24 Fla. L. Weekly Supp. 335a

Online Reference: FLWSUPP 2405VELEInsurance — Property — Attorney’s fees — Where insured tendered its estimate of actual cash value of insured’s loss, as required by policy, and invoked its right to appraisal when insured objected to the amount; appraiser determined that insured was entitled to additional amount; and insurer immediately tendered the additional amount, the insured was not entitled to a judgment confirming the appraisal award, which would trigger entitlement to attorney’s fees under section 627.428

RAFAEL VELEZ, Plaintiff, vs. USAA CASUALTY INSURANCE CO., Defendant. Circuit Court, 11th Judicial Circuit in and for Miami-Dade County, Civil Division. Case No. 15-17443 CA (22). July 20, 2016. Michael A. Hanzman, Judge.ORDER

(a) Granting Defendant’s Motion for Entry of Final Order of Dismissal With Prejudice; and

(b) Denying Plaintiff’s Motion to Compel Appraisal Award

I. Introduction

The question before the Court in this first party property insurance dispute is whether Plaintiff, Rafael Velez (“Velez”), is entitled to a judgment confirming an appraisal award — a judgment which would then trigger his right to recover reasonable attorney’s fees pursuant to Florida Statute § 627.428. He claims entitlement to a judgment because — in his view — Defendant United Services Automobile Association (“USAA”) breached its insurance policy by failing to initially pay “at least” the actual cash value of his insured loss; an obligation imposed both by the policy and by statute. See §627.7011(3)(a), Fla. Stat. (2011). The carrier, on the other hand, insists that because it paid a good faith estimate of “actual cash value,” and demanded appraisal pre-suit — a right expressly provided for by the policy — this litigation was a premature “race to the courthouse” that was not “reasonably necessary” to resolve the parties’ dispute, and which should not be rewarded by an award of attorney’s fees. Travelers of Florida v. Stormont, 43 So. 3d 941 (Fla. 3d DCA 2010) [35 Fla. L. Weekly D2059a]. It therefore seeks an order dismissing this matter with prejudice.

II. Analysis

There is no doubt that: (a) pursuant to its policy and Florida Statute § 627.7011(3) USAA was obligated to initially pay “at least the actual value of the insured’s loss, less any applicable deductible. .,” and (b) a failure to pay “at least” the actual cash value of an insured’s loss may constitute a breach of the policy — a point this Court has already acknowledged. See, Javellana v. Tower Hill, 23 Fla. L. Weekly Supp. 1031[a] (Mar. 31, 2016) (Hanzman, J.). But the policy here also entitled either party to demand a mandatory “appraisal” if a disagreement existed as to the amount of the covered “loss” — a common contractual term. See, e.g., State Farm Florida Ins. Co. v. Cardelles, 159 So. 3d 239 (Fla. 3d DCA 2015) [40 Fla. L. Weekly D504a]; State Farm Florida Ins. Co. v. Hernandez, 172 So. 3d 473 (Fla. 3d DCA 2015) [40 Fla. L. Weekly D1433a]. Put simply, it contained a contractual mechanism to resolve any dispute over the amount of damage caused by a covered peril.¹

Here USAA paid what it believed to be the “actual cash value” of the loss and, when the insured disagreed, it invoked its contractual right to an “appraisal” to resolve the parties’ dispute. The appraiser ultimately agreed with the insured’s contention that the carrier had not initially paid “actual cash value”; entering an award entitling him to an additional $2,265.13. USAA immediately tendered that amount. So the question becomes whether an insurer which: (a) pays what it in good faith believes to be the “actual cash value” of a loss; and (b) exercises its right to an “appraisal” in order to resolve a disagreement with its insured, has breached its policy. The Court concludes it has not. As a result, the insured is not entitled to a judgment confirming the appraisal award and the resulting entitlement to attorney’s fees. See, Hill v. State Farm Florida Ins. Co., 35 So. 3d 956 (Fla. 2d DCA 2010) [35 Fla. L. Weekly D1041a] (“[i]t is only when the claims adjusting process breaks down and the parties are no longer working to resolve the claim within the contract, but are actually taking steps that breach the contract, that the insured may be entitled to an award fees under section 627.428, Florida Statutes (2004)”).

As an initial matter, an insurance contract, like any contract, must be read as a cohesive whole with consideration given to each of its terms and conditions. See, e.g., City of Homestead v. Johnson, 760 So. 2d 80 (Fla. 2000) [25 Fla. L. Weekly S206a] (“courts to read provisions of a contract harmoniously in order to give effect to all portions thereof”). Under this policy the carrier was clearly obligated to initially pay “at least actual cash value.” But that is not a fixed and easily ascertainable amount. To the contrary, it is an estimate based, in part, on subjectivity and the expertise of the preparer. For this reason two competing estimates may both be reasonable, which is precisely why the policy contains a contractual mechanism to resolve any dispute over the value of the loss. So when a carrier pays what it in good faith to believes to be “actual cash value” — and then exercises its contractual right to an appraisal when its insured challenges the amount paid — it has fully complied with its policy, even if an appraisal eventually results in an additional payment. This is so because, as the Hill court pointed out, the appraisal process “is simply work done within the terms of the contract to resolve the claim.” Hill at 961.

USAA therefore did nothing other than honor its contract. It initially paid what it in good faith believed to be the “actual cash value” of the loss and, when the insured disagreed, it exercised its contractual right to an appraisal — an option it resorted to pre-suit. It did not deny coverage, attempt to thwart or delay an appraisal by claiming that the insured had not complied with any post-loss policy obligations, or do anything else that necessitated a court filing. Put simply, USAA did not wrongfully cause its insured to resort to litigation. Hill, supra.²

Under these circumstances an insured is not entitled to a judgment confirming the appraisal award and — a fortiori — attorney’s fees. Federated Nat. Ins. Co. v. Esposito, 937 So. 2d 199 (Fla. 4th DCA 2006) [31 Fla. L. Weekly D2220a] (“court erred in confirming the appraisal award and entering a judgment because it timely participated in the appraisal and paid the award without the need for court intervention”); State Farm Florida Ins. Co. v. Silber, 72 So. 3d 286 (Fla. 4th DCA 2011) [36 Fla. L. Weekly D2298a] (insured could not move to confirm an appraisal award that had already been paid). This is so because when an insurer tenders a good faith payment, and exercises its contractual right to an appraisal, it has not breached the policy, and litigation was not needed to compel contractual compliance. Compare, Goff v. State Farm Florida Ins. Co., 999 So. 2d 684 (Fla. 2d DCA 2008) [33 Fla. L. Weekly D2833a] (judgment and attorney’s fees permitted “because [insured’s] lawsuit forced State Farm to request an appraisal and to pay significant additional amounts”); Lewis v. Universal Prop. & Cas. Ins. Co., 13 So. 3d 1079 (Fla. 4th DCA 2009) [34 Fla. L. Weekly D1104a] (insureds entitled to attorney’s fees when carrier, more than a year after loss, still asserted that the bulk of the damage was not covered and that it intended to close its file; a position it receded from after insured filed suit).

Decisions like Exposito, Silber and Hill recognize that the purpose of § 627.428’s one way fee provision “is to discourage insurance companies from contesting valid claims, and to reimburse insureds for their attorney’s fees incurred when they must enforce in court their contract with the insurance company.” Bell v. U.S.B. Acquisition Co., Inc., 734 So. 2d 403, 411 n. 10 (Fla. 1999) [24 Fla. L. Weekly S220a]; State Farm Florida Ins. Co. v. Lorenzo, 969 So. 2d 393, 397 (Fla. 5th DCA 2007) [32 Fla. L. Weekly D1791e]. The statute is not intended to encourage unnecessary litigation by “rewarding a race to the courthouse for attorney’s fee even where the insurer was complying with its obligations under the policy.” Id. In this case, USAA did nothing more than exercise its contractual right to an appraisal to resolve a good faith dispute over the amount of its insured’s loss. It was not dragged into compliance by litigation.

III. Conclusion

As Judge Altenbernd observed in Hill, “[t]he line between rigorous negotiations and breach of contract is undoubtedly difficult to describe and it is a determination that is fact intensive.” Hill at 960. That line, however, is not hard to draw in this case. On this record it is clear that suit was not needed to — nor did it — force USAA’s compliance with the policy. It was “merely a preemptive lawsuit intended to obtain attorney fees for the usual efforts in negotiating an insurance claim.” Id. For that reason, it is hereby:

ORDERED AND ADJUDGED:

1. Defendant’s Motion for Entry of an Order Dismissing this Cause with Prejudice is GRANTED;

2. Plaintiff’s Motion to Confirm Appraisal Award is DENIED; and

3. This case is dismissed with prejudice, and the Clerk is directed to administratively close this file.

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¹The USAA policy was an “all risks” contract, meaning that it provided coverage for “all losses not resulting from misconduct or fraud unless the policy contains a specific provision expressly excluding the loss from coverage.” Hudson v. Prudential Prop. & Cas. Ins. Co., 450 So. 2d 565 (Fla. 2d DCA 1984).

²Velez nonetheless insists that USAA forced him to file suit because it asserted that damage to his garbage disposer was not compensable, as it was caused by “normal wear and tear” and hence excluded. See July 1, 2015 correspondence. The Court disagrees. First off, Velez has not asserted — let alone prevailed on — a claim for the loss of his garbage disposer. Furthermore, the amount of that “loss” is clearly de minimis and possibly encompassed in the appraisal award. And in any event, the Court concludes, without difficulty, that suit was not filed for purposes of securing payment for the garbage disposer.