APPRAISAL PROVISION APPLIES TO LOSS

Jon Parrish was insured under a policy issued by State Farm Florida Insurance Company at the time his home was damaged by Hurricane Irma. Parrish filed a claim and hired Keys Claims Consultants, Inc. (KCC) to assess the damage and the cost of repairs. Parrish agreed to pay KCC 10% of whatever amount they eventually recovered from State Farm.

Representatives from State Farm and KCC evaluated the damage to Parrish’s home. State Farm could not reconcile KCC’s estimate with its own, so it requested that both perform a second inspection. Instead, KCC wrote a letter to State Farm demanding that they proceed according to the insured’s policy’s appraisal process. KCC also insisted that its president serve as Parrish’s appraiser.

The appraisal provision in Parrish’s policy stated, in part:

Each party will select a qualified, disinterested appraiser (emphasis added) and notify the other of the appraiser’s identity within 20 days of receipt of the written demand. Each party shall be responsible for the compensation of their selected appraiser. The two appraisers shall then select a qualified, disinterested umpire.

State Farm responded that it would be premature to enter its appraisal before it finished investigating Parrish’s claim. State Farm also requested that KCC appoint a different appraiser. Their position was that, since KCC was the insured’s public adjuster, it would not qualify as a “disinterested” party.

Upon completing its claim investigation State Farm sent a letter to KCC with its own significantly lower damages estimate. Later, State Farm issued its own appraisal demand. When KCC’s president was, again, named as appraiser, State Farm then petitioned a trial court to compel selection of a disinterested appraiser.

The trial court ruled that the selection was valid. The court’s view was that the appraiser was disinterested because Parrish and KCC had disclosed their arrangement to State Farm. The trial court also found that Parrish and KCC had no confidential relationship that would disqualify Keys.

The Second District reversed. It found that that the policy’s reference to “disinterested” plainly excluded any appraiser who held an interest in the outcome of the appraisal process. Therefore, Keys could not serve as Parrish’s appraiser.

The Second District found that Keys had an interest for two reasons: First, KCC’s 10% stake in Parrish’s insurance payout gave it a pecuniary interest in the outcome of the appraisal. Second, Keys could not be disinterested because KCC represented Parrish as his public adjuster.

Parrish argued that the policy’s use of “disinterested” applied only to the manner of selecting an appraiser, independently from how the party was compensated. The higher court was not persuaded. It held that, because KCC was to be compensated via contingency fee, the company’s president had a pecuniary interest in the outcome of the claim and could not qualify as a “disinterested” appraiser.

The Supreme Court of Florida approved the Second District’s decision.

Parrish v. State Farm Florida Insurance Company—Supreme Court of Florida—February 9, 2023—No. SC21-172.