The Duty to Notify a Policyholder of the Right to Participate in Mediation with the Florida Department of Financial Services , and How it Affects Appraisal in a First-Party Claim
The Duty to Notify a Policyholder of the Right to Participate in Mediation with the Florida Department of Financial Services , and How it Affects Appraisal in a First-Party Claim
By Ryan Parker
SEPTEMBER / OCTOBER 2023
20
Appraisal is a favored form of alternative dispute resolution in first-party property insurance claims involving a dispute over the amount of loss . Appraisal saves policyholders and insurers considerable costs and attorney ’ s fees , which would otherwise be incurred litigating over the amount owed for a claim . In addition , appraisal avoids unnecessary litigation and generally obviates the need for trial . However , an insurer can waive its right to appraisal under certain circumstances , including by failing to notify a policyholder of the right to participate in mediation with the Florida Department of Financial Services pursuant to § 627.7015 , Fla . Stat . This article discusses the statutory duty to notify a policyholder of the right to mediation , and the ways in which it can affect the right to appraisal . Additionally , this article discusses common arguments that come up in cases relating to the statutory duty to notify a policyholder of the right to mediation , and how those arguments have been addressed by the courts .
I . Florida Statute § 627.7015
“[ A ] t the time a first-party claim . . . is filed by the policyholder , the insurer shall notify the policyholder of its right to participate in the mediation program …” 1 If the insurer fails to notify a policyholder of the right to mediation or if the insurer requests mediation and the mediation results are rejected by either party , the policyholder is not required to participate in appraisal . 2 The information that must be included in the statutory notice can be found in Fla . Admin . Code 69J-166.031 . Additionally , 69J-166.031 ( 2 )( c ) defines “[ c ] laim ” to mean “ any dispute between the insurer and policyholder relating to a material issue of fact …” 3 Accordingly , an insurer is required to notify a policyholder of the right to mediation when there is a “ dispute .” Whether the notice was sent and if so , when it was sent , often becomes the focus of cases in which an insurer seeks to enforce its contractual right to appraisal and the insured does not wish to participate .
II . When an Insurer Fails to Provide the Required Notice
If an insurer fails to notify a policyholder of the right to mediation , the insured is not required to participate in appraisal ; however , there is at least one case in which the court required the insured to participate in appraisal even though the insurer did not notify the insured of the right to mediation . In Am . Integrity Ins . Co . of Fla . v . Gainey , 4 the insured filed a lawsuit against her insurer after a payment was issued , but before she provided a proof of loss or a competing estimate . 5 After the lawsuit was filed , the insurer requested and received a proof of loss from the insured , and upon receipt of the proof of loss the insurer requested appraisal . 6 The insured argued that the insurer waived its right to appraisal by failing to provide the required notice to participate in mediation , and the trial court eventually agreed . 7 In reversing the trial court ’ s decision , the court of appeals found that the notice requirement of § 627.7015 ( 7 ), Fla . Stat . did not apply because the insured prematurely commenced litigation . 8
III . The Timing of the Notice
When an insurer provides the required notice is also important . An insurer is required to send the notice before demanding appraisal . For example , in one case the court found that the insurer waived its right to appraisal because it sent the required notice after demanding appraisal and well after a dispute arose . 9 There have also been cases in which insureds have argued that a premature notice excuses their participation in appraisal . Recently , in Grnja v . People ’ s Trust Ins . Co ., 10 the insureds argued that they were not required to participate in appraisal because the insurer notified them of their right to participate in mediation before there was a dispute . The trial court disagreed and granted a motion to abate and compel appraisal . 11 In affirming the lower court ’ s decision , the Court of Appeal concluded that the insurer did not waive its right to appraisal by providing the notice before a dispute arose , and even if the notice was premature , “ it does not contravene the statute ’ s purpose of preventing an insurer from trapping an uninformed insured into the appraisal process .” 12
IV . Whether Assignees are Excused from Appraisal if Notice is not Provided
Over the past several years , there have been an abundance of property insurance claims that have been assigned to third-party contractors . In some instances , an insurer will demand appraisal directly with an assignee to