A Florida federal court invalidated a $187 million appraisal award that a group of homeowners associations won against their insurers over damage related to Hurricane Sally in 2020, finding that the group's chosen appraiser "never stated the 'amount of loss'" to the property.

Granting summary judgment to the insurers, U.S. District Judge M. Casey Rodgers said while the appraiser for Portofino Master Homeowners Association Inc. and other entities submitted a "statement of loss" with the figure of $233 million, the statement by his "own admission" didn't mean the repairs cost that much.

Portofino's appraiser, George Keys, testified it was a "starting point" for the appraisal panel's neutral umpire to reach the ultimate appraisal figure, the judge found in her Sept. 22 ruling.

"Keys' appraisal team ultimately deferred to the umpire to determine the extent of damages produced by the storm — and therefore the 'amount of loss' to Portofino's property," Judge Rodgers wrote. She said that meant "in Portofino's words, 'Keys' appraisal team did not compute a final number' reflecting the 'amount of loss' as required by the appraisal provisions."

The decision further preserved Portofino's coverage claims against insurers, ordering that the parties go back to form a new panel and conduct another appraisal.

The prevailing insurers are Westchester Surplus Lines Insurance Co., Arch Specialty Insurance Co., Axis Surplus Insurance Co., Evanston Insurance Co., Aspen Specialty Insurance Co., Maxum Indemnity Co., Colony Insurance Co., Homeland Insurance Co. of New York, Independent Specialty Insurance Co., Interstate Fire & Casualty Co., James River Insurance Co., Lloyd's of London Consortium #9226 and Landmark American Insurance Co.

According to court filings, the coverage dispute centers on insured property damage that the Portofino defendant entities said they suffered from Hurricane Sally in September 2020 across their complex of five condominium towers.

With Portofino and the insurers disagreeing on the amount of coverage owed for the hurricane damage, they proceeded with an appraisal as outlined in the policies, under which the insurers and Portofino selected their own appraiser, who would then select a "competent and disinterested" umpire. If the two appraisers couldn't reach an agreed "amount of loss," the umpire would weigh in.

After the panel rendered its $187 million award, Westchester Surplus Lines Insurance Co. and a slew of other insurers kicked off the coverage litigation in January 2023.

On Sept. 22, Judge Rodgers additionally highlighted that the "statement of loss" at issue showed a figure of $233 million even though Portofino initially estimated its damage at $13 million.

"For appraisal to be a meaningful alternative to litigation on 'amount of loss' issues, interests in finality weigh heavily in favor of letting sleeping dogs lie," she said, citing the 1995 state appeals case State Farm Fire & Casualty Co. v. Middleton .

"But appraisals must — and there is no wiggle room here — still be conducted 'in accord with the agreed-on policy provisions,'" she added, pointing to the 2022 state appeals case NCI LLC v. Progressive Select Insurance Co. She further noted that a member of Keys' own team testified that no "thinking person" would use his "à la carte pricing" in the $233 million statement of loss as the total value of hurricane damage, and that it was instead a "price list."

"Here, it is undisputed that Portofino's appraiser, by failing to state the 'amount of loss,' did not comply with the most basic — and fundamental — aspect of the process set forth in the appraisal provisions," Judge Rodgers ultimately determined.

In reaching her conclusion that the appraisal award must be invalidated, the judge added that under the Eleventh Circuit's 2024 ruling in Mont Claire at Pelican Marsh Condominium. Association Inc. v. Empire Indemnity Insurance Co. , the court didn't have to reevaluate the appraisal or assess the accuracy of its calculations either.

A representative of Landmark American Insurance Co. declined to comment. Representatives of the other parties did not immediately respond to a request for comment.

Westchester Surplus Lines Insurance Co., Arch Specialty Insurance Co., Axis Surplus Insurance Co., Evanston Insurance Co., Aspen Specialty Insurance Co. and Maxum Indemnity Co. are represented by John David Dickenson and Alexandra J. Schultz of Cozen O'Connor.

Landmark Insurance Co. is represented by Wayne D. Taylor and Elizabeth D. Salinas of Mozley Finlayson & Loggins LLP.

Independent Specialty Insurance Co., Interstate Fire & Casualty Co. and Lloyd's of London #9226 are represented by David C. Bibb and Brian P. Henry of Rolfes Henry.

Colony Insurance Co. is represented by Jack R. Reiter and Jordan S. Kosches of GrayRobinson PA.

James River Insurance Co. is represented by Eric A. Hiller and Aaron Konstam of Kennedys CMK.

Homeland Insurance Co. of New York is represented by Heidi Hudson Raschke, Madison E. Wahler and Amanda D. Proctor of Carlton Fields.

The Portofino defendants are represented by Edward P. Fleming, Matthew A. Bush and Aaron T. McCurdy of McDonald Fleming LLP; Kurtis Jay Keefer of Goede DeBoest & Cross PLLC; and Charles F. Beall Jr. of Moore Hill & Westmoreland PA.

The case is Westchester Surplus Lines Insurance Co. et al. v. Portofino Masters Homeowners Association Inc. et al., case number 3:23-cv-00453, in the U.S. District Court for the Northern District of Florida.