Invocation of Appraisal Process is Not an Automatic Cure for Civil Remedy Notice

The recent ruling in Fortune v. First Protective Insurance Company d/b/a Frontline Insurance, out of Florida’s 2nd District Court of Appeal, cleared up some longstanding confusion as to what constitutes a “cure” of a civil remedy notice.

In Fortune, the Insureds timely filed a claim with their homeowners insurance policy upon suffering damage to their property from Hurricane Irma.¹ The Insurer investigated the claim and denied, contending that the amount of damage did not exceed the Insureds’ deductible. Upon presenting the public adjuster’s estimate and all other materials to the insurance company, the Insurer invoked the appraisal process under the policy.

Thereafter, the Insureds filed a Civil Remedy Notice alleging that the insurer made a lowball offer and “flagrantly breached” its duty to attempt in good faith to settle claims, under applicable Florida statutes. Additionally, the Insureds alleged that the Insurer refused to reassess its payment of benefits and the basis for payment and that the Insurer “turn[ed] a blindeye and refuse[d] to properly adjust and settle the claim.”

A month and a half after the appraisal, the Insurer paid the net amount owed of $110,067.35 (the appraisal award set by neutral umpire was $121,516.55). Later, on October 25, 2018, the Homeowners filed their complaint that sought relief for insurer bad faith alleging that that the Insurer had “failed to promptly, fully, and adequately pay [the Homeowners] under the Policy and ‘low-balled’ [their] damage estimate”. The Insureds stated that the Insurer had failed to pay damages within 60 days of receipt of the CRN, which is required under 624.155(3)(d).

The Insurer immediately filed a motion to dismiss, arguing that it “fully cured the alleged bad faith during the cure period set forth under Florida Statutes by complying with the appraisal process, which resolved the dispute between the parties and was agreed to by [the Homeowners]. The Insurer was successful, which resulted in an Insureds appeal.

On appeal, the issue became whether the Insurer cured the CRN by invoking the appraisal process and then paying the appraisal award outside the 60-day time limit of 624.155(3)(d).

Florida Statute Section 624.155(1)(b)(1), a provision of Florida’s bad faith statute, provides:

(1) Any person may bring a civil action against an insurer when such person is damaged:
…

(b) By the commission of any of the following acts by the insurer:

1. Not attempting in good faith to settle claims when, under all the circumstances, it could and should have done so, had it acted fairly and honestly toward its insured and with due regard for her or his interests[.]

In its analysis, which heavily relied on Vest v. Travelers Insurance Company,² the court explained:

Even if a policy requires the mediation or appraisal process to occur prior to suit being filed, an appraisal is not a condition precedent to the insurer fulfilling its obligation to fairly evaluate the claim and to either deny coverage or to offer an appropriate amount based on that fair evaluation . . . A fair evaluation would be evidence that an insurer did not act in bad faith. But a lowball offer made in bad faith is not cured by an insurer ultimately paying what it is later found to owe via the appraisal process.

The language of section 624.155(3)(d) does not toll the cure period until an appraisal is completed. Although not applicable here, an amendment to section 624.155, effective July 1, 2019, see Ch. 2019-108, §§ 6, 18, Laws of Fla., reinforces the Homeowners’ position that seeking an appraisal is not a cure to a failure to attempt to timely settle a claim in good faith. The legislature added a new section 624.155(3)(f) which states, “A notice required under this subsection may not be filed within 60 days after appraisal is invoked by any party in a residential property insurance claim.” This new provision affects the time when an insured can file a CRN but does not treat an appraisal or payment of an appraisal award as a cure of any violations alleged in the CRN. And, as the Homeowners argue, if an insured cannot file a bad faith action until the appraisal award is made, see Bryant, 271 So. 3d at 1022, but the appraisal process cures a bad faith violation as a matter of law, then it places insureds in a catch-22 situation. It would allow an insurer to act in bad faith without consequence in settling claims as long as the insurer later pays the appraisal award within the time set by the insurance policy.

Thus, the court ultimately rejected the Insurer’s argument that when the CRN does not state the amount necessary to cure the alleged bad faith, the Insurer’s invocation of the appraisal process constitutes a corrective action within the meaning of the 624.155(3)(d). In reversing the summary judgment order, the court stated that the “Insurer’s invocation of the appraisal process and payment of the appraisal award after the cure period expired did not cure, as a matter of law, an alleged violation for failing to attempt to settle claims in good faith.”
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¹ Fortune v. First Protective Ins. Co., 302 So. 3d 485, 487 (Fla. 2d Dist. App. 2020).
² Vest v. Travelers Ins. Co., 753 So.2d 1270 (Fla. 2000).