INSURANCE-RELATED COURT CASES
Digested from case reports published online
Jon Parrish was insured under a policy issued by State Farm Florida Insurance Company when, in September2017, Hurricane Irma damaged his home. Parrish filed a claim and hired Keys Claims Consultants, Inc. (KCC) to provide public adjusting services—that is, to assess the damage and the cost of repairs. Parrish agreed to pay KCC a contingency fee equal to 10% of whatever amount they eventually recovered from State Farm.
In December 2017, representatives from State Farm and KCC inspected and evaluated the damage to Parrish’s home. KCC presented its estimate of the losses to State Farm, but State Farm could not reconcile KCC’s estimate with its own. On January 8, 2018, State Farm attempted to schedule a second inspection with KCC.
That same day, Bobby Sims of KCC wrote a letter to State Farm demanding that the appraisal process set forth in Parrish’s policy be initiated. In his letter, Sims specified that George Keys, the president of KCC, would serve as Parrish’s appraiser. The appraisal provision in Parrish’s policy stated:
If you and we fail to agree on the amount of loss, either party can demand that the amount of the loss be set by appraisal. A demand for appraisal must be in writing. You must comply with Your Duties After Loss before making a demand.
Each party will select a qualified, disinterested appraiser (emphasis added) and notify the other of the appraiser’s identity within 20 days of receipt of the written demand. Each party shall be responsible for the compensation of their selected appraiser. The two appraisers shall then select a qualified, disinterested umpire. If the two appraisers are unable to agree upon an umpire within 15 days, you or we can ask a judge of a court of record in the state where the residence premises is located to select an umpire. Reasonable expenses of the appraisal and the reasonable compensation of the umpire shall be paid equally by you and us.
State Farm responded on January 15that it would be premature to enter appraisal before it finished investigating Parrish’s claim. State Farm also requested that KCC appoint an appraiser other than Keys. According to State Farm, Keys could not be considered a “disinterested” appraiser because his firm was already serving as Parrish’s public adjuster.
On February 10, having completed its investigation of the claim, State Farm sent a letter to KCC with its own significantly lower damages estimate. After unsuccessful efforts to reconcile the estimates, State Farm issued its own demand for appraisal. Parrish again named Keys as his appraiser. State Farm then petitioned a trial court to compel Parrish to enter appraisal with a disinterested appraiser.
The trial court denied State Farm’s petition, finding that Keys could serve as Parrish’s disinterested appraiser because the two had disclosed their arrangement to State Farm. The trial court also found that Parrish and KCC had no confidential attorney-client relationship that would disqualify Keys.
The Second District reversed. It found that, within the context of the policy, “disinterested” was not ambiguous, and the requirement that appraisers be “disinterested” plainly excluded any appraiser who held an interest in the outcome of the appraisal process. Therefore Keys could not serve as Parrish’s disinterested appraiser.
The Second District found that Keyshad an interest for two reasons: First, KCC’s 10% stake in Parrish’s insurance payout necessarily gave Keys, the firm’s president, a pecuniary interest in the outcome of appraisal. Second, Keys could not be disinterested because KCC represented Parrish as his public adjuster.
First, Parrish argued that the context in which “disinterested” appeared in his insurance provision required the court to understand it as modifying how an appraiser is selected, not compensated. Because the policy’s requirement of disinterestedness comes before (and apart from) its statement that “[e]ach party shall be responsible for the compensation of their selected appraiser,” Parrish argued, the court should understand that the policy makes disinterested-ness a matter separate and apart from the appraiser’s manner of compensation.
Second, Parrish argued that, in the context of his policy, “disinterested” is essentially identical to “independent.”
“Independent” and “disinterested” may do similar work sometimes, the court said, but they are not the same.
Parrish and State Farm did not agree to hire “independent” appraisers. They agreed to hire “disinterested” appraisers. From the text and structure of the policy, and in light of the Florida insurance code, the court said it had no reason to think the parties’ agreement was anything other than to require that each select an appraiser without an interest in the outcome of the claim.
Put simply, the more Parrish recovers, the more KCC collects; and the more KCC collects, the likelier it is that Keys will himself be in a position to be paid, or that his interest in KCC will be valuable. Keys’s pecuniary interest in evaluating Parrish’s loss such that Parrish recovers as much as possible means that Keys is not “disinterested.” To the contrary, the whole point of the contingency fee agreement is to align Keys’s economic interests with Parrish’s.
Because Keys’s company, KCC, is to be compensated via contingency fee, he has a pecuniary interest in the outcome of the claim and cannot qualify as a “disinterested” appraiser.
The Supreme Court of Florida approved the Second District’s decision.
Parrish v. State Farm Florida Insurance Company—Supreme Court of Florida—February 9, 2023—No. SC21-172.