“If you and we fail to agree on the amount of loss, either party can demand that the amount of the loss be set by appraisal. . . . [e]ach party will select a qualified, disinterested appraiser[,]” is a phrase known all too well by courts, carriers, policyholders, and their respective counsel across the State of Florida.
On Feb. 9, 2023, the Florida Supreme Court answered the question of what it means to be a “disinterested” appraiser in the context of this provision in Parrish v. State Farm Florida Insurance Co., No. SC21-172 (Fla. Feb. 9, 2023). The Court summarily found that the existence of a contingency fee arrangement between a public adjusting firm and an insured disqualifies the retained public adjuster, the public adjusting firm, its officers, its LLC members, and anyone else who would benefit from the firm being paid by the appraisal award from being a “disinterested” appraiser.
Parrish reported to State Farm that Hurricane Irma damaged his home and hired Keys Claims Consultants, Inc. (KCC) to provide public adjusting services. In the public adjusting contract, Mr. Parrish agreed to pay KCC a contingency fee equal to ten percent of whatever amount he eventually recovered from State Farm.
In response to the invocation of appraisal, Mr. Parrish appointed Mr. George Keys, the president of KCC, as his appraiser. State Farm petitioned a trial court to compel Mr. Parrish to enter appraisal with a disinterested appraiser. The trial court, relying on Brickell Harbour Condo. Ass’n v. Hamilton Specialty Ins. Co., 256 So. 3d 245 (Fla. 3d DCA 2018) denied State Farm’s petition, finding that Mr. Keys could serve as Mr. Parrish’s disinterested appraiser because the two had disclosed their arrangement to State Farm. State Farm Fla. Ins. Co. v. Parrish, 26 Fla. L. Weekly Supp. 829, 830 (Fla. 20th Cir. Ct. Dec. 14, 2018) (citing Brickell Harbour, 256 So. 3d at 249 (“[D]isclosure rather than disqualification in the case of an appraiser” with a “direct or indirect financial interest in the outcome of the arbitration” is a “workable approach.”)). The trial court also distinguished the instant case from Florida Insurance Guaranty Ass’n v. Branco, 148 So. 3d 488 (Fla. 5th DCA 2014). In Branco, the Court held that an insured’s attorney, who owes a duty of loyalty to its client, could not be a disinterested appraiser as required by the policy. Based on its reading of Branco, the trial court found there was no confidential attorney-client relationship between Mr. Parrish and KCC that would disqualify Mr. Keys.
On appeal, the Second District agreed with State Farm and found that within the context of the policy, “disinterested” was not ambiguous, and the requirement that
appraisers be “disinterested” plainly excluded any appraiser who held an interest in the outcome of the appraisal process. Due to KCC’s ten percent stake in Mr. Parrish’s insurance payout, Mr. Keys had a pecuniary interest in the outcome of appraisal and was not disinterested. The Second District also expressly extended Branco’s prohibition of attorney-appraisers to public adjuster appraisers because “an insured hires [both] for much the same purpose in these disputes: to maximize the insured’s financial recovery on the policy.” Since KCC represented Mr. Parrish as his public adjuster, Mr. Keys, as KCC’s president, could not be disinterested. The Second District certified conflict with Brickell Harbour to the State Supreme Court.
The Supreme Court found that “disinterested” was not ambiguous and confirmed through a thorough analysis of the instances in which the word appeared in Florida Statutes that “disinterested” should be given its plain and ordinary meaning. To articulate that meaning, the Court turned to Black’s Law Dictionary and to Webster’s Dictionary and found that a “disinterested” person cannot have a pecuniary interest in the matter at hand. The Court echoed the analysis of the Second District and held the contingency fee arrangement between Mr. Parrish and KCC gives Mr. Keys, as president of KCC and as one of KCC’s LLC members, a pecuniary interest in Mr. Parrish’s claim. The Court correctly noted the point of this arrangement was to align the economic interests of Mr. Keys with that of Mr. Parrish. Thus, Mr. Keys could not qualify as a “disinterested” appraiser.
This case drives the following point home: all those wearing the public adjusting firm’s embroidered dri-fit polo cannot be disinterested. Notably, the Court took special care to state that the officers and LLC members of those firms could not be disinterested either. This is particularly important to consider because it is not always apparent who the members of an LLC are. When a party appoints an appraiser, the opposing side should practice due diligence and confirm there is no relationship between the appointed appraiser and the entity with the contingency fee agreement.
The Florida Supreme Court’s opinion in Parrish follows a string of recent appellate cases in Florida that have, in one way or another, grappled with the definition and characteristics of a disinterested appraiser. In 2019, Florida’s Third District Court of Appeal held that a public adjuster who is in a contractual agent-principal relationship with the insureds could not be a disinterested appraiser as a matter of law. State Farm Florida Ins. Co. v. Sanders, No. 3D19-927 (Fla. 3d DCA July 24, 2019). In Sanders, the insureds sued their insurer, alleging a breach of contract from a Hurricane Irma claim. The parties entered into an agreed order granting the insurer’s motion to invoke appraisal. This order named the insurer’s appraiser and, consistent with the policy’s language, required the insureds to designate a qualified, disinterested appraiser. The insureds selected their public adjuster to serve as their appraiser.
The insureds and their public adjuster had entered into a contract that assigned 10 percent of the claim settlement to the public adjuster. The insurer moved the trial court to stay the appraisal, arguing that the public adjuster was not a disinterested appraiser. The insureds filed a motion to lift the stay and compel compliance with the order of appraisal. The trial court granted the motion to lift the stay and compelled appraisal. The Third District held that the trial court erred in allowing the public adjuster to serve as an appraiser for the insureds. The Court relied upon the Fifth District’s holding in Branco, stating that appraisals in Florida are creatures of contract, and their scope depends on the provisions of the contract. The Court held that the parties were free to contract to the terms governing the appraisal, and the contract provision showed the parties’ clear intention to restrict the appraisers to “disinterested” persons.
In 2020, Florida’s Fifth District Court of Appeal held that a public adjuster could not serve as a disinterested appraiser where the public adjuster is retained on a contingency fee basis. State Farm Florida Ins. Co. v. Crispin, No. 5D19-249 (Fla. 5th DCA February 7, 2020). In Crispin, the public adjuster was retained under a contingency fee agreement. The insurer issued payment to the insured. Thereafter, the public adjuster advised the insurer that the insured was invoking the insurance policy’s appraisal provision. In pertinent part, this provision said: “[i]f you and we fail to agree on the amount of loss, either party can demand that the amount of the loss be set by appraisal…Each party will select a qualified, disinterested appraiser and notify the other of the appraiser’s identity within 20 days of receipt of the written demand.”
The insured, yet again, chose their public adjuster as their appraiser. The insurer objected, asserting that the insured’s public adjuster was not disinterested with respect to the subject claim. On appeal, the Fifth District examined the meaning of the word “disinterested” as contemplated under the insurance policy. The Court noted that its sister Court, the Fourth District, recently considered this precise issue and evaluated “the same contractual provision and nearly identical facts” in State Farm Florida Ins. Co. v. Valenti (285 So. 3d 958 (Fla. 4th DCA 2019). The Crispin opinion reversed the trial court’s final decree and held that the insured’s public adjuster was not a disinterested person under the terms of the insurance policy.
The Florida Supreme Court’s opinion in Parrish v. State Farm Florida Insurance Company appears to revisit this issue of disinterested appraisers following the Court’s unanimous October 18, 2021 order discharging jurisdiction for review of State Farm Florida Insurance Company v. Sanders, 45 Fla. L. Weekly D870 (Fla. 3d DCA Apr. 15, 2020). The Parrish opinion is but the most recent instance of Florida’s evolving jurisprudence on the roles and limitations of appraisers, public adjusters, and persons involved in property claims. Accordingly, insurers should continue to monitor the evolution of this topic in the post-Parrish era.
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