American Coastal Insurance Company v. San Marco Villas Condominium Association, Inc.

Supreme Court of Florida
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No. SC2021-0883
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AMERICAN COASTAL INSURANCE COMPANY,
Petitioner,

vs.

SAN MARCO VILLAS CONDOMINIUM ASSOCIATION, INC.,
Respondent.

February 1, 2024

GROSSHANS, J.

In this case, we consider whether a trial court can compel an

appraisal of an insured’s loss prior to resolving any pending

coverage issues. The Second District Court of Appeal, in the

decision under review, affirmed an order compelling appraisal even

though coverage issues remained. Am. Coastal Ins. Co. v. San

Marco Villas Condo. Ass’n, Inc., 346 So. 3d 78, 79 (Fla. 2d DCA

2021). Based on that outcome, the district court certified direct

conflict with three decisions of the Fourth District Court of Appeal,

which held that a trial court errs in compelling appraisal without
first resolving all coverage issues. See Citizens Prop. Ins. Corp. v.

Demetrescu, 137 So. 3d 500, 502 (Fla. 4th DCA 2014); Citizens

Prop. Ins. Corp. v. Mich. Condo. Ass’n, 46 So. 3d 177, 178 (Fla. 4th

DCA 2010); Sunshine State Ins. Co. v. Corridori, 28 So. 3d 129, 131

(Fla. 4th DCA 2010). For the reasons explained below, we approve

the Second District’s decision and disapprove the certified conflict

cases to the extent they are inconsistent with this opinion. 1

Facts

American Coastal issued a commercial residential policy to

Respondent San Marco Villas Condominium Association, Inc., a

condominium complex located on Marco Island. That policy

covered the complex’s buildings against a number of perils,

including hurricanes or other windstorms. While the policy was in

full force and effect, Hurricane Irma made landfall near Marco

Island. San Marco’s buildings sustained some damage from the

storm.

Soon after the hurricane, San Marco submitted a claim to

American Coastal. After some investigation, American Coastal

1. We have jurisdiction. See art. V, § 3(b)(4), Fla. Const.

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determined San Marco’s losses to be $356,208.82. It proceeded to

pay $192,629.75 to San Marco, an amount which reflected

depreciation and application of policy deductibles.

Not satisfied with that payment, San Marco obtained an

estimate of its own. That estimate showed damages in excess of

eight million dollars. Noting the divergent estimates of the damage

caused by Hurricane Irma, San Marco demanded an appraisal

pursuant to a provision in the policy, which states:

E. Loss Conditions
....
2. Appraisal. If we and you disagree on the value of
the property or the amount of loss, either may make
written demand for an appraisal of the loss. In this
event, each party will select a competent and impartial
appraiser. If they cannot agree, either may request
that selection be made by a judge of a court having
jurisdiction. The appraisers will state separately the
value of the property and amount of loss. If they fail to
agree, they will submit their differences to the umpire.

A decision agreed to by any two will be binding. Each
party will:

a. Pay its chosen appraiser; and

b. Bear the other expenses of the appraisal and umpire
equally.

If there is an appraisal, we still retain our right to deny the
claim.

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(Emphasis added.)

American Coastal refused to submit to appraisal. It reasoned

that an appraisal at that point was premature as its investigation

was still ongoing.

Ultimately, San Marco sued American Coastal and asked the

court to compel appraisal. Thereafter, American Coastal wrote a

letter to San Marco. In that letter, American Coastal said that it

was denying coverage based on a policy condition that voids

coverage when the insured commits fraud or makes material

misrepresentations about the insurance. After issuing that letter,

American Coastal filed a response to San Marco’s motion to compel.

It argued to the court that appraisal was inappropriate because it

had denied coverage as a whole based on the fraud-

misrepresentation condition in the policy. American Coastal also

filed an answer, which included affirmative defenses and a

counterclaim. Its counterclaim and one affirmative defense relied

on the fraud-misrepresentation condition and sought the return of

its payment to San Marco.

Eventually, the court held a hearing on San Marco’s appraisal

motion. Siding with San Marco, the court entered an order

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compelling appraisal. American Coastal appealed that ruling. But

the Second District affirmed, relying on American Capital Assurance

Corp. v. Leeward Bay at Tarpon Bay Condominium Ass’n, 306 So.

3d 1238 (Fla. 2d DCA 2020) (affirming order compelling appraisal in

separate case). See San Marco Villas, 346 So. 3d at 79. As it had

done in Leeward Bay, the district court certified conflict with

Demetrescu, Michigan Condominium Ass’n, and Corridori. See id.

Having lost in the district court, American Coastal asked us to

review the Second District’s decision. We granted that request and

accepted review based on the certified conflict.

Analysis

American Coastal argues that we should quash the decision

under review and hold that a trial court is precluded as a matter of

law from ordering an appraisal where an insurer has wholly denied

coverage. Assessment of this argument turns on the proper

interpretation of the parties’ contract, which is a legal matter

subject to de novo review. See First Baptist Church of Cape Coral,

Fla., Inc. v. Compass Constr., Inc., 115 So. 3d 978, 980 & n.4 (Fla.

2013).

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Here, the applicable contract is an insurance policy. That

policy establishes an informal out-of-court dispute resolution

process known as appraisal. Cf. Fla. Ins. Guar. Ass’n v. Branco, 148

So. 3d 488, 491 (Fla. 5th DCA 2014) (noting that appraisal is

creature of contract); NCI, LLC v. Progressive Select Ins. Co., 350 So.

3d 801, 807-08 (Fla. 5th DCA 2022) (discussing appraisal process).

Under American Coastal’s policy, each party has the right to

demand an appraisal where there is a disagreement as to the

“amount of loss.” “Loss” in the insurance context “refers to damage

resulting from a covered event.” BonBeck Parker, LLC v. Travelers

Indem. Co. of Am., 14 F.4th 1169, 1178 (10th Cir. 2021) (looking to

both legal and nonlegal dictionaries in defining “loss”).

In this case, there is a disagreement over the amount of loss

caused by Hurricane Irma, a peril that American Coastal does not

contest is covered under the policy. San Marco claims to have

suffered over eight million dollars in losses from the hurricane. On

the other hand, American Coastal contends that San Marco’s losses

are drastically less—characterizing San Marco’s loss figures as

grossly inflated and the product of numerous misrepresentations.

Accordingly, since there is an amount-of-loss dispute, the terms of

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the policy give San Marco a contractual right to an appraisal of that

loss.

Having concluded that San Marco has a contractual right to

appraisal, we now consider whether the trial court had authority to

order appraisal without first ruling on American Coastal’s coverage

defense and counterclaim, i.e., that San Marco made material

misrepresentations about its losses, which operated to void the

policy. Put more generally, we must determine whether trial courts

have discretion to compel appraisal pursuant to the parties’

contract before resolving coverage issues.

To decide this issue, we again turn to the policy—the legal

document establishing the right to appraisal. Although the policy

does not contain a provision directly governing the issue of timing,

it does include a retained-rights provision that speaks to this issue.

That provision gives the insurer the “right to deny [a] claim” even

“[i]f there is an appraisal.” Cf. State Farm Fire & Cas. Co. v. Licea,

685 So. 2d 1285, 1288 (Fla. 1996) (interpreting retained-rights

provision as allowing an insurer to raise—following appraisal—

coverage issues like “violation of the usual policy conditions such as

fraud, lack of notice, and failure to cooperate” (emphasis added)).

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By its terms, this retained-rights provision contemplates appraisals

occurring prior to resolution of coverage issues. Thus, in light of

the retained-rights provision and absent policy language controlling

the issue of timing, we hold that a trial court has discretion in

determining the order in which coverage and amount-of-loss issues

are resolved.

Based on this analysis, we reject American Coastal’s argument

that we should adopt the inflexible coverage-first rule applied in the

certified conflict cases. Those cases do not justify that rule based

on any particular policy provisions, let alone a retained-rights

provision like the one in this case. In addition to lacking textual

support, those cases misread our decision in Johnson v. Nationwide

Mutual Insurance Co., 828 So. 2d 1021 (Fla. 2002), as supporting

the coverage-first rule. For instance, in Corridori, the Fourth

District said that Johnson stood for the proposition “that coverage

issues must be resolved before an appraisal of the amount of a loss

is ordered.” 28 So. 3d at 131 (emphasis added). But that is not

what we said or decided in Johnson. There, we held that causation

is not an amount-of-loss issue where coverage is wholly denied—

ultimately finding that causation in that case presented a legal

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issue for the court. Johnson, 828 So. 2d at 1025-26. Because

there was no amount-of-loss issue present in Johnson, we had no

occasion to address the proper sequence for resolving concurrent

coverage and amount-of-loss issues. Cf. Leeward Bay, 306 So. 3d

at 1241 (“Johnson did not hold that the trial court had to resolve

coverage issues before compelling appraisal.”). Lastly, as for

Michigan Condominium, its reliance on Engle v. Liggett Group, Inc.,

945 So. 2d 1246, 1262-63 (Fla. 2006), was misplaced. Quite

simply, Engle had nothing to do with appraisal or interpretation of

an insurance policy.

Our rejection of American Coastal’s coverage-first rule aligns

with decisions from other jurisdictions. For example, in BonBeck

Parker, a federal appeals court observed that, following appraisal,

an insurer can raise coverage issues like whether the insured

“ ‘intentionally conceal[ed] or misrepresent[ed] . . . material facts’

when filing the claim.” 14 F.4th at 1179-80 (alterations in original).

As support for this determination, the court relied on a retained-

rights provision similar to the one in this case. Id. at 1180

(“Travelers ultimately did not raise these defenses after the Panel

issued its decision in this case. But the point is that they remained

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available to Travelers, even after the Panel determined how much

hail damage occurred. And because they did, Travelers ‘retain[ed]

[its] right to deny the claim.’ ” (citing Licea, 685 So. 2d at 1288));

accord Walnut Creek Townhome Ass’n v. Depositors Ins. Co., 913

N.W.2d 80, 94 (Iowa 2018) (insurer could raise policy exclusion in

court following appraisal); Auto-Owners Ins. Co. v. Summit Park

Townhome Ass’n, 100 F. Supp. 3d 1099, 1103-04 (D. Colo. 2015)

(rejecting argument that insurer would be prejudiced from raising

coverage issues following appraisal process); Quade v. Secura Ins.,

814 N.W.2d 703, 708 (Minn. 2012) (coverage issues to be decided in

court following appraisal).

Our analysis should not be interpreted to mean that

appraisals will be required in all first-party insurance disputes.

Under the terms of American Coastal’s policy, the contracted-for

right to appraisal is triggered when there is a dispute as to the

amount of loss. All other disputes—including those involving

coverage or legal matters—are beyond the scope of appraisal and

must be decided in court. See Licea, 685 So. 2d at 1287 (coverage

issues to be decided in court); Axis Surplus Ins. Co. v. Condor Corp.,

19 F.4th 1062, 1064 (8th Cir. 2021) (“If the question here

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were solely about whether hail is a covered peril . . . , then th[is]

would be [a] ‘legal question[] for the court.’ ” (quoting Quade, 814

N.W.2d at 707)). Consequently, an appraisal panel would lack

authority to decide whether San Marco made misrepresentations

sufficient to warrant voiding the policy under the fraud-

misrepresentation condition. That coverage issue would be for a

judge or jury to decide. However, the existence of a coverage

dispute based on allegations of fraud or material

misrepresentations does not preclude a concurrent amount-of-loss

issue when the parties also disagree about the amount of damage

caused by a covered event. 2

2. As an alternative argument, American Coastal claims that
allowing appraisal first would result in prejudice to its coverage
defense, which seeks to void the policy based on the fraud-
misrepresentation condition. We disagree. It is true that, under
the appraisal provision, the amount-of-loss determination will be
binding. But as we see it, nothing in the appraisal provision (or
process) limits the evidence that the insurer could present in
support of its fraud-misrepresentation affirmative defense or
counterclaim. And to the extent that American Coastal’s concern is
that the appraisal panel’s loss figure would weaken its affirmative
defense or counterclaim, that concern is speculative and overlooks
the safeguards built into the appraisal process. Moreover,
American Coastal provides no authority that a contractual provision
can be bypassed simply by asserting this type of prejudice.

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In sum, we conclude that trial courts have discretion in

determining the order in which coverage and amount-of-loss issues

are resolved. American Coastal, though presenting a myriad of

arguments, has not challenged the trial court’s exercise of that

discretion based on the facts and circumstances unique to this

case. Accordingly, we do not take it upon ourselves to consider

whether the trial court’s decision to defer resolution of coverage

issues until after appraisal was an abuse of discretion.

Conclusion

For the reasons given above, we approve the decision under

review and disapprove the certified conflict cases to the extent they

are inconsistent with this opinion.

It is so ordered.

MUÑIZ, C.J., and CANADY, LABARGA, COURIEL, FRANCIS, and
SASSO, JJ., concur.

NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING MOTION
AND, IF FILED, DETERMINED.

Application for Review of the Decision of the District Court of Appeal
Certified Direct Conflict of Decisions

Sixth District - Case No. 6D23-9

(Polk County)

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Patrick E. Betar and Illon R. Kantro of Berk, Merchant & Sims, PLC,
Coral Gables, Florida,

for Petitioner

W. Wyndam Geyer, Jr., Andy Fuxa, and Jeremy Tyler of Geyer,
Fuxa & Tyler, Sunrise, Florida; and John H. Pelzer of Greenspoon
Marder LLP, Fort Lauderdale, Florida,

for Respondent

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