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If valuation is governed by the Federal Arbitration Act, what is the process? | Real estate insurance coverage law blog



The reaction and urgings of those involved in the assessment to the post, Is the valuation governed by the Federal Arbitration Act? has caused great concern. The feeling was close to panic from those who support themselves as evaluators and asked how they would be approved as arbitrators. Others simply asked what this means in practice – will the process change

A fairly recent case of Hurricane Michael last year suggests that the evaluation process is likely to continue as it is, even if it is controlled by the Federal Arbitration Act. In Register v. Certain Underwriters at Lloyd & # 39; s 1 the Federal Court noted that the question of whether valuation is regulated under the Federal Arbitration Act is in flux:

The district courts are divided on the question of whether federal or State law governs the decision on whether an alternative dispute resolution procedure is "arbitration" for the purposes of the FAA. The eleventh district has not expressly held in one way or another …

In a footnote, the court noted the division between the federal courts in this matter:

The first, second, sixth and tenth districts have ruled that federal law styr, see Bakoss v. Certain Underwriters at Lloyds of London 707 F.3d 1

40, 144 (2d Cir. 2013); Evanston Ins. Co. v. Cogswell Props., LLC 683 F.3d 684, 693 (6th Cir. 2012); Salt Lake Tribune Publ’g Co. v. Mgmt. Planning, Inc. 390 F.3d 684, 689 (10th Cir. 2004); Fit Tech, Inc. v. Bally Total Fitness Holding Corp. 374 F.3d 1, 6 (1st Cir. 2004) while the fifth and ninth districts have established that state law regulates, see Portland Gen.Elec. Co. v. U.S. Bank Tr. Nat & # 39; l Ass & # 39; n 218 F.3d 1085, 1086 (9th Cir. 2000) (with reference to Wasyl, Inc. v. First Boston Corp. 813 F.2d 1579 (9th Cir (1987)); Hartford Lloyd & # 39 ;s Ins. Co. v. Teachworth 898 F.2d 1058, 1062 (5th Cir. 1990).

The court then analyzed Florida – In fact, it noted that the Florida Supreme Court previously ruled that assessment is not arbitration but disagreed that a state court could make a conclusive decision on federal law:

The court has not overlooked the Devon Neighborhood Association …. where the Florida Supreme Court has unequivocally stated that "a valuation clause in an insurance contract is not an agreement to be subject to formal arbitration under the Florida Arbitration Code." in this case, an "arbitration agreement" is covered by the Convention is governed by federal law, not state law.

So, if the Federal Arbitration Act applies, will the evaluation process change in Florida? If I read this case correctly, I do not think that the method the panel conducts itself will change because the court noted the following about the process without saying that it changes only because the Federal Arbitration Act governs:

This process has many elements of classic arbitration through that it prescribes an independent judge (the judge) who will make a final, binding determination of the size of the loss if the party-appointed valuers cannot agree. Although the valuation provision does not dictate how the valuers are to determine the size of the loss, the insurance policy contains standards for "loss settlement" which will probably lead to the determination … In addition, the valuation dividend can be confirmed, changed or submitted by a court after proper exercise ….

however, lacks some elements of classical arbitration. In particular, there is no possibility for the parties to present evidence or arguments in support of their positions, either for the assessors or the judge. See Citizens Prop. 117 So. 3d at 1229 (‘There is no obligation for appraisers to formally communicate their activities to the parties or the lawyer or to hear evidence.’); Liberty Mut. Fire Ins. Co. v. Hernandez 735 So. 2d 587, 589 (Fla. 3d DCA 1999) (notes that an evaluation does not consider & # 39; & # 39; test type & # 39; & # 39;) … In addition, the evaluation will not necessarily give an award that will to resolve the case in its entirety due to confirmation of valuation dividend does not exclude the insurer from raising the defense to coverage …

In another significant footnote, the federal court noted that under Florida law:

[A] practitioners are expected act on the basis of their own skill and knowledge of the issues being assessed.

I can hear a "whew!" from those who are currently making assessments.

This case indicates that the valuation process, which most people are familiar with in the property damages industry, will continue as it has but is governed by federal law in the federal circles that regulate valuation is governed by the Federal Arbitration Act.

Thought For The Day

They always say that time changes things, but you actually have to change them yourself.
—Andy Warhol
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1 Register v. Certain Underwriters at Lloyd & # 39; s No. 5: 2-cv52, 2020 WL 6106624 (ND Fla. 20 April 2020).


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