Final September, I wrote concerning the federal court docket determination vacating a large appraisal award arising from Hurricane Sally harm on the Portofino condominium complicated on Pensacola Seaside in When a $187 Million Appraisal Award Collapsed within the Courtroom.
On the time, I famous that the ruling had the potential to turn out to be some of the important appraisal selections in current reminiscence as a result of it struck on the coronary heart of how value determinations are carried out and the way a lot scrutiny courts could apply to the appraisal course of itself.
The case is now earlier than the US Courtroom of Appeals for the Eleventh Circuit, 1 and the appellate briefs have been filed. 2 Anyone concerned with property insurance coverage claims, whether or not as a policyholder advocate, public adjuster, contractor, lawyer, appraiser, or insurer consultant, ought to pay shut consideration to what occurs subsequent.
The underlying dispute arose from Hurricane Sally. The appraisal course of finally resulted in awards totaling roughly $187 million. The insurers challenged these awards, and the federal district court docket vacated them. Now each side are asking the appellate court docket to resolve whether or not that ruling was appropriate.
What makes this case so necessary is that it raises elementary questions concerning the nature of appraisal itself. Florida courts have repeatedly acknowledged that appraisal isn’t arbitration. In reality, the Florida Supreme Courtroom has expressly said that appraisal is meant to be an off-the-cuff course of slightly than a proper arbitration continuing. There are not any established guidelines of proof. There isn’t a required transcript. There isn’t a choose presiding over the proceedings. There’s typically no formal report of what occurred. The method relies upon closely upon the experience, judgment, and professionalism of the appraisers and umpire chosen by the events.
I personally know all three members of the appraisal panel concerned on this dispute. All three are extremely skilled professionals with substantial backgrounds in property loss valuation and appraisal work. That reality makes this case much more noteworthy as a result of no one can credibly counsel that the panel lacked expertise or familiarity with complicated property losses.
The insurers argue that the appraisal course of failed as a result of the policyholder’s appraiser allegedly admitted that he by no means really said an “quantity of loss” as required by the appraisal provision. In keeping with the insurers, the appraiser offered a group of pricing eventualities and estimates that had been by no means supposed to be aggregated right into a remaining restore determine. They contend that as a result of the appraiser didn’t carry out the elemental contractual responsibility assigned to him, the ensuing awards had been invalid. They additional argue that the appraisal course of turned corrupted by procedural irregularities, late doc manufacturing, and points relating to whether or not the appraiser was actually “disinterested” as required by the coverage.
Portofino takes a really completely different view. The policyholder argues that the district court docket improperly reworked disagreements about appraisal methodology right into a foundation for vacating an award. Portofino factors out that the appraisal panel spent years inspecting the property, listening to testimony, reviewing skilled reviews, contemplating competing estimates, and finally issuing written awards signed by at the very least two members of the panel. In keeping with Portofino, whether or not one agrees with the valuation methodology or the ultimate numbers is inappropriate. The appraisal course of occurred, disputes had been offered, variations had been resolved by the umpire, and awards had been entered. Portofino argues that the district court docket improperly regarded behind the appraisal awards and successfully retried the appraisal course of.
The insurers say this isn’t about whether or not the appraisal reached the precise reply. They contend that is about whether or not the appraisal course of functioned in any respect. Portofino responds that courts are usually not alleged to second-guess appraisers and shouldn’t be permitted to reconstruct appraisal proceedings after the actual fact just because one facet is sad with the end result.
My very own view is that appraisal has at all times occupied an odd place inside property insurance coverage legislation. I’ve typically described appraisal as having the potential to turn out to be a “kangaroo court docket.” My commentary isn’t meant as criticism of appraisers themselves. Somewhat, it displays the truth that appraisal operates with out most of the procedural safeguards present in courts and formal arbitration proceedings. The method relies upon nearly totally upon the integrity, experience, and diligence of the folks chosen to serve.
When appraisers and umpires strategy the duty professionally, appraisal could be an environment friendly and priceless technique for resolving disputes. When issues come up, nonetheless, courts are sometimes left attempting to find out what occurred with out the advantage of a proper report. That’s precisely why this attraction is so necessary.
The Eleventh Circuit will likely be requested to resolve how far courts could go in reviewing an appraisal award earlier than they start invading territory historically reserved for appraisers. The court docket can even have to find out whether or not alleged failures within the appraisal course of itself can justify vacating awards that in any other case seem remaining on their face. The result could considerably have an effect on how future value determinations are carried out and challenged all through Florida and maybe different jurisdictions.
Anyone who participates in property insurance coverage value determinations ought to watch this case rigorously. It could turn out to be some of the influential appraisal selections issued in a few years as a result of it addresses the very basis of what appraisal is, what it’s supposed to perform, and the way a lot judicial oversight ought to exist after the method is full.
Thought For The Day
“Justice is the fixed and perpetual want to render each one his due.”
— Ulpian
1 Westchester Surplus Traces Ins. Co. v. Portofino Grasp Householders Assoc., No. 25-13710 (11th Cir. 2025).
2 Id., see, Portofino’s Opening Transient, and Westchester’s Response Transient.