In Parrish v. State Farm Fla. Ins. Co., the Florida Supreme Court settled a conflict between two appellate courts, holding that a public adjuster, including the president of a public adjusting company, cannot serve as a “disinterested” appraiser if they have a pecuniary interest in the outcome of the appraisal.

Background and Underlying Proceeding

In September 2017, John Parrish, sustained damage to his home from Hurricane Irma. At the time of the damage, the insured had a policy issued by State Farm Florida Insurance Company. The insured hired Keys Claims Consultants, Inc. to provide public adjusting services, including assessment of the damage and repair costs. The insured agreed to pay KCC 10% of the amount recovered from State Farm.

In December 2017, State Farm and KCC inspected the damage to the insured’s home. KCC presented its estimate, which State Farm could not reconcile with its own. State Farm attempted to schedule a second inspection with KCC, but KCC invoked the policy’s appraisal provision, naming George Keys, the president of KCC, as the insured’s appraiser.

The appraisal provision provided: “If you and we fail to agree on the amount of loss, either party can demand that the amount of the loss be set by appraisal.” It further required that “[e]ach party will select a qualified, disinterested appraiser.”

In addition to asserting that appraisal was premature because it was still investigating the insured’s claim, State Farm requested that KCC appoint a different appraiser, claiming that Keys could not be considered a “disinterested” appraiser because he was already acting as the insured’s public adjuster.

After both parties ultimately decided to invoke appraisal, State Farm petitioned the trial court to compel the insured to appoint a “disinterested” appraiser. State Farm argued that the appraiser was not “disinterested” as he had a direct financial relationship with the insured through the public adjuster agreement. The trial court denied the petition, finding that the KCC public adjuster could serve as a “disinterested” appraiser, because the appraiser and insured had disclosed their arrangement to State Farm.

State Farm appealed the decision, and the Second District Court of Appeal reversed the trial court’s decision. The Second District held that within the context of the policy, “disinterested” was not ambiguous, and the requirements of a “disinterested” appraiser excluded any appraiser who held an interest in the outcome of the appraisal process. The Second District determined that Keys had an interest in the outcome because of KCC’s 10% interest in the recovery, which gave Keys a pecuniary interest since he is the firm’s president, and because KCC represented the insured as its public adjuster.

The Second District certified conflict with Brickell Harbour Condo. Ass’n v. Hamilton Specialty Ins. Co., 256 So.3d 245 (Fla. 3d DCA 2018), to the extent that case held that a public adjuster with a contingency interest can serve as a “disinterested” appraiser.

Supreme Court Reasoning and Opinion

The Supreme Court stated that, because there is no factual dispute, the only issue to be determined was what the term “disinterested” means in the context of the insurance policy. The court looked to the insurance contract to see whether the term “disinterested” was defined, in order to determine whether the parties agreed to give “disinterested” a meaning other than the one provided to it in general usage. Because there was no given definition within the policy, the court next looked at statutes for support. The Florida Insurance Code was reviewed to see if the word “disinterested” should be defined as anything other than its ordinary meaning. The court concluded that it should not.

Next, the court looked at Black’s Law Dictionary, which, at the time the policy was issued, defined “disinterested” as “free from bias, prejudice, or partiality and therefore able to judge the situation fairly; not having a pecuniary interest in the matter at hand.” Similarly, Webster’s Dictionary defined “disinterested” as “1: lacking or revealing lack of interest . . . apathetic . . . 2: not influenced by regard to personal advantage: free from selfish motive: not biased or prejudiced.” Based on these dictionary definitions, the court concluded:

“[A] “disinterested” person cannot, consistently with the generally understood meaning of that word, have a pecuniary interest in the matter at hand.”

The insured attempted to argue that the inquiry should not end with whether the appraiser has a pecuniary interest. The insured first argued that within the context of the insurance provision, “disinterested” modifies how the appraiser is selected, rather than the appraiser’s manner of compensation. Second, the insured argued that in the context of the policy, “disinterested” is identical to the word independent, and relied on Galvis v. Allstate Insurance Co. 721 So.2d 421 (Fla. 3d DCA 1998) in arguing that an appraiser could be independent while also receiving a contingency fee.

The Supreme Court rejected these arguments, noting that “independent” and “disinterested” “may do similar work sometimes, but they are not the same.” The court ruled that the insured and insurer did not agree to hire “independent” appraisers, but rather “disinterested” appraisers. Therefore, the court had “no reason to think the parties’ agreement was anything other than to require that each select an appraiser without an interest in the outcome of the claim.”

The court further determined that because Keys is president of KCC, the contingency fee agreement between KCC and the insured gave him a pecuniary, or financial, interest in the matter being appraised.

“Put simply, the more Mr. Parrish recovers, the more KCC collects; and the more KCC collects, the likelier it is that Mr. Keys will himself be in a position to be paid, or that his interest in KCC will be valuable. Mr. Keys’s pecuniary interest in evaluating Mr. Parrish’s loss such that Mr. Parrish recovers as much as possible means Mr. Keys is not “disinterested.” To the contrary, the whole point of the contingency fee agreement is to align Mr. Keys’s economic interests with Mr. Parrish’s.”