Here’s the situation, your Florida home gets damaged and you need to file a property damage claim with your insurance carrier. As a part of this process, you’ll need to use an appraiser to evaluate the value of the property and damages. Historically, homeowners have opted to work with a trusted public adjuster as the appraiser, but recent rulings in Florida have made this a highly contested issue.
If you were to ask a Florida insurance lawyer whether you could legally hire your public adjuster for the appraisal, the answer will likely be “it depends”. It’s a classic lawyerly response but holds true nonetheless.
The situation in Florida is highly nuanced right now and in order to better understand it, we need to look at the ruling in State Farm Florida Insurance Company v. Sanders from 2019. The court held that a direct or indirect financial (or personal) interest in the outcome of an insurance appraisal does not mean that the appointed appraiser must be disqualified. This ruling meant that a public adjuster hired based on a contingency fee agreement could still act as a “disinterested” appraiser.
This was an unfavorable decision for insurance carriers in the state of Florida, so they took action immediately. Upon rehearing the case, opinions have shifted and things are currently split amongst the five District Courts of Appeals (DCAs) in Florida.
The Cliff Notes: Key Takeaways From This Post
We looked into Florida’s insurance appraisal process; however, here are the key bullet points if you are in a rush:
- Insurance appraisal process typically requires a homeowner to check if their policy contains an appraisal clause, and if so, what provisions are mandatory.
- The key consideration is the presence of language such as “needs to be independent” or “needs to be disinterested”.
- Most public adjusters are contracted using contingency fee agreements in which they earn a certain percentage of whatever they recover from the insurance company.
- Florida’s Third DCA has taken the stance that it would be acceptable to use a public adjuster for an appraisal if the homeowner’s policy includes “disinterested” language, as long as financial interest is disclosed.
- Other DCAs disagree and State Farm has petitioned for new policies that make things more difficult for homeowners.
- Homeowners in Pinellas should contact an experienced insurance lawyer who can help them find reputable public appraisers and negotiate flat fees for appraisal services.
How Does The Insurance Appraisal Process Work (Typically)?
Before we go dive further into the contention between the five DCAs, let’s quickly review how this insurance appraisal process works for homeowners like you. According to Keith Stahl, one of our elite insurance attorneys, there are 2 key considerations you need to keep in mind:
- Does your home insurance policy contain an appraisal clause? Most do nowadays, but you should double-check just to be sure.
- Are there mandatory stipulations in your clause? Will you be forced to go through your insurance company to hire an appraiser? Can you demand that the insurance carrier hire a different third-party appraiser?
For example, let’s say a homeowner is seeking an appraisal for a hurricane damage claim. They’ve found a public adjuster that they would like to hire for their appraisal. Will their insurance carrier contest this? It depends on the specific appraisal language within their home insurance policy.
The tricky thing is these appraisal clauses use a lot of similar language that only differs slightly between insurance carriers. As any experienced insurance lawyer would tell you, it’s often these slight variations that have the biggest impact on the final outcome for homeowners in insurance dispute cases.
Most clauses state that each party chooses their own appraiser and that appraiser must be competent. Competency in this context basically means the appraiser must be knowledgeable of the industry, can accurately apportion costs, pricing scope, and is familiar with pertinent construction costs. A competent appraiser should essentially know what needs to be done to repair the damage in question. Most public adjusters would automatically qualify as being competent if they are licensed.
This aspect of the appraisal clause is straightforward, but the issue we’re discussing in this post arises from the use of language like “needs to be independent” or “needs to be disinterested.” When the clause includes words like “disinterested”, the focus gets shifted to an evaluation of the implied financial relationship between the homeowner and the public adjuster.
Why Public Adjusters Offer Contingency Fee Agreements for Appraisals
In most of these appraisal cases, Florida homeowners aren’t hiring a public adjuster based on an hourly rate fee. Depending on the insurance claim, this can be a lengthy process and an hourly fee agreement would often become too expensive for most homeowners. Most public adjusters contract with homeowners based on a contingency fee agreement. Sound familiar? This is similar to how law firms like ours handle personal injury cases in Pinellas.
Just as a quick recap, a contingency fee contract stipulates that the public adjuster will earn a certain percentage of whatever they recover from the insurance company or is paid by the insurance company.
Due to the prevalence of the practice in Florida, there are statutory laws governing the exact percentage a public adjuster can earn as their contingency fee following specific events (like a hurricane). Their contingency fee can only be 10 percent in those cases.
The 5 District Court of Appeals in Florida
As of December 2021, the 5 DCAs in Florida don’t all see eye to eye when it comes to a homeowner’s right to hire a public adjuster for their appraisal. If you have some historical knowledge of our DCAs, it may be easier to understand why this is the case.
For those who don’t here’s a quick breakdown of each District Court of Appeals:
Florida’s First DCA
- Headquartered in Tallahassee
- Covers the Panhandle over to Jacksonville (Northern Florida)
- It handles most of the appeals in state administrative law matters
- It is also solely responsible for handling appeals in workers’ compensation cases
Florida’s Second DCA
- Headquartered in Lakeland (also hears oral arguments in Tampa)
- 14 Florida counties included in the Second District (including Pasco, Pinellas, and Hillsborough)
- Our law firm is located within the Second District
Florida’s Third DCA
- Headquartered in Miami
- Jurisdiction over cases in Monroe and Miami-Dade Counties
- The third district has traditionally been more progressive in its rulings than the other districts
Florida’s Fourth DCA
- Headquartered in West Palm Beach
- Jurisdiction over cases in Broward, Indian River, Okeechobee Counties (Amongst others)
Florida’s Fifth DCA
- Headquartered in Daytona Beach
- This District holds jurisdiction over counties in the center of the state (including Orange and Osceola counties)
What is the Third DCA’s Stance vs the Other Districts?
Of the five DCAs, only the Third DCA has taken a stance that favors Florida homeowners. If your home is located in a county under the jurisdiction of the Third DCA, their stance is that the PA can still qualify as disinterested despite their given financial interest in the outcome. This is dependent on the PA adhering to a code of ethics developed for arbitrators and commercial disputes. According to this Code of Ethics, PAs would be required to disclose their financial interest in their role as the appraiser.
Initially, the Third DCA had taken a different stance on this issue. Upon rehearing the case, they claimed they had been mistaken in their position. The Second, Fourth and Fifth DCAs have taken the stance that it would not be acceptable to use a public adjuster for an appraisal if the homeowner’s policy has a clause with “disinterested” language present.
The Impact of the State Farm Insurance v. Sanders 2019 Case
Home insurance policies in Florida are constantly being changed and updated. Sadly, many of these updates don’t end up benefiting homeowners. This has really been highlighted in high-profile cases like the State Farm Florida Insurance Company v. Sanders case in 2019.
Like many other Florida homeowners, the insured party had filed a property damage claim with State Farm for damages sustained during Hurricane Irma. The appraisal clause in their homeowner’s policy stated that “[e]ach party will select a qualified, disinterested appraiser …”
On December 12, 2018, the parties entered into an agreed order granting State Farm’s Motion to Invoke Appraisal. The Order listed a third-party organization as State Farm’s appraiser and required the insured party to name their “qualified, disinterested appraiser,” as stated in State Farm’s policy. The homeowner hired a public adjuster under a contingency fee agreement to be their appraiser.
State Farm claimed the PA was not a disinterested party due to:
- Their relationship with the homeowner
- Their contingency fee agreement
- Prior damage estimates provided
On April 9, 2019, the court permitted the public adjuster to act as the “disinterested” appraiser in this case. State Farm quickly petitioned for a rehearing regarding this decision. While most DCAs have sided with State Farm’s stance on this issue, the Third DCA sided with the homeowner after rehearing the case. Specifically, that if the financial interest is disclosed, it is acceptable for the PA to participate in the appraisal process.
How Does This Affect Insurance Carriers in Florida?
This ruling isn’t in the best interest of insurance carriers in Florida. Why? The homeowner isn’t forced to pay out of pocket for the appraisal while the insurance carrier will have to pay to bring on their appraiser. Insurance companies responded to this by petitioning the office of insurance regulation and proposing the inclusion of new language in their policies that would allow them to make things more difficult for homeowners.
Currently, the Third DCA seems to be the lone holdout on the side of the homeowner and allows them to use their PA as an adjuster. Our expert insurance lawyers theorize that this may need to be decided by the Florida Supreme Court.
Why Pinellas Homeowners Should Talk to an Insurance Lawyer
For Pinellas homeowners, you now know what the Second DCAs stance on this issue means for you. If your home insurance policy includes this language requiring the appraiser to be a disinterested party, you’re not going to be able to enter into a contingency fee agreement with your PA. What are your options?
What you could do is contact another public adjuster and negotiate a flat fee for the appraisal. For example, say you wanted to work with Jack the public adjuster. Jack has a great reputation, but he would want to sign a contingency fee agreement to do the appraisal. You’ve reviewed your homeowner’s insurance policy and it does contain “disinterested” language. Instead, you contact a public adjuster named Beth who is willing to work for a flat fee as an appraiser. This is a viable option for homeowners in Pinellas at the moment.
Savvy Pinellas homeowners may choose to speak with an insurance attorney in this situation, because an experienced lawyer will have strong relationships with reputable public appraisers and other professionals that can serve as an appraiser.
If you are in this situation, you should consider contacting Herman & Wells. We have a team of elite insurance lawyers who are ready to help and are well connected with great public adjusters in Pinellas and Hillsborough. Call our firm at (727) 821-3195 or request a free legal consultation using our convenient online form.