NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING MOTION AND, IF FILED, DETERMINED
IN THE DISTRICT COURT OF APPEAL OF FLORIDA SECOND DISTRICT
THE CINCINNATI INSURANCE ) COMPANY, a foreign corporation doing ) business in the State of Florida, ) ) Appellant, ) ) v. ) Case No. 2D14-827 ) CANNON RANCH PARTNERS, INC., ) a Florida corporation, ) ) Appellee. ) )
Opinion filed October 17, 2014.
Appeal pursuant to Fla. R. App. P. 9.130 from the Circuit Court for Hillsborough County; Sam D. Pendino, Judge.
Guy E. Burnette, Jr., of Guy E. Burnette, Jr., P.A., Tallahassee, for Appellant.
John J. Thresher and Kimberly D. Thresher of Thresher and Thresher, P.A., Tampa, for Appellee.
VILLANTI, Judge. The Cincinnati Insurance Company seeks review of the order denying its
motion to compel appraisal and abate litigation.1 Because the matter in dispute is one
subject to appraisal, we reverse and remand for further proceedings.
Cincinnati Insurance insures a piece of commercial real property owned
by Cannon Ranch Partners, Inc. The Cannon Ranch policy includes coverage for
sinkhole damage. On August 14, 2012, Cannon Ranch discovered structural damage
on its property and subsequently filed a claim with Cincinnati Insurance. Cincinnati
Insurance sent a letter to Cannon Ranch confirming the receipt of the claim and
advising that an investigator would inspect Cannon Ranch's property to determine the
cause of the damage. The investigator hired by Cincinnati Insurance, AMEC
Environmental and Infrastructure, determined that the damage was caused by a
sinkhole. AMEC recommended that perimeter compaction grout and shallow chemical
grout be applied to remediate the sinkhole activity at a cost of roughly $220,000. AMEC
further determined that underpinning was not necessary to repair Cannon Ranch's
property.
Cincinnati Insurance provided AMEC's report to Cannon Ranch. After
reviewing AMEC's report, Cannon Ranch contacted Cincinnati Insurance to express
concern that AMEC did not include underpinning in its repair recommendation and that
AMEC was biased in its investigation because it had been hired by Cincinnati
Insurance. In response, Cincinnati Insurance offered Cannon Ranch the opportunity to
nominate a list of five investigators, one of which would be chosen by Cincinnati
Insurance to conduct a second investigation. Using this method, C.E. Odell &
1 We have jurisdiction. See Fla. R. Civ. P. 9.130(a)(3)(C)(iv).
-2- Associates was hired to reinspect Cannon Ranch's premises. C.E. Odell conducted a
survey and determined that underpinning was necessary in addition to the grouting
procedure recommended by AMEC, and it estimated that the repairs would cost
approximately $495,945.
At Cincinnati Insurance's insistence, a third company, Geohazards,
conducted a peer review of the reports from both AMEC and C.E. Odell. Geohazards
determined that underpinning was not necessary and furthermore that AMEC's testing
was insufficient to establish that even shallow chemical grout was required to restore
the property to its pre-sinkhole state.
Following its receipt of these divergent reports, Cannon Ranch entered
into a contract with RAB Foundation Repair LLC to perform repairs, including
underpinning, on the property consistent with the recommendations of C.E. Odell at an
estimated cost of $566,755. However, according to its terms, the contract was
contingent on Cincinnati Insurance's approval. Not unexpectedly, Cincinnati Insurance
refused to approve the contract because the repairs were not based on the
recommendations of AMEC or Geohazards. Instead, Cincinnati Insurance sent a letter
to Cannon Ranch demanding an appraisal of the damage and citing the following
provision from paragraph 2, Section D of the insurance policy:
If we and you disagree on the value of the property, the amount of Net Income and operating expense, 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. The two appraisers will select an umpire. If they cannot agree, 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, the amount of Net Income and operating expense, and amount of "loss." If they fail to agree, they will
-3- submit their differences to the umpire. A decision agreed to by any two will be binding. Each party will:
a. Pay its chosen appraiser; and
b. Bear the other expenses of the appraisal and umpire equally.
If there is an appraisal, we still retain our right to deny the claim.
(Emphasis added.) Cannon Ranch refused to participate in the appraisal process and
brought suit against Cincinnati Insurance for breach of contract. Cincinnati Insurance
subsequently filed its motion to abate the litigation and compel appraisal.
At the hearing on the motion, Cincinnati Insurance argued that the
disagreement on the appropriate method of repair and the estimated costs of restoration
was a dispute over the amount of "loss" that was subject to appraisal under the terms of
the insurance policy. In response, Cannon Ranch argued that the method of repair was
a matter of coverage, which is exclusively a judicial question. Cannon Ranch also
argued that Cincinnati Insurance had no right to appraisal under the policy because
disputes over coverage do not trigger the appraisal clause found in paragraph 2,
Section D of the insurance policy. The court denied the motion, finding that appraisal
was not mandatory under the terms of the insurance policy. Cincinnati Insurance now
appeals, arguing that the trial court erred in finding that appraisal was not mandatory
due to the language of the insurance policy and that there was no right to an appraisal
because the issue in dispute is one of the amount of loss and not one of coverage. We
agree on both points.
First, the trial court erred in finding that appraisal was not mandatory
under the language of the insurance policy. In its oral ruling, the trial court found that
-4- Cincinnati Insurance could not demand appraisal because the insurance policy's
appraisal clause allowed Cincinnati Insurance to retain the right to deny the claim
following a proper appraisal. While the trial court did not expound on the reasoning
behind its decision, it could not have found the appraisal clause to be unenforceable
unless the clause violated either statutory law or public policy. See Green v. Life &
Health of Am., 704 So. 2d 1386, 1390-91 (Fla. 1998). Cannon Ranch points to no
statutes or public policy considerations that are violated by this "retained rights"
provision. Moreover, controlling Florida law permits "retained rights" provisions, and
these provisions do not render the appraisal clause unenforceable. See State Farm
Fire & Cas. Co. v. Licea, 685 So. 2d 1285, 1288 (Fla. 1996). Hence, the trial court
erred to the extent it found that Cincinnati Insurance could not demand an appraisal due
to the language of the appraisal clause being unenforceable as inconsistent or violative
of public policy.
Second, the trial court erred in finding that there was no right to an
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NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING MOTION AND, IF FILED, DETERMINED
IN THE DISTRICT COURT OF APPEAL OF FLORIDA SECOND DISTRICT
THE CINCINNATI INSURANCE ) COMPANY, a foreign corporation doing ) business in the State of Florida, ) ) Appellant, ) ) v. ) Case No. 2D14-827 ) CANNON RANCH PARTNERS, INC., ) a Florida corporation, ) ) Appellee. ) )
Opinion filed October 17, 2014.
Appeal pursuant to Fla. R. App. P. 9.130 from the Circuit Court for Hillsborough County; Sam D. Pendino, Judge.
Guy E. Burnette, Jr., of Guy E. Burnette, Jr., P.A., Tallahassee, for Appellant.
John J. Thresher and Kimberly D. Thresher of Thresher and Thresher, P.A., Tampa, for Appellee.
VILLANTI, Judge. The Cincinnati Insurance Company seeks review of the order denying its
motion to compel appraisal and abate litigation.1 Because the matter in dispute is one
subject to appraisal, we reverse and remand for further proceedings.
Cincinnati Insurance insures a piece of commercial real property owned
by Cannon Ranch Partners, Inc. The Cannon Ranch policy includes coverage for
sinkhole damage. On August 14, 2012, Cannon Ranch discovered structural damage
on its property and subsequently filed a claim with Cincinnati Insurance. Cincinnati
Insurance sent a letter to Cannon Ranch confirming the receipt of the claim and
advising that an investigator would inspect Cannon Ranch's property to determine the
cause of the damage. The investigator hired by Cincinnati Insurance, AMEC
Environmental and Infrastructure, determined that the damage was caused by a
sinkhole. AMEC recommended that perimeter compaction grout and shallow chemical
grout be applied to remediate the sinkhole activity at a cost of roughly $220,000. AMEC
further determined that underpinning was not necessary to repair Cannon Ranch's
property.
Cincinnati Insurance provided AMEC's report to Cannon Ranch. After
reviewing AMEC's report, Cannon Ranch contacted Cincinnati Insurance to express
concern that AMEC did not include underpinning in its repair recommendation and that
AMEC was biased in its investigation because it had been hired by Cincinnati
Insurance. In response, Cincinnati Insurance offered Cannon Ranch the opportunity to
nominate a list of five investigators, one of which would be chosen by Cincinnati
Insurance to conduct a second investigation. Using this method, C.E. Odell &
1 We have jurisdiction. See Fla. R. Civ. P. 9.130(a)(3)(C)(iv).
-2- Associates was hired to reinspect Cannon Ranch's premises. C.E. Odell conducted a
survey and determined that underpinning was necessary in addition to the grouting
procedure recommended by AMEC, and it estimated that the repairs would cost
approximately $495,945.
At Cincinnati Insurance's insistence, a third company, Geohazards,
conducted a peer review of the reports from both AMEC and C.E. Odell. Geohazards
determined that underpinning was not necessary and furthermore that AMEC's testing
was insufficient to establish that even shallow chemical grout was required to restore
the property to its pre-sinkhole state.
Following its receipt of these divergent reports, Cannon Ranch entered
into a contract with RAB Foundation Repair LLC to perform repairs, including
underpinning, on the property consistent with the recommendations of C.E. Odell at an
estimated cost of $566,755. However, according to its terms, the contract was
contingent on Cincinnati Insurance's approval. Not unexpectedly, Cincinnati Insurance
refused to approve the contract because the repairs were not based on the
recommendations of AMEC or Geohazards. Instead, Cincinnati Insurance sent a letter
to Cannon Ranch demanding an appraisal of the damage and citing the following
provision from paragraph 2, Section D of the insurance policy:
If we and you disagree on the value of the property, the amount of Net Income and operating expense, 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. The two appraisers will select an umpire. If they cannot agree, 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, the amount of Net Income and operating expense, and amount of "loss." If they fail to agree, they will
-3- submit their differences to the umpire. A decision agreed to by any two will be binding. Each party will:
a. Pay its chosen appraiser; and
b. Bear the other expenses of the appraisal and umpire equally.
If there is an appraisal, we still retain our right to deny the claim.
(Emphasis added.) Cannon Ranch refused to participate in the appraisal process and
brought suit against Cincinnati Insurance for breach of contract. Cincinnati Insurance
subsequently filed its motion to abate the litigation and compel appraisal.
At the hearing on the motion, Cincinnati Insurance argued that the
disagreement on the appropriate method of repair and the estimated costs of restoration
was a dispute over the amount of "loss" that was subject to appraisal under the terms of
the insurance policy. In response, Cannon Ranch argued that the method of repair was
a matter of coverage, which is exclusively a judicial question. Cannon Ranch also
argued that Cincinnati Insurance had no right to appraisal under the policy because
disputes over coverage do not trigger the appraisal clause found in paragraph 2,
Section D of the insurance policy. The court denied the motion, finding that appraisal
was not mandatory under the terms of the insurance policy. Cincinnati Insurance now
appeals, arguing that the trial court erred in finding that appraisal was not mandatory
due to the language of the insurance policy and that there was no right to an appraisal
because the issue in dispute is one of the amount of loss and not one of coverage. We
agree on both points.
First, the trial court erred in finding that appraisal was not mandatory
under the language of the insurance policy. In its oral ruling, the trial court found that
-4- Cincinnati Insurance could not demand appraisal because the insurance policy's
appraisal clause allowed Cincinnati Insurance to retain the right to deny the claim
following a proper appraisal. While the trial court did not expound on the reasoning
behind its decision, it could not have found the appraisal clause to be unenforceable
unless the clause violated either statutory law or public policy. See Green v. Life &
Health of Am., 704 So. 2d 1386, 1390-91 (Fla. 1998). Cannon Ranch points to no
statutes or public policy considerations that are violated by this "retained rights"
provision. Moreover, controlling Florida law permits "retained rights" provisions, and
these provisions do not render the appraisal clause unenforceable. See State Farm
Fire & Cas. Co. v. Licea, 685 So. 2d 1285, 1288 (Fla. 1996). Hence, the trial court
erred to the extent it found that Cincinnati Insurance could not demand an appraisal due
to the language of the appraisal clause being unenforceable as inconsistent or violative
of public policy.
Second, the trial court erred in finding that there was no right to an
appraisal because the issue in dispute is in fact one of the amount of loss and not one
of coverage. In Florida, "[a] challenge of [c]overage is exclusively a [j]udicial question."
Midwest Mut. Ins. Co. v. Santiesteban, 287 So. 2d 665, 667 (Fla. 1973). However,
"when the insurer admits that there is a covered loss," any dispute on the amount of
loss suffered is appropriate for appraisal. Johnson v. Nationwide Mut. Ins. Co., 828 So.
2d 1021, 1025 (Fla. 2002) (quoting Gonzalez v. State Farm Fire & Cas. Co., 805 So. 2d
814, 816-17 (Fla. 3d DCA 2000)). Notably, in evaluating the amount of loss, an
appraiser is necessarily tasked with determining both the extent of covered damage and
the amount to be paid for repairs. Id. Thus, the question of what repairs are needed to
-5- restore a piece of covered property is a question relating to the amount of "loss" and not
coverage. Ipso facto, the scope of damage to a property would necessarily dictate the
amount and type of repairs needed to return the property to its original state, and an
estimate on the value to be paid for those repairs would depend on the repair methods
to be utilized. The method of repair required to return the covered property to its
original state is thus an integral part of the appraisal, separate and apart from any
coverage question. Because there is no dispute between the parties that the cause of
the damage to Cannon Ranch's property is covered under the insurance policy, the
remaining dispute concerning the scope of the necessary repairs is not exclusively a
judicial decision. Instead, this dispute falls squarely within the scope of the appraisal
process—a function of the insurance policy and not of the judicial system. Therefore,
Cincinnati Insurance acted within its rights when it demanded an appraisal, and the trial
court erred in denying the motion on this basis.
Accordingly, we reverse the order denying the motion to compel appraisal
and abate litigation and remand for the entry of an order compelling arbitration and
abating the litigation.
Reversed and remanded with directions.
SILBERMAN and KELLY, JJ., Concur.
-6-