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Seville Place Permitted to Add a Bad Faith and Punitive Damage Claim against State Farm after Umpire Signed Appraisal, but before Final Judgment.

On October 14, 2009, the Third District Court of Appeal ruled that an insured could proceed with a bad faith and punitive damage claim against State Farm in its initial lawsuit against the insurer for damages from Hurricane Wilma. 

The association made a claim under the policy for hurricane-related losses.  State Farm inspected the property and estimated the total amount of loss was $324,017.00 for repairs to the roofs.    In January 2006, it made two payments on the claim which totaled $90,564.62, reducing the amount payable by the deductible and depreciation.  On the other side of the spectrum, Seville Place’s estimate of the damage exceeded $4.6 million.

In October 2006 (a year after the loss), Seville Place made a written demand for appraisal. The policy contained a typical appraisal clause that said:

If we [State Farm] and you [the Association] 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. Each party will notify the other of the selected appraiser's identity within 20 days after receipt of the written demand for an appraisal. The two appraisers will select an umpire. If the appraisers cannot agree upon an umpire within 15 days, 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. . . . If we submit to an appraisal, we will still retain our right to deny the claim.

The association filed suit after State Farm would only agree to appraisal under certain conditions. The appraiser and the umpire signed a final appraisal award, fixing the insured loss at $2,960,405.   The Association then filed a Motion asking to amend its complaint to include bad faith and punitive damage claims.  State Farm objected, indicating that Seville Place must obtain a final judgment from a jury before it may proceed with its bad faith and punitive damages claim. The Court disagreed.  It said:

State Farm originally estimated the Association's covered loss at $324,017. This is less than eleven percent of the amount determined by the appraisal process. State Farm will have an opportunity to explain this fact, to explain the extraordinary length of time it has taken to resolve the Association's claim, and to defend State Farm's aggressive legal tactics (including the unfounded imposition of conditions on the contractually-stipulated appraisal provision and the last-minute attempt to remove the neutral umpire). For now, however, we find no basis in this record to quash the orders below as requested by State Farm.

 The Court also rejected State Farm’s argument that a bad faith claim is premature until the insurer exhausts all appellate remedies regarding liability and loss amount, noting no “decision by this Court or the Florida Supreme Court has held that liability and the extent of damages must also be “finally final,” surviving any appellate remedies sought by an insurer, before the insured's bad faith claim is ripe.”

Of course the decision is not final until all post-trial motions have been resolved.  However, it does give hope to the thousands of community associations that are still struggling to obtain insurance proceeds for losses sustained from Hurricane Wilma and other storms.

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