Insured’s Lawyer May not Act as an “Disinterested Party” in Appraisal Process

Florida’s Fifth District Court of Appeal held, as a matter of first impression, that an insured’s own attorney cannot serve as a disinterested appraiser under a homeowner’s policy appraisal clause. The homeowner had invoked appraisal on a sinkhole claim and named a partner of his own law firm as his appraiser. Because a lawyer owes the client an undivided duty of loyalty, the court held he could not be “disinterested.”

Disinterested Appraiser: Case Overview

Florida Insurance Guaranty Association, Inc. v. Branco, 148 So. 3d 488 (Fla. 5th DCA 2014), is the Florida decision practitioners cite for the rule that a party’s own lawyer is not a disinterested appraiser. The Fifth District also resolved two related appraisal questions: whether appraisal reaches the method of repair, and whether an insured waives appraisal by litigating coverage first. What follows is a short brief of the case — facts, issues, holding, and rationale.

Facts

In April 2010, the Brancos reported suspected sinkhole damage at their home to their homeowner’s carrier, HomeWise Preferred Insurance Company. HomeWise retained an engineering firm to investigate and, relying on that report, denied the claim on the ground that no covered sinkhole loss had occurred. The Brancos sued HomeWise for breach of contract, and HomeWise answered in May 2011, again denying coverage.

HomeWise was declared insolvent in November 2011 and the case was automatically stayed. Florida Insurance Guaranty Association (FIGA) assumed the claim, and after the stay was lifted in August 2012 the Brancos amended their complaint to name FIGA as the defendant. On April 8, 2013 — nearly two years into the litigation — FIGA admitted that sinkhole activity had caused damage to the home and that the Brancos were entitled to the amount payable for the actual repair.

On April 30, 2013, three weeks after that admission, the Brancos demanded appraisal under the policy and moved to compel when FIGA refused. The appraisal clause obligated each side to select a disinterested appraiser. The Brancos designated a partner in the law firm that represented them in the litigation. The trial court granted the motion to compel appraisal and approved the Brancos’ lawyer as their appraiser. FIGA appealed that non-final order.

Issues: Can an Attorney Be a Disinterested Appraiser?

FIGA raised three issues on appeal:

1. Scope of appraisal. Whether the appraisal clause reaches a dispute over the method and scope of repair, or is limited to the bare dollar amount of the loss.
2. Waiver. Whether the insureds waived appraisal by actively litigating the case for more than two years before demanding it.
3. Qualification of the appraiser. Whether an insured’s own attorney may serve as that insured’s disinterested appraiser under the policy.

Holding

Affirmed in part, reversed in part, and remanded. A dispute over the method and scope of repair falls within the policy’s appraisal clause, and the Brancos did not waive appraisal by litigating coverage before it was conceded. But on the question of first impression, the Fifth District held that an attorney may not serve as a disinterested appraiser for his or her own client. The portion of the order approving the Brancos’ lawyer was reversed and the case remanded for selection of a qualified appraiser.

Rationale

Method versus amount. Valuing a loss presupposes a judgment about what repairs are necessary; an appraiser cannot put a number on the loss without deciding what the loss requires. Reading the clause to exclude repair-method disputes would leave appraisal with nothing to decide and render the provision meaningless.

Waiver. Waiver requires conduct inconsistent with the right asserted. Appraisal fixes the amount of loss, so it becomes meaningful only after coverage is conceded or adjudicated. Because FIGA and its insolvent predecessor denied coverage outright until April 8, 2013, the Brancos’ earlier litigation conduct was not inconsistent with a right that had not yet ripened, and their demand three weeks after the admission of coverage was prompt.

Disinterestedness. The word “disinterested” in the policy expresses the parties’ intent that appraisers be neutral evaluators rather than advocates. An attorney owes the client an undivided fiduciary duty of loyalty, and that duty cannot be squared with neutrality — it creates too great a likelihood of partiality for the lawyer to qualify as a disinterested appraiser. The court also pointed to the 2004 revision of the AAA/ABA Code of Ethics for Arbitrators, which adopted a presumption of neutrality for all arbitrators, including party-appointed ones, undercutting older authority that tolerated openly partisan party-appointed appraisers.

After Branco: The Supreme Court Adopts the Same Test

The Florida Supreme Court took the same plain-meaning approach to the term in Parrish v. State Farm Florida Insurance Co., No. SC21-172 (Fla. Feb. 9, 2023), holding that a public adjuster compensated by contingency fee has a pecuniary interest in the outcome and therefore cannot be a disinterested appraiser. Parrish cites Branco and extends its logic from attorneys to anyone retained to maximize the insured’s recovery, including the adjusting firm’s officers and members.

Practice Points

Read the appraisal clause before naming anyone. If the policy says “disinterested,” the appointment is limited to a neutral evaluator; if it says only “competent” or “impartial,” different analysis may apply. Never name your own lawyer, your own public adjuster, or anyone paid a percentage of the recovery.

Vet the proposed appraiser for pecuniary interest, not just formal independence. After Parrish, a contingency arrangement anywhere in the chain — the appraiser, the firm, its owners — defeats the appointment, and an objection is preserved by raising it before the panel is seated rather than after an award issues.

Watch the coverage timeline on waiver. Appraisal is about the amount of loss, so a demand made promptly after the carrier concedes coverage is timely even after years of litigation. Conversely, a carrier that denies coverage outright should not expect a waiver argument to succeed against a disinterested appraiser demand that follows its own about-face.

Florida Ins. Guar. Ass’n, Inc. v. Branco, 148 So. 3d 488 (Fla. 5th DCA 2014).