Florida Fifth District Court of Appeal Permits Lawsuit for Breach of Contract Due to Insurer’s Failure To Pay Interest on an Appraisal Award

By Zachary D. Sonenblum

In Taylor v. State Farm Fla. Ins. Co., Florida’s Fifth District Court of Appeal reversed the trial court’s order of dismissal and remanded the matter for further proceedings after the Insurer failed to pay the Insured interest on an appraisal award.

By way of factual background, in 2020, Insured, Aymee Taylor made a claim for water damage due to an overflowing sink. In 2021, the Insured and State Farm went to appraisal, which resulted in an appraisal award to the Insured for her damages, and State Farm promptly paid the appraisal award. However, the Insured subsequently sued State Farm for breach of contract because the amount of State Farm’s payment did not include any interest. After the trial court dismissed the Insured’s claim, the Insured appealed, and the 5th DCA agreed with the Insured, finding that the Insured can sue for breach of contract for failure to pay interest on the appraisal award.

The subject policy provided in pertinent part:

8. Loss Payment. We will adjust all losses with you. We will pay you unless some other person is named in the policy or is legally entitled to receive payment. Loss will be payable upon the earlier of the following:

a. 20 days after we receive your proof of loss and reach agreement with you; or
b. 60 days after we receive your proof of loss and:

(1) there is an entry of a final judgment; or
(2) there is a filing of an appraisal award with us.

If we do not pay or deny a loss within 90 days after we receive notice of an initial, reopened, or supplemental property insurance claim from you and no factors beyond our control would reasonably prevent us from making payment, interest will be paid in accordance with Section 627.70131(5) of the Florida Insurance Code.

(emphasis added).

In analyzing the above-quoted loss-payment policy provision, the 5th DCA explained:

Taylor’s policy did not just incorporate section 5(a) by reference, which it certainly could have done. Instead, State Farm decided, for whatever reason, to include a separate and independent loss payment provision that, like the statute, provided for the payment of interest. The only reference to section 5(a) in the loss payment provision simply deals with the manner in which interest will be paid. We find this wholly insufficient to adopt the entirety of section 5(a), including the limitation on actions, a goal State Farm could have easily accomplished had it chosen to do so. […]

The parties were free to add this provision to the Policy, and State Farm’s decision to do so must mean something […]

The Court ultimately concluded that “an insurance policy that contains a standalone, independent obligation to pay interest can form the sole basis for a private cause of action that is not precluded by the statutory limitation on actions.”

Therefore, the 5th DCA reversed the trial court’s order of dismissal, and remanded the case back to the trial court for further proceedings.