27 Fla. L. Weekly Supp. 156a
Online Reference: FLWSUPP 2702YEARInsurance — Property — Appraisal — Disinterested appraiser — Public adjuster whose employer was retained on contingent fee basis by insureds, provided initial public adjustment of claim on behalf of insureds, and has fiduciary relationship with insureds as result of contract is not “disinterested” appraiser as required by policy
GLADSTONE YEARWOOD and HARRIETT YEARWOOD, Petitioners, v. STATE FARM FLORIDA INSURANCE COMPANY, Respondent. Circuit Court, 9th Judicial Circuit in and for Orange County. Case No. 2018-CA-8119-O, Division 39. March 29, 2019. Chad K. Alvaro, Judge. Counsel: Joshua Gilbert and Matthew G. Struble, Struble, P.A., Fort Lauderdale, for Plaintiff. Christopher Goodrum and Lynn S. Alfano, Alfano Kingsford P.A., Maitland, for Defendant.
FINAL DECLARATORY JUDGMENT
THIS MATTER came before the Court for a hearing on March 27, 2019 (“Hearing”) on Petitioner’s Petition for Declaratory Judgment, and Respondent’s Response and Memorandum of Law in Opposition to Petitioner’s Petition for Declaratory Judgment, and the Court, being duly advised in the premises and having heard arguments of counsel, finds as follows.
INTRODUCTION
Petitioners, Gladstone Yearwood and Harriett Yearwood (“Insureds”), are insureds under a policy of insurance bearing policy number 80QF83183 (“Policy”) issued by Respondent, State Farm Florida Insurance Company (“State Farm”). After the Insureds suffered a covered loss, State Farm invoked its appraisal rights under the Policy, whereupon the Insureds sought to nominate as their appraiser Kyle Pich (“Pich”), a public adjuster employed by the company initially retained by the Insureds to adjust the claim on their behalf, Five Star Claims Adjusting (“Five Star”). State Farm objected on the ground that Five Star and Pich are not “disinterested” within the meaning of the appraisal provision in the Policy. Petitioners seek a declaration that Pich meets the requirement of being a “disinterested” appraiser and thus is legally permitted to serve as their designated appraiser under the Policy.
The Court noted at Hearing that the case came before the Court in an unusual procedural posture in that there was no motion bringing a particular issue before the Court; rather, the parties noticed the case for a final determination by the Court as to the ultimate issue in the case. Both parties consented to the Court’s consideration of this matter in that procedural posture. No evidence was taken at the Hearing, and the parties did not object to the Court’s consideration of the legal effect of the Policy language inasmuch as the existence of the Policy, in the form presented to the Court (Pet. at Ex. A), was undisputed.
ANALYSIS
The Policy provides that, if the parties do not agree to the amount of a covered loss, either can demand that the amount of the loss be set by appraisal. And, “[i]f either makes a written demand for appraisal, each shall select a competent, disinterested appraiser” to participate in a process whereby the appraisers will attempt to agree on an amount of the loss, or, failing that, submit their disagreement for resolution by an impartial umpire chosen by the appraisers or the Court (Pet. at Ex. A, p. 14). State Farm argues that Pich may not serve as a “disinterested” appraiser because (1) Five Star and Pich were retained on a contingent fee basis, (2) Five Star (and possibly Pich) had already been involved in the adjustment of the claim on the Insured’s behalf prior to Pich ever being nominated as their appraiser, and, (3) Five Star and Pich allegedly have a fiduciary duty to the Insureds by virtue of being their “agent”.
In Rios v. Tri-State Ins. Co., 714 So. 2d 547, 548 (Fla. 3d DCA 1998) [23 Fla. L. Weekly D1522b], insureds moved to compel an appraisal, and their insurer sought to compel discovery as to the nature of the compensation they sought to pay their appraiser in order to determine if the insured’s appraiser was, as required by the policy, an “independent” appraiser. The trial court ordered the disclosure, and the insureds petitioned the Third District Court of Appeal for a writ of certiorari. On appeal, the court held that the term “independent” did not foreclose the possibility that an appraiser could be paid on a contingent fee basis. The court went on to reason that since the Code of Ethics for Arbitrators in Commercial Disputes (“Code of Ethics”) did not provide for automatic disqualification of an arbitrator who has a direct or indirect financial interest in the outcome of an arbitration, then an appraiser’s direct or indirect financial interest in the outcome of an appraisal should not disqualify him or her.
The Third District Court of Appeal confronted the “identical” issue and procedural posture in Galvis v. Allstate Ins. Co., 721 So. 2d 421 (Fla. 3d DCA 1998) [23 Fla. L. Weekly D2594a], except that the appraisal provision in Galvis, as here, provided for the appointment of a “disinterested”, rather than an “independent”, appraiser. Relying on Rios, the court found that the appraiser in question was not disqualified by virtue of his contingent fee interest in the dispute and simply ordered the disclosure of his compensation arrangement pursuant to the Code of Ethics.
The Third District Court of Appeal recently relied on Rios and Galvis in holding that a contingent fee interest did not render an appraiser partial so as to foreclose his participation as an appointed appraiser for an insured. Brickell Harbour Condo. Ass’n, Inc. v. Hamilton Specialty Ins. Co., 256 So. 3d 245, 249 (Fla. 3d DCA 2018) [43 Fla. L. Weekly D2321a].
Together, Rios, Galvis, and Brickell Harbour support the proposition that a contingent fee interest does not, in and of itself, disqualify a party from serving as an appraiser for an insured in the appraisal process. However, the Fifth District Court of Appeal has noted that changes to the Code of Ethics upon which Rios, and subsequently Galvis, extensively relied, have “undercut[ ] the continued viability of the holding in Rios” and “undermin[ed] the Rios holding.” Florida Ins. Guar. Ass’n v. Branco, 148 So. 3d 488 (Fla. 5th DCA 2014) [39 Fla. L. Weekly D2020a]. In Branco, the Fifth District Court of Appeal held that a party was precluded from nominating its attorney as an appraiser because the attorney had a fiduciary relationship with his client and therefore was not a “disinterested” appraiser as required by the policy language. See also Verneus v. Axis Surplus Ins. Co., 2018 WL 3417905 (S.D. Fla. 2018)(striking appraiser as not “impartial”).
This Court agrees that the holdings in Rios and Galvis have questionable remaining viability given the changes to the Code of Ethics on which those holdings were based (and, albeit philosophically, wonders why the Rios and Galvis courts felt it necessary to stray beyond the plain meaning of the terms “independent” and “disinterested” in the first place). Appraisals are creatures of contract and the subject or scope of appraisal depends on the contract provisions. Branco, 148 So. 3d at 491. Absent ambiguity, the plain meaning of an insurance policy controls. Id. Resort to the rules of contractual interpretation is only appropriate when the policy language is ambiguous or susceptible to multiple meanings. Id.
Here, as acknowledged by both parties, the term “disinterested” is readily capable of definition. “Disinterested” means “free from bias, prejudice, or partiality and therefore able to judge the situation fairly; not having a pecuniary interest in the matter at hand.” BLACK’S LAW DICTIONARY (10th ed. 2014). Very obviously, Five Star and Pich do have a pecuniary interest in the matter at hand; they will be entitled to receive ten percent of the amount recovered as a result their efforts. Having a direct interest in the result of the appraisal certainly creates the specter that Five Star and Pich may not be able to “judge the situation fairly.”
Similarly, the parties did not dispute at the Hearing that Five Star provided initial public adjustment of the claim on behalf of the Insureds. Just as did the would-be appraiser in Verneus, supra, Pich, “as a professional who presumably values his reputation” has “an interest to protect”, and is “unlikely to reach a conclusion as an appraiser that is significantly different” from his initial adjustment of the claim. Verneus, 2018 WL 3417905 at *6. While it is unclear, as a factual matter, whether Pich, or another agent of Five Star, provided the initial adjustment of the claim, the incentive for one Five Star adjuster to support the estimate of another Five Star adjuster is nonetheless present even if a different Five Star agent prepared the initial estimate.
As also argued by State Farm, the contract between the Insureds and Five Star establishes a principal and agent relationship between the Insureds and Five Star. A fiduciary relationship may be either express or implied. Maxwell v. First United Bank, 782 So. 2d 931, 933 (Fla. 4th DCA 2001) [26 Fla. L. Weekly D853a]. Express fiduciary relationships, such as principal/agent, are created by contract. Id. Here, Five Star is expressly referred to as the Insureds’ “agent” in their contract. That contract also requires joint checks to be written to the Insureds and Five Star, and permits Five Star to deposit checks written by a carrier into Five Star’s accounts and then disburse the Insureds’ portion to the Insureds. Even if not all principal/agent relationships are fiduciary in nature, the appointment of Five Star to receive the Insureds’ funds and disburse them to the Insureds, paired with Five Star’s obligation to account for such funds, creates a fiduciary relationship between Five Star and the Insureds that the Court must consider in determining whether Pich is truly “disinterested” within the meaning of the Policy language.
The Insureds suggest that the fact that the Policy provides for the appointment of an umpire mitigates any partiality that an appointed appraiser might have, but the Court rejects that notion. The presence of one element of contractual language does not read out of the Policy another element of contractual language. The Court is required to give effect to all elements of the Policy, including the requirement that each party’s appraiser be “disinterested”. The Insureds further suggest that a per se rule against an appraiser having a contingent fee interest in an appraisal impermissibly interferes with an insured’s ability to compensate his adjuster as he or she sees fit. But, this Court does not enforce such a per se rule; just as in Verneus, the existence of that contingent fee interest is just one of the factors to be weighed in determining whether or not an appraiser is interested. Additionally, if the Legislature determines as a matter of policy that requiring “disinterested” appraisers to represent insureds places an unfair burden on insureds who are thereby compelled to pay their adjusters hourly and out-of-pocket, then it can take action. In the meantime, this Court must enforce the Policy as it is written.
Five Star’s contingent fee interest the Insured’s recovery, paired with the fact that it was the company that provided the initial estimate of the Insured’s claim and has a fiduciary relationship with the Insureds, means that Pich is not “disinterested” as required by the Policy. It is accordingly
ORDERED and ADJUDGED as follows:
1. The Court finds and declares, for all the reasons set forth above, that Pich is not “disinterested” and is therefore disqualified from serving as an appraiser on behalf of the Insureds in their appraisal proceedings.
2. Declaratory judgment is entered in favor of Defendant, and against Plaintiff, and Defendant shall go henceforth without day.
3. The Insureds shall have twenty-one days to appoint a disinterested appraiser.
4. The Court retains jurisdiction for the limited purpose of adjudicating appraisal related requests for relief, such as appointment of an umpire.
