Is it worth assessing or litigating a case if the costs of the assessment or trial are greater than the value of the dispute? How can policyholders prevent insurers from paying less than what is owed if the amount owed is a small amount?
These were the two questions in my head when I read 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 made an assignment of benefits in favor of At Home, which in turn submitted fees to First Acceptance in the amount of $2,477.03. Upon receipt of At Home̵7;s invoice, First Acceptance invoked the appraisal clause of the policy…
First Acceptance’s correspondence stated that it had issued a payment 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 to determine the payment amount.
At Home then sued First Acceptance 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 repairman apparently tried to get Florida’s prior law allowing attorney’s fees to be paid instead of proceeding to the appraisal with all costs to his appraiser and half the judge paid no way to recover those. The windshield repairman claimed:
At Home argued that based on the policy’s definition of “loss,” the phrase “amount of loss” in the appraisal provision referred only 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 the assessment was not appropriate. At Home also raised arguments based on the prohibitive cost doctrine…
The Court of Appeal disagreed and stated that the matter must proceed to assessment:
At Home’s interpretation of the phrase “amount of loss” as limited to the extent of physical damage is unreasonable. Looks Johnson v. Nationwide Mut. ins. Co., 828 So. 2d 1021, 1025 (Fla. 2002) (‘[W]if the insurer admits that there is a covered loss, but there is disagreement as to the amount of the loss, it is up to the appraisers to arrive at the amount to be paid.'(quote. 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 construe the Appraisal Clause to require an assessment of the amount of a loss. This necessarily includes determinations of the cost of repair or replacement and whether the demand for 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 the covered damage and the amount to be paid for repairs.’ (citation omitted)); Citizen Prop. ins. corp. v. River Manor Condo. Ass’n, Inc., 125 So. 3d 846, 854 (Fla. 4th DCA 2013) (‘The assessors determine the amount of the loss, which includes calculating the cost of repairing or replacing damaged property …’).
In a case with nearly identical facts, the Fifth District recently held that determining the amount of loss for appraisal purposes “necessarily involves determining both the extent of the covered injury 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, i Mendota, At Home sought to avoid an appraisal by arguing that the appraisal provision, based on the policy’s definition of the term “loss,” applied only when there was a dispute over the amount of physical damage. The Fifth District disagreed:
Here, the assessment provision refers to a lack of agreement on the “magnitude of the loss”. Although the policy definition of “loss” includes the term “physical damage to property,” this does not mean that a determination of the “amount of loss” is limited to a determination of the extent of physical damage. A determination of the “magnitude of loss” necessarily involves determining both the extent of the covered damage and the amount of money required to repair or replace the damaged property. Looks, for example, Cincinnati Ins. Co. v. Cannon Ranch Partners, Inc., 162 So. 3d 140, 143 (Fla. 2d DCA 2014) (‘In particular, in evaluating the amount of loss, an appraiser is necessarily tasked with determining both the extent of the covered damage and the amount payable for repairs.’). The district court’s overly narrow interpretation of the term “amount of loss” would render the appraisal provision meaningless and would ignore the other provisions of the policy that discuss “loss” in terms of cost to repair or replace. For example, the policy’s physical casualty loss payment provisions provide that Mendota “may pay the loss in money or repair or replace the damaged or stolen property.” Similarly, the physical damage limitation of liability provisions provide that Mendota’s limit of liability for a loss would not exceed the minimum amount necessary to repair physical damage to a insured car ….’
I agree with. So the answer to the title of the question is “yes”.
Still, the other two questions are important. If the insurer is not acting in good faith and only reduces amounts owed, shouldn’t there be a good faith application? How else are we going to keep insurance companies that want to cheat their own customers in check?
As for the public policy argument, the windshield repairman lost that argument as well:
At Home also asserts its arguments under the prohibitive cost doctrine and based on the general policy underlying section 627.428, Florida Statutes. Although the trial court rejected either argument in the proceedings below, we note that both arguments have been properly rejected by Florida courts in windshield cases. Looks Progressive Am. ins. Co. v. Hillsborough Ins. Recovery Ctr., LLC, 349 So. 3d 965, 973 (Fla. 2d DCA 2022) (holding that the prohibitive cost doctrine does not apply to contractually mandated appraisals and that the appraisal provision did not violate public policy….
The practical effect is that insurers can invoke appraisal to avoid a policyholder’s right to attorney’s fees. Florida law will soon not allow recovery of attorneys’ fees for any first party insurance cases because the Florida laws allowing them have now been eliminated in future cases.
It is not he who gets the exact point in the dispute who scores the most in the controversy – but he who has shown the better temper.
1 First Acceptance Ins. Co. v. At Home Auto Glass, No. 6D23-1192, 2023 WL 3910577 (Fla. 6)Th DCA 9 June 2023).