Villagio at Estero Condominium Association, Inc. v. American Capital Assurance Corp., No. 2D20-1414, 46 Fla. L. Weekly D879, 2021 WL 1432160 (Fla. 2d DCA Apr. 16, 2021) (substituted opinion on rehearing). Silberman, J.; Morris and Lucas, JJ., concur. Appeal from the Circuit Court for Lee County (McHugh, J.).
The court’s opinion can be found here: https://www.2dca.org/content/download/732226/opinion/201414_DC08_04162021_085950_i.pdf
(a) Facts
Villagio at Estero Condominium Association (“Villagio”) was the named insured under a commercial property policy issued by American Capital Assurance Corporation (“American Capital”). After Hurricane Irma damaged the property, American Capital adjusted the claim, determined the covered loss to be $1,736,048.15, and paid Villagio $263,465.11 and then a further $70,913.33. Villagio later submitted a sworn proof of loss claiming $28,374,754.40 ($24,237,262.30 after the deductible). American Capital rejected that proof of loss as grossly inflated, called it “an intentional misrepresentation and/or concealment of material fact,” declared the policy void, and denied the claim in full — including the portion it had already paid.
Procedurally, Villagio sued in Lee County for breach of contract and declaratory relief and moved to stay the litigation and compel appraisal under the policy. American Capital opposed, arguing the alleged fraud voided the policy and forfeited appraisal, and that coverage had to be adjudicated first. The trial court found the appraisal provision enforceable but denied the motion, ruling that “the issue of coverage has to be determined before the appraisal provision in the contract will apply.” Villagio took a nonfinal appeal.
Judgment: affirmed in part, reversed in part, remanded, and conflict certified. The Second District affirmed that the appraisal clause is enforceable, reversed the denial of appraisal insofar as it required all coverage issues to be resolved first, and remanded for the court to compel appraisal. It certified conflict with the Fourth District’s decisions in Citizens Property Insurance Corp. v. Demetrescu, 137 So. 3d 500 (Fla. 4th DCA 2014); Citizens Property Insurance Corp. v. Michigan Condominium Ass’n, 46 So. 3d 177 (Fla. 4th DCA 2010); and Sunshine State Insurance Co. v. Corridori, 28 So. 3d 129 (Fla. 4th DCA 2010).
(b) Issues
Whether a trial court must resolve all coverage issues — including an insurer’s post-payment defense that the insured fraudulently inflated the claim and thereby voided the policy — before it may compel appraisal, where the insurer has already acknowledged coverage and paid part of the loss. Put differently: is the insurer’s misrepresentation and fraud defense a “coverage” question reserved to the court, or an amount-of-loss question that appraisal may address?
(c) Holding
Not all coverage issues must be decided before appraisal. Whether a loss is covered at all is exclusively a judicial question; but once the insurer admits a covered loss, any dispute over the amount of that loss is appropriate for appraisal. Where the insurer has acknowledged coverage and made payments and then disputes the claim as inflated, the coverage dispute is intertwined with the amount of loss, and the court should compel appraisal rather than hold it in abeyance pending a coverage ruling — allowing appraisal and the insurer’s fraud defenses to proceed on a dual track.
(d) Rationale
The court treated its recent decision in American Capital Assurance Corp. v. Leeward Bay at Tarpon Bay Condominium Ass’n, 306 So. 3d 1238 (Fla. 2d DCA 2020) — same insurer, same acknowledge-then-resist-appraisal posture — as controlling. By adjusting the loss and issuing two payments, American Capital had already admitted the loss was covered; its later position that the claim was fraudulently inflated was in substance a dispute about the amount of loss. As the court put it, “this case necessarily involves the amount of loss; any coverage dispute is intertwined with the amount of loss.” An insurer cannot recharacterize an amount-of-loss dispute as a coverage dispute — and so escape the appraisal clause it drafted — by relabeling an inflated claim as fraud after paying on it.
The court further reasoned that the fraud and misrepresentation defenses turn on disputed facts about the true scope and value of the damage — precisely what an appraisal panel exists to determine — so the panel’s findings could aid the court’s later evaluation of the fraud defense. A dual-track approach, in which appraisal proceeds while the coverage and fraud defenses remain pending, is judicially efficient and preserves the insurer’s retained rights, because an appraisal award fixes only the amount of loss and does not bar the insurer from continuing to contest whether it owes on that award. Because the Fourth District requires coverage disputes to be resolved before appraisal in all cases, the court certified conflict with Demetrescu, Michigan Condominium Ass’n, and Corridori.
Note: the certified conflict was later resolved in the insured’s favor. In American Coastal Insurance Co. v. San Marco Villas Condominium Ass’n, No. SC2021-0883 (Fla. Feb. 1, 2024), the Florida Supreme Court approved the Second District’s approach and disapproved the Fourth District’s inflexible “coverage-first” rule.