Florida’s Second DCA Finds Sinkhole Insurance Claim Neutral Evaluation is Mandatory … All the Time

Florida Homeowners Insurance Claims and Litigation Handbook

Overview:

Want to read about the definitive appellate decision on sinkhole coverage and neutral evaluation? You have come to the right place.


In Trapeo v. Citizens, the Second DCA recently reminded us that neutral evaluation for sinkhole claims is mandatory regardless of when requested. 

Here is a copy of the order:

Download (PDF, 63KB)

In 2009, Citizens issued the insurance policy at issue to the Plaintiff, Gary Trapeo.  In 2010, he reported a sinkhole claim.  In 2012, he filed a lawsuit against Citizens alleging its repair recommendation was not sufficient to stabilize the property.  In December of 2012 and after the parties engaged in discovery, Citizens requested neutral evaluation.  In addition, Citizens filed a “Notice of Automatic Stay” with the trial court requesting the case be stayed until after the parties participated in neutral evaluation.  Mr. Trapeo objected to the Notice and argued that Citizens, by participating in the litigation for approximately 10 months, waived its right to stay the case and demand neutral evaluation.  The trial court agreed with him and denied Citizens the opportunity to submit the claim to neutral evaluation.

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The Second DCA first addressed whether the 2009 or 2011 version of Fla. Stat. 627.7074 (the neutral evaluation statute) applied by the trial court.  The main difference between the two statutes is that the 2011 version mandates stay of the case and participation in the neutral evaluation process “regardless of when noticed.”  The Second DCA determined the stay portion of the 2011 statute was “procedural” rather than “substantive;” therefore, the 2011 statute must be applied to a lawsuit filed after its effective date.

The Court explained why Citizens could not waive its right to request neutral evaluation:

Citizens correctly argues that neutral evaluation, once requested, is mandatory. The trial court’s determination that neutral evaluation was waived conflicts with the express language of the statute. “Neutral evaluation is available to either party,” “supersedes the alternative dispute resolution process under s. 627.7015,” and is “mandatory if requested by either party.” § 627.7074(2), (3), (4). The statute’s language is compulsory; it repeatedly and almost exclusively directs that acts “shall” occur. There is no waiver provision and no timeframe for requesting neutral evaluation.2 It is an optional but statutorily guaranteed process. That is, once the request for neutral evaluation has been filed with the Department, participation in neutral evaluation is mandatory and guaranteed. See § 627.7074(4); cf.Williams, 62 So. 3d at 1135-36. Certiorari relief is appropriate because the trial court’s order purports to deprive Citizens of a statutory process to which it is entitled resulting in material harm. Cf.Williams, 62 So. 3d at 1136-37. This conclusion is supported by language of the statute applicable at the time the lawsuit was filed. The 2012 statute specifically provides, “Regardless of when noticed, any court proceeding related to the subject matter of the neutral evaluation shall be stayed pending completion of the neutral evaluation and for 5 days after the filing of the neutral evaluator’s report with the court.” § 627.7074(10) (emphasis added); cf. Cruz, 76 So. 3d at 398 n.1 (“We also note that section 627.7074 does not impose a waiver or other penalty when a neutral evaluation is not completed within forty-five days. Its proviso that ‘[n]eutral evaluation shall be conducted as an informal process in which formal rules of evidence and procedure need not be observed,’ § 627.7074(5), suggests that the legislature intended no sanction for failure to strictly adhere to the time period.”). The statute provides neutral evaluation as both a potential precursor to litigation and as a parallel, contemporaneous process. It is not an “either or” or “opt out of litigation” procedure, unlike contractual arbitration provisions. Cf. ch. 682, Fla. Stat. (2011) (applying to those instances where the parties have an arbitration agreement). It is also not a process that occurs as part of a civil proceeding, unlike court-ordered mediation, nor is it a presuit requirement.

In addition, the Second DCA held “the circuit court does not have authority over the neutral evaluation process.  The Department [of Financial Services] does.”  Accordingly, the court determined that only the Department has the power to decide whether a party has waived its right to neutral evaluation.

In addition, the court determined that Citizens correctly invoked the process simply by filing the Notice of Automatic Stay.

In a footnote, the court acknowledged the trial court’s concern that this ruling allows a party to request neutral evaluation on the eve of trial; however, the court responded that “the current language of the statute is clear.”

Thankfully, this issue is now resolved.  By my count, this is now the third time the Second DCA has ruled in an insurer’s favor requiring the parties to participate in neutral evaluation.  I would assume this will be the last.  To summarize, when a party requests neutral evaluation, the case is stayed and the parties must attend neutral evaluation.  There do not appear to be any exceptions.  In addition, if a party thinks there may be an exception, the trial court is not the forum, the Department of Financial Services is.

For more information on sinkhole claims and insurance litigation, feel free to contact me at (813) 513-5440 or email me at [email protected] You can also find several articles addressing the legal issues arising from sinkhole claims here.

Takeaway:

Here is one of the few occasions when plaintiffs’ attorneys failed to properly use litigation project management.  Although they might argue that they had an obligation to fight this issue, the statutes were pretty clear (and the majority of plaintiffs’ attorneys agreed) that neutral evaluation is required when requested.  Plaintiffs’ attorneys are usually the best at making efficient and effective decisions using project management; however, they failed here.

If you want to know more about the remarkable things that are being done to control homeowners insurance litigation, including checklists and guides for sinkhole claims, please message me.


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