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In a setback for the insurance industry, the Florida Supreme Court has ruled that homeowners can collect insurance money on property damage claims without going through arbitration. The ruling in the two cases, Allstate Insurance Company v. Luis and Lilia Suarez and Allstate Insurance Company v. Julian Martinez, extends not just to disputes involving Hurricane Andrew damages but to all future property and casualty loss claims. The high court ruled that the homeowners’ insurance policies written by Allstate Insurance Co. for two policyholders clearly stated that disagreements over the amount of loss would be settled through appraisal. “It is clear from a plain reading of the clause that an informal appraisal proceeding, not a formal arbitration hearing was intended and agreed upon by the parties,” the court held in its Dec. 12 decision. Appraisal is generally a more informal and less expensive method than arbitration. John Cosgrove, a Miami attorney who formerly headed the Florida House’s insurance committee and who represented the Suarez family, called the ruling an important victory for insurance consumers. “If Allstate had prevailed, it would have changed the whole nature of claims resolution and made it much more expensive and difficult for insureds to get lawyers to take these kinds of cases,” Cosgrove said. “If it cost you $1,000 to settle a claim through appraisal, it could cost $10,000 in arbitration.” Christopher Lynch, a partner at Angones, Hunter, McClure, Lynch, Williams & Garcia, who argued the Florida Supreme Court appeal for Allstate, did not return calls for comment. The Suarez family and Martinez, both of Miami, were two of more than 600,000 homeowners who filed insurance damage claims after Hurricane Andrew devastated South Florida in August 1992. The storm cost carriers more than $16 billion and rattled the insurance industry nationwide. Like many policyholders, both families initially were paid an award for property damages in the months following the hurricane. But in the following years, the Suarez family and Martinez were part of a wave of policyholders who filed supplemental claims after realizing the insurance money did not cover the full cost of repairs. In the Suarez case, the couple initially received a payout from their carrier, Allstate Insurance, of $21,460 in September 1992 but filed a supplemental claim disputing the amount in June 1997. Allstate denied the claim, and the couple filed a petition in Miami-Dade Circuit Court to compel appraisal. Judge David Tobin granted the petition and appointed a neutral umpire to oversee the process. In line with the dispute provision of their insurance policy, Tobin ordered Allstate to appoint an appraiser to conduct an evaluation, and the couple did the same. If the two appraisers could not reach an agreement on the amount of loss, the umpire would make the final decision. The appraisers reached a new assessment of $38,078, which Tobin certified in 2000. Allstate then moved to vacate the award because it was not reached through arbitration. Allstate claimed it was a violation of its due process rights not to allow the company the opportunity to present evidence and call witnesses. In an appraisal, each side’s appraisers reach independent conclusions and meet only to iron out any differences. There are no lawyers or court reporters at the meeting. The facts in the Martinez case were very similar to those in the Suarez case, with the exception that Martinez was not only awarded $18,782 after an additional appraisal, but $15,431 in prejudgment interest from the date of loss. The prejudgment interest award has since been overturned. But Allstate claimed that arbitration was necessary in these cases because there were issues to resolve beyond the expertise of the appraisers. The appraisers would have to determine not only the amount of homeowners’ loss, but whether the damage was caused by Hurricane Andrew or by normal wear and tear. “There is no realistic way that even the most experienced appraiser or umpire could determine causation absent the presentation of evidence, testimony and cross-examination,” Lynch wrote in his brief to the Florida Supreme Court. Arbitration helps insurers weed out fraudulent claims, Allstate said. But the state supreme court ruled that the Suarez family’s Allstate policy laid out specific instructions for carrying out an appraisal to resolve claim disputes. It said nothing about arbitration, which would amount to conducting a mini-trial, the court said. The Florida Supreme Court’s ruling upheld the findings of the 3rd District Court of Appeal, which ruled in favor of the plaintiffs in two separate opinions issued in June 2001 and July 2001. In reaching its conclusion, the 3rd District Court of Appeal recognized that its decision was in direct conflict with previous holdings in the 1st and 5th District Courts of Appeal and certified the cases to the Florida Supreme Court for resolution. By siding with the 3rd District Court of Appeal, the Florida Supreme Court struck down those rulings in Florida Farm Bureau Casualty Insurance Co. v. Sheaffer and Hoenstine v. State Farm Fire & Casualty, saying the policy language was just as clear on the appraisal issue as in the Suarez and Martinez cases. “It is no longer a viable argument for the insurance companies to argue that when they’re ordered to go to appraisal, they’re entitled to a full-blown evidentiary hearing,” said Michael Higer, a partner at Mintz, Truppman, Clein & Higer in North Miami, who represented Martinez. “An appraisal is an informal process.” Cosgrove said that despite Allstate’s effort to require arbitration, the Florida Supreme Court ruling actually is a win for the insurance industry as well for consumers. “I thought Allstate was making a huge mistake in pursuing this appeal because the appraisal process is far more economical for both the consumer and the insurance company,” he said.

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