 292 So.3d 1260, 1262 (Fla. 5th DCA 2020) (reversing order denying insurer's motion to compel appraisal); State Farm Fla. Ins. Co. v. Sheppard, 268 So.3d 1006 (Fla. 1st DCA 2019) (same); People's Tr. Ins. Co. v. Garcia, 263 So.3d 231 (Fla. 3d DCA 2019) (same).^[4]

In sum, where “coverage [is] admitted and the only remaining dispute is the amount of the loss ... appraisal is appropriate.” McGowan, 411 F.Supp.3d at 1297 (quoting Gonzalez v. Am. Sec. Ins. Co., 2015 WL 12852303, *3-4 (M.D. Fla. Nov. 10, 2015))

A. Court's authority to compel appraisal

In Florida, where arbitration and appraisal are generally considered distinct mechanisms of alternative dispute resolution, the state's contract law applies. See Timothy Law & Jillian Starinovich, What Is It Worth? A Critical Analysis of Insurance Appraisal, 13 Conn. Ins. L. J. 291, 300 (2007).

Florida courts enforce a party's valid invocation of a right to have amount-of-loss issues determined by an appraisal panel because doing so “upholds the terms of the policy” and “conserves the parties' and trial court's resources” by submitting those issues to a...