Case No. 2D20-1414
Cary J. Goggin and Amanda Broadwell of Goede, Adamczyk, DeBoest & Cross, PLLC, Naples, for Appellant. Patrick E. Betar, Evelyn M. Merchant and Judith B. Goldstein of Berk, Merchant & Sims, PLC, Coral Gables, for Appellee.
NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING MOTION AND, IF FILED, DETERMINED Appeal pursuant to Fla. R. App. P. 9.130 from the Circuit Court for Lee County; Michael T. McHugh, Judge. Cary J. Goggin and Amanda Broadwell of Goede, Adamczyk, DeBoest & Cross, PLLC, Naples, for Appellant. Patrick E. Betar, Evelyn M. Merchant and Judith B. Goldstein of Berk, Merchant & Sims, PLC, Coral Gables, for Appellee. SILBERMAN, Judge.
Villagio at Estero Condominium Association (Villagio) appeals a nonfinal order that denies its motion to stay and compel appraisal in its action against American Capital Assurance Co. (American Capital) for (1) breach of an insurance contract and (2) declaratory judgment. Villagio contends that this court should reverse the trial court's order to the extent that it orders the determination of all coverage matters prior to appraisal and that this court should compel the parties to appraisal. Based on this court's opinion in American Capital Assurance Corp. v. Leeward Bay at Tarpon Bay Condominium Ass'n, 45 Fla. L. Weekly D2463 (Fla. 2d DCA Nov. 4, 2020), we reverse to the extent that the trial court ruled that the issue of coverage must be determined before appraisal and remand for an order compelling appraisal. In addition, the trial court should exercise its discretion on remand as to whether to allow the appraisal to go forward on the "dual-track approach" approved in Leeward Bay. Id. at D2464. To the extent that the trial court found that the parties' contract has an enforceable appraisal provision, we affirm.
American Capital insured Villagio under a commercial property insurance policy. As a result of damages suffered during Hurricane Irma, Villagio filed a claim, and American Capital paid a portion of the claim. American Capital first determined the amount of the loss under the policy to be $1,736,048.15 and paid Villagio $263,465.11, representing the loss less the deductible and depreciation. American Capital increased its estimate of the covered loss to $1,963,996.36 and paid an additional $70,913.33 to Villagio under the policy. Villagio later filed a sworn proof of loss for $28,374,754.40, with a claim of $24,237,262.30 after the deductible.
American Capital subsequently made a determination that Villagio's claim was grossly inflated and was "an intentional misrepresentation and/or concealment of material fact." As a result, American Capital deemed the claim void and denied coverage for the claim as a whole. About two weeks later, Villagio filed suit for breach of contract and declaratory judgment in which Villagio sought an appraisal. Villagio filed a motion to stay and compel appraisal.
In its affirmative defenses, American Capital asserted that Villagio "intentionally concealed or misrepresented material facts concerning the scope and amount of damages claimed" and "grossly overexaggerated" its loss. Thus, American Capital denied the claim in its entirety and stated that the claim was void under the policy and that Villagio "ha[d] forfeited its right to proceed to appraisal." American Capital also filed a response in opposition to Villagio's motion to stay and compel appraisal.
At the nonevidentiary hearing on the motion, Villagio argued that American Capital initially extended coverage on the claim and then decided to void coverage for the claim and deny that appraisal was appropriate. Villagio contended that by setting forth a misrepresentation defense regarding the amount of damages, the question was one of the scope of loss which was a question for the appraisal panel. Villagio requested that the trial court either stay the case and order the parties to appraisal or to "dual track" the case by ordering the parties to appraisal but allowing them to continue with discovery while the appraisal was pending.
American Capital did not contend that Villagio failed to comply with any postloss conditions. Rather, American Capital argued that because it had denied the claim as a whole based on fraud, compelling the parties to appraisal was improper. If the court compelled appraisal, American Capital requested that the court order a dual track and strike Villagio's chosen appraiser as not being impartial.
After the hearing, the trial court denied Villagio's motion and stated the following in its written order:
[T]he Court finds that the issue of coverage has to be determined before the appraisal provision in the contract will apply. Therefore the Court denies the Motion to Stay and Compel Appraisal. The parties will continue to litigate the issue of coverage. The Court does find that the contract in question has an enforceable appraisal provision and if it is determined coverage exists the matter of damages will be determined by appraisal . . . .
On appeal, Villagio contends that the trial court erred by ruling that all coverage issues must be determined prior to appraisal. Villagio also contends that American Capital's defense of misrepresentation necessitates factual determinations that are the appropriate province of an appraisal panel. Villagio further asserts that the trial court correctly recognized that American Capital's defenses to coverage did not invalidate the appraisal provision of the policy or the requirement to appraise.
As it did in Leeward Bay, American Capital contends here that no appraisable issue exists because it wholly denied the claim based on intentional misrepresentation of the amount of loss that constituted fraud which voids coverage under the policy. American Capital further argues that when Villagio requested appraisal it had the burden of demonstrating that no coverage issues remained.
To support an order compelling appraisal under the parties' insurance policy, the trial court "must make a preliminary determination as to whether the demand for appraisal is ripe." Citizens Prop. Ins. Corp. v. Admiralty House, Inc., 66 So. 3d 342, 344 (Fla. 2d DCA 2011). An appraisal "demand is ripe where postloss conditions are met, 'the insurer has a reasonable opportunity to investigate and adjust the claim,' and there is a disagreement regarding the value of the property or the amount of loss." Leeward Bay, 45 Fla. L. Weekly at D2463 (quoting Admiralty House, 66 So. 3d at 344); see also State Farm Fla. Ins. Co. v. Hernandez, 172 So. 3d 473, 477 (Fla. 3d DCA 2015) (stating that a "party seeking appraisal must comply with all post-loss obligations before the right to appraisal can be invoked under the contract").
It is undisputed that a coverage challenge "is exclusively a judicial question" rather than one for appraisal. Johnson v. Nationwide Mut. Ins. Co., 828 So. 2d 1021, 1025 (Fla. 2002) (quoting State Farm Fire & Cas. Co. v. Licea, 685 So. 2d 1285, 1287 (Fla. 1996)). But " 'when the insurer admits that there is a covered loss,' any dispute on the amount of loss suffered is appropriate for appraisal." Cincinnati Ins. Co. v. Cannon Ranch Partners, Inc., 162 So. 3d 140, 143 (Fla. 2d DCA 2014) (quoting Johnson, 828 So. 2d at 1025).
In Leeward Bay, this court affirmed a nonfinal order that compelled appraisal and stayed the proceedings where the insured, Leeward Bay, had sought the appraisal. 45 Fla. L. Weekly at D2463. There, American Capital paid a portion of the claimed loss, and Leeward Bay subsequently submitted a proof of loss for over $8,000,000. Id. Leeward Bay filed suit the next month and sought appraisal. American Capital asserted in response that the policy was void. It denied the claim on the basis that Leeward Bay overinflated its claim, thereby rendering the policy void due to fraud. Id.
This court addressed Sunshine State Insurance Co. v. Rawlins, 34 So. 3d 753, 754 (Fla. 3d DCA 2010), and adopted the Third District's "dual-track approach." Leeward Bay, 45 Fla. L. Weekly at D2464. Further, this court certified conflict with the Fourth District's decisions in Citizens Property Insurance Corp. v. Demetrescu, 137 So. 3d 500, 502 (Fla. 4th DCA 2014), Citizens Property Insurance Corp. v. Michigan Condominium Ass'n, 46 So. 3d 177, 178 (Fla. 4th DCA 2010), and Sunshine State Insurance Co. v. Corridori, 28 So. 3d 129, 131 (Fla. 4th DCA 2010), "to the extent that they hold the trial court must always resolve coverage disputes prior to compelling an appraisal." 45 Fla. L. Weekly at D2464. Here, American Capital relied on those Fourth District decisions for that proposition in its answer brief.
As in Leeward Bay, American Capital cannot avoid appraisal by claiming that the insured fraudulently overinflated its claim after American Capital previously admitted coverage. See id. at D2463. In adopting the dual-track approach, this court in Leeward Bay explained:
Notably, American Capital initially conceded coverage. It then claimed fraud when it disagreed with Leeward Bay's allegedly overstated estimate of its loss. It seems clear to us that this case necessarily involves the amount of loss; any coverage dispute is intertwined with the amount of loss. The appraisal would likely assist the trial court when it later determines whether Leeward Bay fraudulently inflated its claim. The dual-track approach is not only judicially efficient, see Rawlins, 34 So. 3d at 755, but it may also be necessary where the findings in the appraisal are interconnected to the trial court's finding of liability.45 Fla. L. Weekly at D2464. This court concluded that the trial court acted within its discretion in compelling appraisal and affirmed. Id.
The facts here are very similar to the facts in Leeward Bay, but we point out one difference. Here, American Capital declared the policy void, and then about two weeks later Villagio filed suit and sought appraisal. In Leeward Bay, the insured sought appraisal before American Capital first declared the policy void. Id. at D2463. But that distinction does not change the result here. In both cases American Capital initially made payment under the policy, thereby admitting coverage under the policy. When the insured filed what American Capital found to be an overinflated claim, it denied the claim and declared the policy void. Thus, "this case necessarily involves the amount of loss; any coverage dispute is intertwined with the amount of loss." Id. at D2464.
Therefore, based on Leeward Bay, we reverse the order denying the motion to stay and compel appraisal to the extent that it orders the determination of all coverage matters prior to appraisal. We remand for the trial court to compel appraisal and exercise its discretion as to whether to allow "the appraisal to go forward on a dual track basis, while preserving all of [the insurer's] rights to contest coverage as a matter of law." Rawlins, 34 So. 3d at 755. To the extent that the trial court found that the parties' contract has an enforceable appraisal provision, we affirm.
Affirmed in part, reversed in part, and remanded. MORRIS and LUCAS, JJ., Concur.