Analysis and Interpretation by  Michael A. Cassel

​​On July 24, 2019, the Third District Court of Appeal released their decision in  State Farm Florida Insurance Company v. Charles and Diana Sanders, [1]  (hereinafter "Sanders").  The  Sanders  opinion discusses whether a public adjuster can act as a disinterested appraiser. ​

Background and Facts

In September 2017, the insureds sustained a loss to their home as a result of Hurricane Irma.  The claim was reported to State Farm.  At some point during the adjustment phase of the claim, the insureds hired a public adjuster and entered into a contract stating that the public adjuster will “be the agent and representative, under the insurance contract by State Farm Insurance... to adjust, appraise, advise and assist in the settlement of the loss.”  Ostensibly, State Farm was presented with an estimate by the insureds' public adjuster and afforded coverage in an amount less than that which was demanded. 

In response to this underpayment, the insureds initiated litigation.  After suit was filed, State Farm moved to compel appraisal pursuant to the terms of the insurance policy which states, in pertinent part, that, in the event of an appraisal, “[e]ach party will select a qualified, disinterested appraiser...”  Ultimately, the parties agreed to the appraisal process.  In their agreed order, State Farm specifically delineated their appraiser and provided the insureds with 20 days to name their own appraiser.  The insureds then named their public adjuster as appraiser. 

State Farm responded refusing to allow the insureds' public adjuster to act as a “disinterested” appraiser.  The trial court entered an order compelling appraisal with the appraiser's as named.  The instant appeal followed.

3d DCA Opinion

The 3d DCA found that “a fiduciary, such as a public adjuster who is in a contractual agent-principal relationship with the insureds, cannot be a disinterested appraiser as a matter of law. The trial court thus departed from the essential requirements of the law in allowing [the insureds' public adjuster] to be named the insureds' disinterested appraiser.” [2]

Analysis, Impact, and Effect

Before I begin my analysis, I must disclose that, while I was representing insurance carriers, I vigorously litigated the position State Farm asserted in Sanders.  In fact, I even prevailed at the circuit court level on the issue.  With that said, I also witnessed the Fourth District Court of Appeals reject the argument that a public adjuster could not be impartial or disinterested. [3]  Based on my experiences, and now that I have been representing policyholders, my view has changed - not because I am simply flip-flopping to take a position that would be beneficial to my clients but, instead, as further outlined below, because I realized that the detrimental ramifications of disallowing public adjusters to act as “disinterested” appraisers may far outweigh the benefit. 

Most, if not all, appraisal provisions in Florida insurance policies mandate that each party remain responsible to pay for their own appraiser.  When utilizing a public adjuster as an appraiser, that compensation is limited to the statutory fee cap and requires no additional out of pocket costs to the insureds.  The holding in Sanders interestingly avoids any mention of this contingency fee relationship despite discussions regarding same in prior 3d DCA cases such as Rios v. Tri-State [4] and Galvis v. Allstate [5]  Reading Rios and Galvis together, the 3d DCA held that a public adjuster operating under a contingency fee could maintain status as a “disinterested” appraiser as long as they disclosed any interest in the outcome of the appraisal.  In contrast, the Sanders opinion focuses solely on the agency relationship between the insureds and their public adjuster as well as the resulting fiduciary duties owed to the insureds.  This analysis was based on the holding in FIGA v. Branco [6] which states that one who owes a fiduciary duty to another (in Branco, the insured's attorney) cannot act as a “disinterested” party.

“Agency is the fiduciary relationship that arises when one person (a ‘principal') manifests assent to another person (an ‘agent') that the agent shall act on the principal's behalf and subject to the principal's control, and the agent manifests assent or otherwise consents so to act.” [7]  Said another way, to establish the existence of an agency relationship, the following essential elements must be established: “(1) acknowledgment by the principal that the agent will act for him, (2) the agent's acceptance of the undertaking, and (3) control by the principal over the actions of the agent.” [8]  There is no doubt that a public adjuster accepts the undertaking of acting on behalf of a consenting insured.  As such, I do not think it is disputable that the first two (2) elements of agency are met.  With that said, the question remains as to whether the policyholder has an inherent right to control the public adjuster as an agency relationship would not be formed otherwise. [9] 

Unless created by law, “the right to control depends upon the terms of the employment contract.” [10]  While there is no specifically delineated right to control contained within the public adjuster statute nor within Florida's Ethical Requirements for All Adjusters and Public Adjuster Apprentices, the Florida Administrative Code governing the Conduct of Public Adjusters in particular states that “[a] public adjuster shall not accept a settlement of a claim unless the terms and conditions of the settlement are approved by the insured or claimant.” [11]  This does, in fact, create an element of control in favor of the insured over the public adjuster's actions.  As such, it seems clear that an agency relationship forms through the retention of a public adjuster.

With that said, “[a] fiduciary is a person who stands in a special relationship of trust, confidence, or responsibility in his obligation to others.” [12]  “The term ‘fiduciary' or ‘confidential' relation… is a very broad one…  The origin of the confidence and the source of the influence are immaterial.  The rule embraces both technical fiduciary relations and those informal relations which exist whenever one man trusts in and relies upon another.” [13]  Based on this definition, anybody selected by any party could be disqualified under a standard mandating a “disinterested” appraiser.  While a public adjuster may have a specific fiduciary relationship with his or her client, so too might any appraiser retained by the insurance carrier through an implied/informal mechanism. 

There is no doubt that insurance companies hire specific appraisers with whom they have had a successful working relationship to represent their interests and place trust in said appraisers.  Furthermore, there is no doubt that appraisers utilized by insurance carriers have a financial interest in the outcome of the appraisal.  A beneficial appraisal award or agreement will assist the appraiser in securing additional assignments and, therefore, additional compensation from the insurance company.  Also, a public adjuster operating on a contingency fee basis has the incentive to finalize the appraisal as quickly as possible, avoid incurring additional costs from an umpire which are to be paid by the client, and negotiate an agreement.  An appraiser operating on an hourly rate, such as those hired by insurance carriers, have an incentive to drag out the appraisal for as long as possible in order to maximize their billing and, therefore, their own recovery.

It then begs the question: can anyone ever act as a truly disinterested appraiser as long as the parties are required to assign and pay their own appraisers?  While carriers may rejoice over the Sanders opinion, the 3d DCA's failure to address a number of other factors as well as the 4th DCA's prior ruling on this issue [14],[15] may ultimately create further controversy and additional litigation moving forward.  Quite frankly, it is possible that with the finding in Sanders, when viewed alongside the Florida Supreme Court's broad definition of a fiduciary, a policy requiring that a "disinterested" appraiser be named may be an impossible task thereby frustrating the purpose of the appraisal provision rendering same unenforceable.

In the meantime, whether the appraiser can qualify under the terms of a policy and can be considered disinterested when the appraisal provision calls for same should be addressed on a case by case basis.  Insureds and public adjusters alike should request information as to the relationship between the carriers and their appraisers.  This information should necessarily include the appraiser's compensation structure, any contract between the appraiser and carrier, the number of appraisals in which the appraiser has been hired by the carrier, and the total amount of compensation paid to the appraiser. 

​As always, should you have any questions about how this analysis may relate to your own claim,  please do not hesitate to contact us for a free consultation.​​

[1] State Farm Florida Ins. Co. v. Sanders, 3D19-927, 2019 WL 3309217 (3d DCA 2019)

[2] Id. at 4

[3] Federated Nat'l Ins. Co. v. Koberling, 228 So. 3d 569 (Fla. 4th DCA 2017)

[4] Rios v. Tri-State Ins. Co., 714 So. 2d 547 (Fla. 3d DCA 1998)

[5] Galvis v. Allstate Ins. Co., 721 So. 2d 421 (Fla. 3d DCA 1998)

[6] 148 So. 3d 488, 495 (Fla. 5th DCA 2014)

[7] Restatement (Third) of Agency § 1.01 (2006)

[8] Fernandez v. Florida Nat'l Coll., Inc., 925 So.2d 1096, 1101 (Fla. 3d DCA 2006) (quoting Goldschmidt v. Holman, 571 So.2d 422, 424 n.5 (Fla. 1990) )

[9] Orlinsky v. Patraka, 971 So. 2d 796, 800 (Fla. 3d DCA 2007)

[10] National Sur. Corp. v. Windham, 74 So.2d 549, 550 (Fla.1954) (“The [principal's] right to control depends upon the terms of the contract of employment....”)

[11] Florida Administrative Code, Rule 69B-220-051(7) (2015)

[12] Alvarez v. State, 800 So. 2d 237, fn. 4 (Fla. 3d DCA 2001)

[13] Quinn v. Phipps, 113 So. 419, 421 (Fla. 1927) quoting Mayrand v. Mayrand, 194 Ill. 45, page 48, 61 N. E. 1040, page 1041

[14] See Koberling, supra

[15] State Com'n on Ethics v. Sullivan, 430 So. 2d 928, 932 (Fla. 1st DCA 1983) (“[A] PCA establishes no precedential point of law and other parties before a different court may not go behind a PCA to argue that it establishes a controlling precedent.”)