Interested to Know Whether a Contingency Fee Public Adjuster Can Serve as a “Disinterested” Appraiser? 

Nov 15, 2021

by Amy Koltnow & Michael Billmeier

Many eyes were watching the Florida Supreme Court’s review of the “disinterested” appraiser dilemma in the case of State Farm Florida. Ins. Co. v. Sanders, with hopeful anticipation that this issue would be definitively resolved with statewide uniformity. 

The Florida Supreme Court initially accepted jurisdiction to review the “disinterested” appraiser issue based on the Third District’s certified direct conflict with decisions of other district courts of appeal and certified the question as one of great public importance. Under these circumstances, the Florida Supreme Court’s review of the issue was discretionary. One year later, after the case had been fully briefed by the parties, and numerous industry organizations had chimed in as amici curiae, and the attorneys presented oral arguments before a panel of six of the seven Florida Supreme Court judges, the Florida Supreme Court unanimously decided not to review the case. 

In its order discharging jurisdiction, the court tersely stated that based on its review of the Third District’s decision and the parties’ arguments it had decided not to consider the issue. 

The Conflicting Decisions in Florida and the Florida Supreme Court’s Review

Before the Sanders case, the Third District held that an appraiser’s direct or indirect financial or personal interest in the outcome of an insurance appraisal did not require the disqualification of the party’s appointed appraiser. This rule of law was based on prior legal precedent in the district which, in turn, was based on a prior version of the code of ethics for arbitrators. 

The law, however, was different in the Fifth and Fourth District Courts of Appeal, which held that an insured’s public adjuster who is entitled to a contingency fee cannot serve as a “disinterested” appraiser in the appraisal process. The cases in the Fourth and Fifth districts were decided after the code of ethics for arbitrators had been revised to require a presumption of neutrality for all arbitrators. 

In the Sanders case, the Third District issued an opinion upholding the controlling law in that district, although recognizing the holding was different than cases in the Fifth and Fourth District Courts of Appeal. Perhaps more importantly, the Third District held the Sanders case did not present an appropriate procedural posture for appellate review. Since the lower court had correctly followed the law in that district, the appellate court could not rule on the issue until the conclusion of the case. Nevertheless, the Third District’s three-judge panel “certified” direct conflict with decisions of other district courts of appeal and “certified” the issue as one of great public importance, giving a clearer pathway to the Florida Supreme Court’s review of the issue. 

State Farm then sought review from the Florida Supreme Court based on the Third District’s certified conflict with other districts and the certified issue as a matter of great public importance. 

In opposition to the Florida Supreme Court accepting jurisdiction, Sanders argued their appointed appraiser was not also their public adjuster—he was merely an employee of the public adjusting company, and the brother of the public adjuster who signed the contingency fee contract with Sanders. Moreover, Sanders argued there was no evidence that Sanders’ chosen appraiser was being paid on a contingent fee basis. Because the facts in this case were not the same as in the other Fourth and Fifth District Courts’ opinions addressing the issue, Sanders argued there was no true “conflict”. 

While the Sanders case was pending before the Florida Supreme Court, the Second District sounded in on the issue. In State Farm Fla. Ins. Co. v. Parrish, the Second District followed the Fourth and Fifth Districts and held a public adjuster who has a contingency interest in an insured’s appraisal award, or represents an insured in an appraisal process, is not a “disinterested appraiser”.

The Arguments on Each Side of the Issue

Although the objective of the appraisal process is impartiality, parties argue there is a built-in bias on each side of the equation for whomever represents a party as its chosen appraiser. Insurers contend that an appraiser chosen by an insured who are paid a percentage of the total appraisal award may have an incentive to present higher value claim amounts to increase the fee he or she will earn. 

Advocates for policyholders say that an appraiser hired by insurance companies have an incentive to present lower value claim amounts so he or she will be more frequently chosen by that insurer. 

The cost of participating in an appraisal process is borne by each party. If the two appraisers cannot agree on the value of the damages, they appoint an umpire who, in theory, is the “true” neutral who will decide the award. The umpire’s fee is shared equally by both parties. 

From an insured’s perspective, as someone having suffered a property loss and who may not have the means to pay for an appraiser, there is significant financial benefit to using his or her public adjuster to serve as the appointed appraiser in the process. 

Now that Florida’s Highest Court Will Not Resolve the Conflict, Where Does That Leave Us?

After all eyes were on the Florida Supreme Court to resolve the conflicting case law within the state, the state’s highest court chose not to decide the issue. 

It’s possible the Florida Supreme Court did not consider the case to be in the correct procedural posture for its review, or perhaps the Court considered the facts in the Sanders case did not directly conflict with the other district courts, or that the issue was not of great public importance. 

Interestingly, during the pendency of the case, the Sanders hired a new appraiser, the appraisal process went forward, and State Farm paid the claim. At the oral arguments before the Florida Supreme Court, Chief Justice Canady seemed particularly concerned the Court would be issuing an advisory opinion. The Florida Supreme Court’s order discharging jurisdiction, however, is somewhat cryptic as the specific reasons why the Court decided not to hear the case are not revealed. 

Whatever the reasoning, the impact of the Florida Supreme Court deciding not to review the issue is that the opinions from the district courts of appeal still conflict with one another. For cases that fall within the Fifth and Fourth District Courts (and now also in the Second District), an insured’s public adjuster who is entitled to a contingency fee cannot serve as a “disinterested” appraiser in the appraisal process. In the Third District, an insured’s public adjuster who is entitled to a contingency fee may serve as a “disinterested” appraiser in the appraisal process provided the financial relationship is disclosed.  

The claims affected by this issue are those where the appraisal process has been invoked, and the policy has language requiring a “disinterested” appraiser. However, not all Florida policies contain an appraisal provision, and some policies do not have language requiring a “disinterested” appraiser. 

Currently, three out of the five Florida appellate district courts are persuaded that the link between an appraiser’s fee being tied to the amount of the award makes the contingency-paid appraiser more interested in the outcome of the appraisal process than other types of fee arrangements. The First District Court of Appeal has not considered this issue. 

The Third District appears to be leaning toward reversing its prior precedent and following the Fifth and Fourth (and now Second) District Courts of Appeal. The Sanders case, however, was not in the right procedural posture for the court to consider the issue. If and when the issue is presented in the correct procedural posture, the Third District may recede from its prior legal precedent and disallow an insured’s public adjuster who receives a contingency fee to serve as a “disinterested” appraiser in the appraisal process. 

In the meantime, insurance companies may revise their policy language to “close the gaps” created by uncertainty from court decisions. For example, insurance companies may consider expressly defining the meaning of “disinterested” appraiser in their policies or adding specific qualifications for appointed appraisers and umpires. 

Is Appraisal Still a Worthwhile Process for Dispute Resolution? 

The appraisal process is designed to obtain a swift resolution of the value of the loss when the parties cannot agree. The neutrality of the appraisers involved is essential to the success of the process. 

Some insurance companies have removed the appraisal provision from their policies in part because of a perception the process was not impartial and was not working as intended. However, there has been an increasing level of uncertainty resolving claim disputes through the court system. An insured has a statutory entitlement to attorney’s fees in litigated insurance disputes, and the courts may award a contingency fee “multiplier” to the already court-determined reasonable attorney fee. A fee “multiplier” (which can be up to 3 times the amount of an attorney’s “reasonable” fee) can exponentially increase the cost of a disputed claim and incentivizes attorneys to draw out the resolution of disputes over the value of the damage through unnecessary litigation. 

The increase in litigation and the impact of attorney fee awards in litigated disputes is a prominent cost factor driving claims resolution and increased premiums. The appraisal process, in fact, may reduce these cost drivers. Attorneys are less likely to be involved in the appraisal process and they do not have the same opportunities to engage in or prolong the process as they do in court proceedings. 

The appraisal process, therefore, still appears to be an effective and efficient way to resolve insurance disputes for both insureds and for insurance companies. 

So, if you are interested to know whether a contingency fee public adjuster can serve as a “disinterested” appraiser, the answer is a definitive “yes”—but only if the policyholder resides in one of the counties within the jurisdiction of the Third District (Miami-Dade and Monroe County).

If you were hoping for a pronouncement of statewide uniformity on this issue, you will just have to stay tuned!

Florida Insurance Defense Lawyer Amy Koltnow
Amy L. Koltnow, Esq.
Shareholder, Colodny Fass
(954) 492-4010


Michael Billmeier
Partner, Colodny Fass
(850) 577-0398


About Colodny Fass
For more than 40 years, Colodny Fass has represented clients throughout Florida and across the nation in diverse areas of the law. Consistently named as one of the top firms in the State of Florida, Colodny Fass lawyers have attained the highest rating of “AV” by Martindale-Hubbell, the most respected attorney ranking service in the world. They also have been named perennially to the top listings of many respected publications such as SuperLawyers, South Florida Legal Guide Top Lawyers, Florida Trend’s Legal Elite and others. The Firm has also attained the AM Best “Best Recommended Attorney” and “Qualified Law Firm” status. Providing full-service law and governmental consulting with personal attention, Colodny, Fass effectively handles a multiplicity of matters “From the Capitol to the Courthouse.”