The Florida Supreme Court has overruled previous precedent and ruled against appraisers who charge a contingent fee or have a contingent interest in the outcome of an appraisal.1 This case will immediately affect all ongoing and future evaluations. If you are in a valuation with a contingently interested valuer, you must immediately seek legal advice on your next steps.
The retention is simple:
[A]n appraiser cannot be ‘disinterested’ if he or she, or a company in which he or she has an interest, is to be compensated for services as a public adjuster with a contingency fee.
The Florida Supreme Court went to great lengths to describe the appraiser̵7;s financial interest and the contingent fee for the public adjuster:
The contingency fee arrangement agreed between Mr. Parrish and KCC give Mr. Keys, as president of KCC, a financial interest in Mr. Parrish’s claim. As a “member of a limited company” – in this case KCC – Mr. Keys is by definition an “interest holder” in it. See § 605.0102(31)(f), Fla. Stat. (2022). And here is Mr. Key’s interest of a financial or financial nature. See Financial interest, Black’s Law Dictionary (11th ed. 2019) (defining “financial interest” as “[a]n interest involving money or its equivalent’). Simply put, the more Mr. Parrish recovers, the more KCC collects; and the more KCC collects, the more likely Mr. Keys himself will be able to get paid, or that his interest in KCC will be valuable. Mr. Key’s financial interest in evaluating Mr. Parrish’s loss so that Mr. Parrish recovering as much as possible means that Mr. Keys is not “disinterested”. On the contrary, the whole point of the contingency fee agreement is to align Mr. Key’s financial interests with Mr. Parrish’s.
While I can appreciate this reasoning supporting the decision, the court made a number of mistakes that other members of the Merlin Law Group highlighted to me. The largest was the following:
[P]The parties to a contract choose their words on purpose, and we respect those choices when we can discern them.
When did the insured have to agree to accept a standardized formulary system between insurance companies? Any law student who takes a basic insurance law course learns that the policyholder has no option to agree to the language found in the vast majority of policies. The policy is an adhesion contract. How judges missed this basic legal contract concept noted in scores of other insurance cases is disappointing.
For the benefit of those who wish to read the parties’ briefs, I attach them in the footnotes.
To improve is to change; to be perfect is to change often.
1 Parrish v. State Farm Florida Ins. Co.No. SC21-172 (Fla. Feb. 9, 2023).