A Florida federal magistrate made three very similar rulings in one day regarding pending appraisals, which should be read by all involved with appraisal. 1 The Orders set out criteria for appraisers, the appointment of an umpire that requires the appraisers to be present and in front of the court if an agreement cannot be reached, discovery and the form of the award.

This trilogy of three cases illustrates one judicial approach to handling insurance disputes requiring appraisals. By mandating detailed, itemized awards and permitting discovery, the court ensures a thorough and transparent appraisal process. The differences in deadlines and specific agreements within the orders reflect tailored responses to each case’s circumstances. This comparative analysis underscores the importance of precise documentation and adherence to procedural directives when resolving appraisal disputes.

The court mandated in all three cases that appraisers be paid on a flat rate or based on an hourly fee:

Selecting Appraisers and Umpire: By August 1, 2024, each party must select a competent and impartial appraiser. The appraisers may not have served as an adjuster for either party and their compensation may not be contingent on the outcome of this matter, the outcome of the appraisal, or on any valuations they may make during the appraisal process. See Parrish v. State Farm Fla. Ins. Co., No. SC21-172, 2023 WL 1830816, *6 (Fla. Feb. 9, 2023) (‘[A]n appraiser cannot be ‘disinterested’ if he or she, or a firm in which he or she has an interest, is to be compensated for services as a public adjuster with a contingency fee.’). In other words, they may only be paid on a flat-fee or hourly basis for their service as impartial appraisers.

The next procedure is novel and apparently reflects policy language in the appraisal clause that the appraisers, not the parties, are to agree upon an umpire:

The appraisers must agree to an umpire by August 15, 2024, and the parties will contemporaneously file a joint notice identifying the members of the appraisal panel. If the appraisers are unable to agree, then the parties will file a motion by August 22, 2024, requesting a court appointed umpire, and the motion will be set for an in-person hearing during which the parties’ appraisers will explain their objections to each other’s proposed umpires.

A footnote added a new dimension to appraisal, which seems to reflect the court’s view that appraisal is more akin to arbitration than appraisal. As I read it, any party must provide information to all members and cannot have any contact or communication with any one member, including the appraiser the party selected:

The parties may communicate with, and provide information to, the three-member panel, but once it is assembled, they must forego any ex parte communications with the panel or any of its members.

Supporting my view that the court finds that appraisal is akin to arbitration is the following ruling citing the Federal Arbitration Act:

Discovery During Appraisal: The court’s experience in other insurance-coverage matters with appraisal issues has revealed that parties and appraisers sometimes find that the tools of formal discovery can facilitate the appraisal process. And as provided in the Federal Arbitration Act, a majority of the arbitration panel ‘may summon in writing any person to attend before them or any of them as a witness and in a proper case to bring with him or them any book, record, document, or paper which may be deemed material as evidence in the case.’ See 9 U.S.C. § 7. Likewise, a party may, with the concurrence of at least two members of the appraisal panel, conduct discovery concerning the amount of loss issues referred to the appraisal panel for resolution.

What I am not certain about is whether this is to be conducted like an arbitration rather than an informal appraisal because the court made this footnote when citing that the Federal Arbitration Act applied:

See Milligan v. CCC Info. Servs. Inc., 920 F.3d 146, 152 (2d Cir. 2019) (appraisal constitutes an arbitration for purposes of the FAA); Martinique Properties, LLC v. Certain Underwriters at Lloyd’s London, 567 F. Supp. 3d 1099, 1106 (D. Neb. 2021), aff’d sub nom., 60 F.4th 1206 (8th Cir. 2023) (same); Register v. Certain Underwriters At Lloyd’s, No. 5:20-cv-52-TKW-MJF, 2020 WL 6106624, *3 (N.D. Fla. Apr. 20, 2020) (same); Liberty Mut. Grp., Inc. v. Wright, No. CIV.A. DKC 12-0282, 2012 WL 718857, *6 (D. Md. Mar. 5, 2012) (requests to appoint an appraisal umpire are processed as motions under the FAA); see also Fit Tech, Inc. v. Bally Total Fitness Holding Corp., 374 F.3d 1, 7 (1st Cir. 2004) (an agreed method to reach a binding resolution by a third-party neutral about a fact in dispute constitutes an arbitration for purposes of the FAA).

How are two appraisers supposed to get the information to make their unilateral determination if the parties cannot have contact with them? Is this judge anticipating that attorneys are going to present this information in an arbitration setting?

The court required the following for the form of the Award:

For each covered subpart of the property (to the extent there are multiple), the appraisal panel must delineate corresponding replacement cost values, actual-cost values, ordinance-or-law figures, and any other policy-benefit figures as appropriate. …RCV awards must further delineate separate figures for each component (e.g., roof, gutters, each window, each door, the drywall for an interior room, etc.).

The court then followed one of the worst reasoned cases ever written about actual cash value:

To the extent the award includes any figures for replacing undamaged items to match the replacement of damaged items, any such award must be separately set forth in the RCV award and no portion of it should be included in the ACV award. See Vazquez v. Citizens Prop. Ins. Corp., 304 So. 3d 1280, 1283-1285 (Fla. 3d DCA 2020) (the cost of matching is not relevant or recoverable when repairs have not been made such that recovery is for actual cash value only).

This federal magistrate making this ruling is smart. Federal judges are required to follow state law. He is also required to follow federal precedent regarding growing case law suggesting that appraisals are governed under the Federal Arbitration Act rather than a procedure that has no rules.

Florida state court judges need better coaching-up and explanation about what actual cash value means. This blog post is about appraisal, but our current Florida jurists are making things up about actual cash value that never existed when policyholders could only purchase actual cash value policies. We, the policyholder bar, have to do a better job explaining this basic concept, which is now off the rails in Florida.

I know many in other jurisdictions that follow the RCV minus depreciation equals ACV test are wondering how Florida came up with a new formula that exists nowhere else in the country, which excludes matching of the undamaged portions of property when considering ACV. All property adjusters reading basic property insurance adjustment treatises are taught differently. Florida judges have made up this new adjustment standard. I will write more about this in future posts.

I am certain to bring up these three cases today at the Insurance Appraisal and Umpire Association certification course in Ft. Lauderdale. I will pull off one shoe to explain how RCV is determined and how ACV works, including concepts with matching. Sometimes, simple explanations show how ludicrous legal logic can go about historic insurance concepts.

Finally, I sincerely meant that federal magistrate Nicholas Mizell is smart and very qualified. He was at the top of his law school class and had extensive litigation experience before coming to Florida and joining a reputable firm in Ft. Myers. An older website noted this about him:

Nick is a shareholder and principal with the firm’s civil trial and appellate group. He is currently the President of the Michael McDonnell Inn of Court, and a member of the executive committee of the Trial Lawyer’s Section of the Collier County Bar Association. Nick is also a member of the executive committee of the Trial Lawyer’s Section of the Florida Bar Association, where he serves as an editor of The Florida Discovery Handbook and a faculty member of the annual Advanced Trial Advocacy Program and the annual mock trial competition. He also serves as a court-appointed member of the local rules committee of the U.S. District Court for the Middle District of Florida.

…

Nick has served the Boy Scouts of America for several years as an Assistant Scoutmaster of Troop 2001 in Naples, Florida, where his sons completed their trail to Eagle Scout and became brotherhood members of the Order of the Arrow. His oldest son is a cadet with the United States Military Academy at West Point, and Nick and his wife are active members of the West Point Parents Club of Southwest Florida and the West Point Society of Naples.

While we were not involved in these three cases, I confess that I sometimes disagree and question a decision by a judge. I kick myself for not doing better when I feel like I did not win an argument I should have because intelligent judges depend upon sound advocates explaining why the law should follow a certain logic. I tell the attorneys in my firm not to blame the judge for a poor ruling but to blame ourselves for not doing a better job convincing them.

Thought For The Day

Judges should always be men of learning and experience in the laws, of exemplary morals, great patience, calmness, coolness, and attention.
—John Adams

1 Zhou v. Westchester Surplus Lines Ins. Co., 2:24-cv-512 (M.D. Fla. July 19, 2024); Westchester Surplus Lines Ins. Co. v. Jadestation Holdings, No. 2:23-cv-927 (M.D. Fla. July 19, 2024); Olson v. QBE Specialty Ins. Co., 2:23-cv-963 (M.D. Fla. July 19, 2024).