Retained Rights and Loss Versus Coverage

Posted on October 31, 2014

Earlier this month in Cincinnati Ins. Co. v. Cannon Ranch Partners, Inc., 2014 Fla. App. LEXIS 17033 (Fla. 2d DCA 2014), the Second District Court of Appeal of Florida (“2d DCA”) ruled that a trial court erred and found that an appraisal was mandatory under the language of the insurance policy because the policy’s “retained rights” provision did not violate any statutory law or public policy.  Furthermore, the 2d DCA held that the insurer had a right to an appraisal because there was a dispute as to the loss and not as to the coverage under the policy.  As such, the remaining dispute concerning the repairs to the property is one subject to appraisal, a function of the policy and not the judicial system.

Cincinnati Ins. insured a piece of commercial real property owned by Cannon Ranch, which included coverage for sinkhole damage.  In August of 2012, Cannon Ranch discovered structural damage on its property and subsequently filed a claim. Thereafter, Cincinnati Ins. sent an investigator to inspect the property and determine the cause of damages, and cost of repair. The investigator, AMEC, determined that grout could be applied to remediate the sinkhole activity at a cost of $220,000, and further determined that no underpinning was necessary to repair the property.  After reviewing the report, Cannon Ranch expressed concern that AMEC’s report did not include underpinning; they were biased in its investigation, and therefore wanted a second investigation done by one of five investigators from a list given by Cincinnati Ins. 

C.E. Odell & Associates (“Odell”) was chosen by Cannon Ranch and hired to re-inspect the property.  They determined that underpinning was necessary to the grouting and estimated the costs to be approximately $495,945, much higher than the original estimation.  At Cincinnati’s request, a third company, Geohazards, conducted a peer review of both reports and found that underpinning was in fact, not necessary.  Following these divergent reports, Cannon Ranch entered into contract with RAB Foundation Repair LLC to perform the repairs, including underpinning at a cost of $566.755.  Cincinnati Ins. refused to approve the contract and sent a letter demanding an appraisal of the damage citing their 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 appraisers will state separately the value of the property . . . and amount of “loss.” If they fail to agree, they will 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.

Subsequently, Cannon Ranch brought suit against their insurance provider for breach of contract, and Cincinnati Ins. filed its motion to abate litigation and compel further appraisal.  The 2d DCA reversed the trial court’s decision and found in favor of Cincinnati Ins.  Under Florida law, appraisal clauses are valid and enforceable unless they violate either statutory law or public policy.  Moreover, Florida law permits “retained rights” provisions, and they do not render the appraisal clause unenforceable. Therefore, Cincinnati Ins. could demand an appraisal due to the language of the clause and it being consistent with Florida public policy.

Furthermore, the 2d DCA ruled that there was a right to an appraisal because the issue in dispute is in fact one of loss and not one of coverage.  In Florida, a challenge of insurance coverage is exclusively a judicial question, however, when the insurer admits a covered loss, any dispute as to the amount is appropriate for appraisal.  Therefore, the question of what repairs are needed to restore a piece of covered property in Florida is a question relating to the amount of “loss,” and not coverage.  The method of repair is thus an integral part of the appraisal, separate and apart from any coverage question.  Consequently, because the dispute between the two parties was one of repairs, and not concerning the cause of the damage, the dispute is a function of the insurance policy. 

Therefore, Cincinnati Ins. acted within its rights to demand an appraisal, and the trial court erred in denying their motions on this basis.  The 2d DCA reversed the orders denying the motion to compel appraisal and abate litigation.

If you or anyone you know is in need of representation in actions involving Guardianship, Probate and/or Trust Disputes, or questions pertaining to such proceedings, please contact The Law Offices of Glenn M. Mednick, P.L., at (954) 315-1154 or

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