Sometimes there is a disagreement between an insurer and an insured regarding the valuation of a property damage claim. To resolve these disputes, many homeowners and commercial property insurance policies contain appraisal provisions that provide an option for the insured or the insurer to resolve disputes regarding the value of a claim without resorting to litigation.
The appraisal language in an HO3 policy typically reads as follows:
Appraisal. If you and we fail to agree on the actual cash value, amount of loss, or cost of repair or replacement, either can make a written demand for appraisal. Each will then select a competent, independent, appraiser and notify the other of the appraiser's identity within 20 days of receipt of the written demand. The two appraisers will choose an umpire. If they cannot agree upon an umpire within 15 days, you or we may request that the choice be made by a judge of a district court of a judicial district where the loss occurred. The two appraisers will then set the amount of loss, stating separately the actual cash value and loss to each item.
Once the appraisal clause/provision is invoked, the insured's appraiser and the insurer’s appraiser will estimate the damage and try to come to an agreement on the amount of loss. Typically, a win-win for both parties.
Although the process generally runs smoothly without any major roadblocks, a recent decision by the Florida Fourth District Court of Appeal highlighted an issue that may affect the appraisal process nationwide.
In Silversmith v. State Farm Ins. Co., 46 Fla. L. Weekly 1592 (Dist. Ct. App. 2021), the court held that an insured may electronically record an insurer’s appraiser during an inspection of the insured’s property. In Silversmith, the insured filed a first-party property insurance claim related to storm damage to her home. After the insured and the insurer disagreed about the scope of damage and the cost of repairs, the insurer made a written demand for an appraisal pursuant to the terms of the policy.
In response, the insured filed a lawsuit seeking a declaration that she had a right to record the appraiser while he inspected her property. The insurer’s appraiser objected on privacy grounds.
The trial court, relying on Section 934.03 of the Florida Statutes (the two-party consent rule), denied the request. The court found that Florida privacy laws prohibited the recording of oral conversations, noting that “no one may audio/video record the inspection unless all participants consent.”
On appeal, the appellate court reversed the trial court finding that the insurer’s appraiser did not have a legitimate expectation of privacy while performing an appraisal at the insured’s property and noted that “nothing in the policy precluded [the videotaping] of an appraisal inspection.” The appellate court also noted that the insurer did not identify any law that would validly preclude a homeowner from openly recording an inspection of her own home.
The appellate court further noted its decision was consistent with a prior Florida decision which denied certiorari review of an order allowing a homeowner to record an inspection.
Comment: Although this decision focused on whether the insurer’s appraiser had a reasonable expectation of privacy in the insured’s home, it is not clear whether this decision would allow an insurer to videotape the insured’s appraiser performing an inspection. Because the court decided the case on a legitimate expectation of privacy in the insured’s home, the issue of whether a court will hold the insured’s own appraiser to this same privacy standard is unresolved.
In New Jersey and New York, however, the recording laws stipulate that it is a one-party consent state. Thus, only one party needs to consent to a recording. You are legally allowed to record a conversation if you are a contributor, or with prior consent from one of the involved parties, barring any criminal intentions. Therefore, it appears that the result would be the same since only one party needs to consent to be recorded, and that the insured’s appraiser would be able to be recorded.
Under Pennsylvania law it is a felony to record an oral or telephone communication without the consent of all parties. Therefore, an insured cannot record an appraisal with the consent of the appraiser.