As we continue our summer series on the appraisal process, it’s essential to delve into a crucial aspect: the obligation of the policyholder to comply with all post-loss obligations before moving forward with appraisal. In simpler terms, the appraisal process may not be “ripe” until these obligations have been fulfilled.

The Rise of Appraisals and Legal Implications

In recent years, there has been a notable increase in appraisals within the insurance industry. Consequently, courts across the country are addressing numerous legal issues that arise during and after the appraisal process. As a representative of the policyholder, it is your duty to ensure that all post-loss obligations are met. This responsibility involves advising the policyholder to thoroughly review the policy language to understand the nature and extent of their post-loss duties.

Understanding Refusal to Enter Appraisal

A common scenario involves insurance companies refusing to enter into appraisal. While it might seem that insurers are simply being difficult, there are cases where the refusal stems from recognizing that the appraisal process is not yet ripe. Under Texas law, many post-loss obligations are considered “conditions precedent” to coverage. This means that if an insured fails to comply with these obligations, the insurer is typically relieved from further performance. 1

The Impact of Post-Loss Obligations in Florida

This is typical in almost every jurisdiction. However, Florida courts have flushed out this issue comprehensively. In Florida, not complying with post-loss obligations can be a material breach of policy conditions, potentially fatal to a claim and grounds for voiding the policy. In the case of Himmel v. Avatar Property & Casualty Ins. Co., 2 the appellate court reversed two consolidated Motions for Summary Judgment in favor of Avatar due to the breach of policy conditions. Furthermore, in Citizens Prop. Ins. Corp. v. Mango Hill Condo. Ass’n 12 Inc., the court held that insureds must comply with the post-loss terms of their policies to enable insurers to investigate claims and disagree on loss amounts before the appraisal term becomes effective. 3

Legal Precedents and Requirements

The law is clear: the party seeking appraisal must comply with all post-loss obligations before invoking the right to appraisal. 4 Courts have found that until these conditions are met and the insurer has had a reasonable opportunity to investigate and adjust the claim, there is no disagreement regarding the value of the property or the amount of loss. 5

This compliance includes the requirement for the policyholder to sit for an examination under oath (EUO). Failure to comply with a demand for an EUO is considered a willful and material breach of the insurance contract, precluding the insured from recovery under the policy. 6

Challenges in the Large Loss Arena

Complications often arise in large loss scenarios. Insurance policies have evolved, making post-loss obligations increasingly complex. It can be challenging to determine what is required and what is not. Therefore, policyholder representatives should seek legal counsel in large loss matters before invoking the appraisal clause. Ensuring that appraisal is the appropriate course of action at the right time can prevent many issues once the appraisal process is complete.

Conclusion

In conclusion, understanding and complying with post-loss obligations are fundamental steps before initiating the appraisal process. This compliance ensures that both parties—policyholder and insurer—are on the same page and that the appraisal process can proceed smoothly. By thoroughly reviewing policy language and seeking legal advice, policyholder representatives can navigate the complexities of post-loss obligations and protect their client’s interests.

1 Members Mut. Ins. v. Cutaia, 476 S.W.2d 278, 279 (Tex.1972); Hohenberg Bros. v. George E. Gibbons & Co., 537 S.W.2d 1, 3 (Tex.1976)). See also Sepulveda v. State Farm Lloyds, No. 5:20-CV-157, 2021 WL 8441964, (S.D. Tex. May 24, 2021); Wright v. State Farm Lloyds, No. 4:23-CV-01248-O, 2024 WL 1587057, (N.D. Tex. Mar. 25, 2024), report and recommendation adopted, No. 4:23-CV-01248-O, 2024 WL 1588504 (N.D. Tex. Apr. 11, 2024).
2 Himmel v. Avatar Prop. & Cas. Ins. Co., 257 So. 3d 488 (Fla. 4th DCA 2018).
3 Citizens Prop. Ins. Corp. v. Mango Hill Condo. Ass’n 12 Inc., 54 So. 3d 578, 581 (Fla. Dist. Ct. App. 2011).
4 State Farm Florida Ins. Co. v. Hernandez, 172 So. 3d 473, 476-77 (Fla. 3d DCA 2015)).
5 Citizens Property Ins. Corp. v. Galeria Villas Condominium Ass’n, Inc., 48 So.3d 188, 191 (Fla 3d DCA 2010).
6 Goldman v. State Farm Fire Gen. Ins. Co., 660 So. 2d 300, 303 (Fla. 4th DCA 1995).