Right to sue insurance companies disappears
Are you thinking of suing your insurance company because it won’t agree to pay what your contractor says is needed to fix your hurricane-damaged roof?
Don’t be surprised if you open your mailbox one day and find the option to sue is gone because your insurer is sending your dispute to an alternative resolution process called appraisal.
That means you and your insurer would each be required to hire your own appraisers — which could cost you hundreds, perhaps thousands of dollars — and if they can’t agree on a settlement, you would have to split the cost of hiring an umpire to resolve the claim.
Whatever comes out of the process would be binding. And unless you can prove the appraisal process was flawed, you would be prohibited from litigating the claim in court.
Insurers in Florida are sending increasing numbers of claims disputes to appraisal to expedite the settlement process and reduce the volume of lawsuits filed against them, industry experts say. While lawsuits can drag on for years and run up legal fees far exceeding the cost of repairs, a claim sent to appraisal can be settled in weeks.
Use of appraisal by state-run Citizens Property Insurance Corp. has spiked sharply since Hurricane Irma hit the state in September 2017. The storm triggered a surge in lawsuits by policyholders, and Citizens turned to appraisal to stem the tide, spokesman Michael Peltier said.
Between December 2017 and July 2018, appraisal has been used 10,644 times in Florida, or an average of 1,331 a month, to settle Citizens claims disputes, according to data provided by Citizens at the request of the South Florida Sun Sentinel. During the same period a year earlier, appraisal was used 1,485 times, or an average of 186 a month. The company has received 70,544 claims related to Hurricane Irma.
Most of the appraisal requests were by Citizens, but some came from policyholders “to get claims [settled] more quickly,” Peltier said.
How often private market insurers are using appraisal is unknown. There’s no requirement to send data to the state Office of Insurance Regulation or the Department of Financial Services. But informally, industry sources acknowledge appraisal is being used more often.
Whether allowing insurers to demand appraisal unilaterally is fair to consumers depends on whom you ask.
Insurers say appraisal gets policyholders paid quicker and — by pre-empting litigation — reduces insurers’ overall costs of settling claims, which reduces costs passed to future ratepayers. Insurers have long complained that plaintiff’s attorneys file too many suits because state law allows them to recover fees from insurers far exceeding the value of the disputed claim. Plaintiff ’s attorneys say appraisal puts policyholders and third-party assignees at a disadvantage when forced to pay upfront for their own appraiser.