Waiver of Appraisal Right
Versailles Sur La Mer Condominium Ass’n, Inc. v. Lexington Ins. Co., No. 6:18-cv-1125-Orl-37TBS (U.S. District Court, Middle District Florida, July 24, 2018)
The firm obtained an order denying plaintiff’s motion to compel Lexington Insurance Company to submit plaintiff’s Hurricane Irma claim to appraisal, ruling that plaintiff had waived its right to appraisal by suing Lexington and participating in the litigation for several months before seeking appraisal.
Plaintiff, a condominium association in Melbourne, Florida, initially submitted a claim under a first-party property policy issued by Lexington for wind damage caused by Hurricane Irma. Following Lexington’s partial payment of $200,000 on the wind claim, plaintiff submitted an additional $10 million claim for “racking” of its oceanfront building, deforming the structure and rendering the building a total loss. Lexington denied coverage for the “racking” claim based lack of evidence, as well as the existence of pervasive, long-term deterioration of the building that existed for more than a decade before the storm.
Plaintiff filed an action against Lexington and pursued discovery, during which Lexington uncovered hundreds of thousands of pages of records that revealed the extent of the building’s pre-existing structural deterioration. Five months after commencing suit, plaintiff filed a motion to compel appraisal. Lexington opposed, arguing that appraisal was not appropriate in light of the outstanding coverage issues and that, in any event, plaintiff waived its right to appraisal by failing to invoke it in a timely fashion.
On the first point, the court noted that appraisal may be compelled even if an insurer has raised coverage defenses. While several Florida cases hold that coverage defenses should be litigated and resolved prior to appraisal, the court concluded that these decisions applied only if an insurer has completely denied the claim; if any part of the claim has been accepted, appraisal may be compelled, even as to additional claims raised after the initial acceptance of coverage.
On the second point, regarding waiver, the court held that the focus of the inquiry should be on whether the insured acted inconsistently with its appraisal rights. Specifically, the court concluded that plaintiff’s delay in demanding appraisal – until unfavorable documents were revealed and the need for extensive further discovery was evident – was “inconsistent with its appraisal rights.”
As a result of this decision in Lexington’s favor, plaintiff abandoned its “total loss” claim in light of the evidence uncovered in discovery.