Can An Insurer Force a Two Thousand Dollar Dispute Into Appraisal?

Is it worthwhile to appraise or file a lawsuit over a matter if the costs of the appraisal or litigation are greater than the value of the dispute? How can policyholders stop insurers from paying less than what is owed if the amount owed is a small amount?

These were the two questions in my head while reading a recent opinion in an appraisal case1 with these facts:

On September 26, 2020, the insured hired At Home Auto Glass, LLC (‘At Home’), to replace her vehicle’s damaged windshield. The insured executed an assignment of benefits in favor of At Home, which in turn submitted charges to First Acceptance in the amount of $2,477.03. Upon receipt of At Home’s invoice, First Acceptance invoked the appraisal clause in the policy….

…

First Acceptance’s correspondence stated that it had issued payment in the amount of $333.29, which it had determined was the ‘prevailing competitive price to repair or replace the property,’ and attached a copy of the estimate used in determining the payment amount.

At Home then sued First Acceptance seeking to recover the invoiced amount in full. In response to the complaint, First Acceptance filed a ‘Motion to Dismiss, or in the alternative, Motion to Stay to Enforce Appraisal.’

The windshield repairer obviously was trying to have Florida’s prior law allowing for attorney fees paid rather than proceed to appraisal with all the costs of its appraiser and half the umpire paid no ability to recover those. The windshield repairer argued:  

At Home argued that based on the policy’s definition of ‘loss,’ the phrase ‘amount of loss’ in the appraisal provision only referred to the extent of the physical damage, not the monetary value of the repairs. And because the extent of the physical damage was not in dispute, At Home argued that appraisal was not appropriate. At Home also raised arguments based on the prohibitive cost doctrine….

The appellate court disagreed and indicated that the matter had to proceed to appraisal:

At Home’s interpretation of the phrase ‘amount of loss’ as limited to the extent of physical damage is unreasonable. See Johnson v. Nationwide Mut. Ins. Co., 828 So. 2d 1021, 1025 (Fla. 2002) (‘[W]hen the insurer admits that there is a covered loss, but there is a disagreement on the amount of loss, it is for the appraisers to arrive at the amount to be paid.’(quoting Gonzalez v. State Farm Fire & Cas. Co., 805 So. 2d 814, 816 (Fla. 3d DCA 2000))); State Farm Fire & Cas. Co. v. Licea, 685 So. 2d 1285, 1288 (Fla. 1996) (‘We interpret the appraisal clause to require an assessment of the amount of a loss. This necessarily includes determinations as to the cost of repair or replacement and whether or not the requirement for a repair or replacement was caused by a covered peril ….’); Cincinnati Ins. Co. v. Cannon Ranch Partners, Inc., 162 So. 3d 140, 143 (Fla. 2d DCA 2014) (‘[I]n evaluating the amount of loss, an appraiser is necessarily tasked with determining both the extent of covered damage and the amount to be paid for repairs.’ (citation omitted)); Citizens Prop. Ins. Corp. v. River Manor Condo. Ass’n, Inc., 125 So. 3d 846, 854 (Fla. 4th DCA 2013) (‘The appraisers determine the amount of the loss, which includes calculating the cost of repair or replacement of property damaged ….’).

In a case with nearly identical facts, the Fifth District recently held that a determination of the amount of loss for appraisal purposes ‘necessarily includes determining both the extent of the covered damage and the monetary amount necessary to repair or replace the damaged property.’ Mendota Ins. Co. v. At Home Auto Glass, LLC, 348 So. 3d 641, 643 (Fla. 5th DCA 2022). Similar to this case, in Mendota, At Home sought to avoid an appraisal by arguing that based on the policy’s definition of the term ‘loss,’ the appraisal provision only applied where there was a dispute as to the amount of physical damage. The Fifth District disagreed:

Here, the appraisal provision references a lack of agreement as to ‘the amount of the loss.’ Although the policy definition of ‘loss’ includes the term ‘physical damage to property,’ that does not mean that a determination of ‘the amount of the loss’ is limited to a determination of the extent of physical damage. A determination of ‘the amount of the loss’ necessarily includes determining both the extent of covered damage and the monetary amount necessary to repair or replace the damaged property. See, e.g., Cincinnati Ins. Co. v. Cannon Ranch Partners, Inc., 162 So. 3d 140, 143 (Fla. 2d DCA 2014) (‘Notably, in evaluating the amount of loss, an appraiser is necessarily tasked with determining both the extent of covered damage and the amount to be paid for repairs.’). The trial court’s overly-narrow interpretation of the term ‘the amount of loss’ would render the appraisal provision meaningless and would ignore the other provisions in the policy that discuss ‘loss’ in terms of cost to repair or replace. For example, the policy’s Physical Damage Coverage provision for Payment of Loss provides that Mendota ‘may pay the loss in money or repair or replace the damaged or stolen property.’ Similarly, the Physical Damage Coverage provision for Limit of Liability provides that Mendota’s limit of liability for a loss would not exceed the lesser of the ‘amount necessary to repair physical damage to an insured auto ….’

I agree. So, the answer to the question title question is “yes.” 

Still, the other two questions are important. If the insurer is failing to act in good faith and simply lowballing amounts owed, shouldn’t there be a good faith cause of action available? Otherwise, how do we ever keep insurers who want to cheat their own customers in check?     

Regarding the public policy argument, the windshield repairer lost that argument as well:

At Home also reasserts its arguments under the prohibitive cost doctrine and based on the public policy behind section 627.428, Florida Statutes. Although the trial court declined to entertain either argument in the proceedings below, we note that both arguments have been soundly rejected by Florida courts in the context of windshield cases. See Progressive Am. Ins. Co. v. Hillsborough Ins. Recovery Ctr., LLC, 349 So. 3d 965, 973 (Fla. 2d DCA 2022) (holding that prohibitive cost doctrine does not apply to contractually mandated appraisals and that appraisal provision did not violate the public policy….

The practical impact is that insurers may invoke appraisal to avoid a policyholder’s right to attorney fees.  Florida law will shortly not allow recovery of attorney fees on any first-party insurance coverage cases because the Florida statutes allowing those have now been eliminated on future cases.    

Thought For The Day

It is not he who gains the exact point in dispute who scores most in controversy – but he who has shown the better temper.

—Samuel Butler

1 First Acceptance Ins. Co. v. At Home Auto Glass, No. 6D23-1192, 2023 WL 3910577 (Fla. 6th DCA June 9, 2023).