27 Fla. L. Weekly Supp. 773c

Online Reference: FLWSUPP 2708LAVOInsurance — Automobile — Appraisal — Prohibitive cost doctrine — Inability of plaintiff to pay costs of appraisal can be element of invoking prohibitive cost doctrine, but it is not necessary element — Where plaintiff has demonstrated that differential between relatively small amount of liquidated damages and significantly higher costs of appraisal would act as deterrent to bringing claim, evidence is sufficient for plaintiff to invoke prohibitive cost doctrine as defense to motion to compel appraisal

BROWARD INSURANCE RECOVERY CENTER, LLC (a/a/o Jeff Lavoro), Plaintiff, v. PROGRESSIVE AMERICAN INSURANCE COMPANY, Defendant. County Court, 17th Judicial Circuit in and for Broward Count. Case No. COCE 18-20362 (51). September 4, 2019. Kathleen McCarthy, Judge. Counsel: Joseph R. Dawson, Jopseph R. Dawson, P.A.; Emilio Stillo, Emilio Stillo, P.A.; and Mac Phillips, Phillips Tadros, P.A., for Plaintiff. Michael Orta and Daniel Montgomery, Cole, Scott & Kissane, P.A., for Defendant.

LIMITED ORDER FOLLOWING EVIDENTIARY HEARINGON PLAINTIFF’S MOTION TO INVOKE THE PROHIBITIVECOST DOCTRINE AS A DEFENSE TO THE DEFENDANT’SMOTION TO COMPEL APPRAISAL

THIS CAUSE having come on to be heard on July 29,2019, for an evidentiary hearing on Plaintiff’s defense to Defendant’s Motion to Compel Appraisal violating the Prohibitive Cost Doctrine, the Court having received testimony, argument of counsel, and having reviewed the pertinent case law and therefore having been duly advised in the Premises, finds as follows:

Background and Findings of Fact

1. This Order is solely limited to a determination of the applicability of the Cost Prohibitive Doctrine as articulated by the United States Supreme Court in Green Tree Financial Corp.-Alabama v. Randolph, 531 U.S. 79 (2000), and its progeny, including Zephyr Haven Health & Rehab Ctr., Inc.,v. Hardin, 122 So. 3d 916 (Fla. 2d DCA 2013) [38 Fla. L. Weekly D2070a]. See also, Bradford v. Rockwell Semiconductor Systems, Inc., 238 F. 3d 549 (4th Cir. 2001).

2. Plaintiff has filed an amended complaint against the Defendant seeking declaratory relief and damages alleging, generally, that the Defendant has implemented a flawed reimbursement analysis emanating from a policy provision which is vague and ambiguous and which has resulted in an underpayment in this and in many other claims. The Plaintiff further alleges that the continued failure of the Defendant to provide the data and method of computation it utilizes to determine whether the amount it reimbursed the Plaintiff violates the provision of the policy requiring the paid amount not to exceed the “prevailing competitive labor rates charged in the area where the property is to be repaired . . . .’ ”¹

3. On March 28, 2019, the Defendant filed its Motion to Dismiss Plaintiff’s Amended Complaint or in the Alternative, Motion to Strike Same and Compel Appraisal of the claim under the appraisal provision of the subject insurance policy essentially claiming that this provision requires that the dispute be resolved by appraisal as the preferred non-judicial mechanism of dispute resolution.

4. The Plaintiff has responded with several different arguments as to why this claim is not one for which appraisal is legally appropriate. Amongst those arguments is (i) that a coverage issue exists because the policy provision is vague and ambiguous; (ii) that the failure of Defendant to disclose the data and method of computation it utilizes to determine whether the amount it reimbursed the Plaintiff complies with the policy requirements requires judicial intervention; and (iii) that the assertion that the appraisal clause be enforced on this claim violates the Prohibitive Cost Doctrine because the cost of the appraisal process significantly exceeds the liquidated damages sought by Plaintiff, which cannot be recovered if the case is dismissed and appraisal compelled, even if the Plaintiff succeeds in obtaining a recovery and therefore is the prevailing party.

5. On April 4, 2019, this Court entered an Order granting Plaintiff’s Motion for Evidentiary Hearing in order to consider evidence necessary to establish the applicability of the Prohibitive Cost Doctrine.

6. At the hearing, the owner of Broward Insurance Recovery Center, LLC, Steven Schaet, testified as to the expenses incurred by the Plaintiff in participating in the appraisal process in a handful of claims over the course of several years. The Plaintiff also entered into evidence the various payment drafts from the Plaintiff to the appraisers in amounts ranging from $ 150.00 to $ 200.00 dollars per claim. Further, Mr. Schaet testified that he was unable to obtain an appraiser for less than $150.00 dollars per claim. The Plaintiff also introduced the contingency fee agreement executed between the Plaintiff and counsel for the Plaintiff which established that appraisal and umpire costs would not be advanced as they are not taxable. The agreement further provides that the client, Broward Insurance Recovery Center, LLC is responsible for all appraisal and umpire costs.

Plaintiff established that the amount of the liquidated damages was $26.50, and the cost of the appraisal was between $150 and $200, with an additional sum being reasonably anticipated if an umpire is required. As such, the uncontroverted evidence was that the Plaintiff would expend between $123.50 and $173.50 more than it could recover on each claim, which it argued created a clear economic deterrence to its desire to contest the amount of reimbursement for the windshield repair services.

7. The Defendant produced no witnesses or evidence at the hearing.

Legal Analysis

8. The Prohibitive Cost Doctrine is an equitable doctrine which serves to invalidate arbitration agreements under specific circumstances. In Zephyr Haven, the Second District Court of Appeals accepted the rejection of the argument that arbitration agreements which provide for a sharing of the costs of the procedure are per se unenforceable, but “held that a case-by-case analysis is appropriate, focusing on, among other things, upon the claimant’s ability to pay the arbitration fees and costs, the expected cost differential between arbitration and litigation in court, and whether the cost differential is so substantial as to deter the bringing of claims.” Id., at 922. (emphasis added).

9. While the inability to pay was an element in Zephyr Haven, as the plaintiff in that case claimed an inability to pay the costs of the arbitration clause in a contract she executed when becoming a resident at an assisted living facility, the inability to pay is not a necessary element of the Prohibitive Cost doctrine, but a factor to be considered, if raised, and established factually.

10. The Plaintiff did not raise an inability to pay the costs of the appraisal as a basis for invoking the Prohibitive Cost Doctrine. Instead, the Plaintiff addressed the significant differential between the liquidated damages being sought and the cost of the appraisal by placing into evidence the cost of the appraisal in the form of prior checks and invoices for appraisal. Also placed into evidence was the amount billed for the services rendered and the amount reimbursed by Defendant which was $63.60, less than the amount billed. The Defendant did not provide any evidence to dispute these amounts.

11. Whether the Plaintiff has the ability to pay the appraisal is not an element necessary to invoke the Prohibitive Cost Doctrine as that was not a basis upon which the Plaintiff was attempting to invoke this doctrine. Rather, Plaintiff argued, and this Court agrees, that the basis for the invocation of this equitable doctrine was the differential in the amount of the liquidated damages ($26.50) and the anticipated costs of the appraisal ($150-$200), which would clearly act as a significant deterrent to the bringing of this claim.

12. While the inability to pay the costs of appraisal could be an element to invoke the Prohibitive Cost Doctrine, it is not a necessary element, as it is one of several factors a court can consider when a party is seeking to invoke this doctrine.

13. The Court rejects the narrow analysis suggested by Defendant regarding the application of the Prohibitive Cost Doctrine. While the facts in Zephyr Haven may have involved a claimed inability to pay, that opinion synthesized the holdings in Green Tree and Bradford to require the party seeking to invoke the doctrine to “make some showing of individualized prohibitive expense . . . to invalidate an arbitration agreement on the ground that fee splitting would be prohibitively expensive.” Zephyr Haven at 922. (citations omitted) (emphasis added).

14. Here, the Plaintiff has demonstrated the individualized prohibitive expense by focusing on the relatively small amount of liquidated damages against the significantly higher costs or appraisal which is not taxable and therefore cannot be recouped even if the Plaintiff prevailed. From a purely economic standpoint, no plaintiff would ever seek to recover the difference given the fact that the costs of recovery is six to eight times the amount which it sought to recover. This would undoubtedly act as a deterrence to the brining of a claim, which was the rationale for the Prohibitive Cost Doctrine. While neither Zephyr Haven nor Bradford dealt with identical facts, neither of those cases had liquidated damages as does the Plaintiff in this case which requires a slightly different analysis but does not alter the logical conclusion regarding the invocation of the doctrine.

15. This ruling of the Court is solely limited to the precise question of whether there is evidence sufficient to invoke the Prohibitive Cost Doctrine as a defense to the Defendant’s Motion to Compel Appraisal. The Court shall entertain, at a date to be scheduled, the other arguments of the parties as to that Motion, and as to the Defendant’s Motion to Dismiss.

Based upon the foregoing, the Court finds that the differential between the liquidated damages sought by Plaintiff and the costs of appraisal are sufficiently significant so as to deter the bringing of this claim, and the Plaintiff has met their burden of establishing the invocation of the Prohibitive Cost Doctrine as an averment of the Motion to Compel Appraisal.

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¹The Limits of Liability provision in the Policy of insurance pertaining to windshield damage reflects the following language:

LIMITS OF LIABILITY

……..

2. Payments for loss to a covered auto, non-owned auto, or custom parts or equipment are subject to the following provisions:

d. In determining the amount necessary to repair damaged property to its pre-loss physical condition, the amount to be paid by us:

(i) will not exceed the prevailing competitive labor rates charged in the area where the property is to be repaired and the cost of repair or replacement parts and equipment, as reasonably determined by us; and

(ii) will be based on the cost of repair or replacement parts and equipment which may be new, reconditioned, remanufactured or used, including, but not limited to:

(a) original manufacturing parts of equipment; and

(b) nonoriginal manufacturing parts or equipment.