By Hope Patti
Law360 (March 2, 2022, 2:41 PM EST) — A Florida federal judge approved a condo association’s
$13.8 million appraisal award for hurricane damage sustained in 2017, saying a Chubb unit failed to demonstrate partiality of an appraiser in its bid to vacate the award.
On Tuesday, U.S. District Judge Marcia G. Cooke denied Westchester Surplus Lines Insurance Co.’s motions to vacate and dismiss the action, both of which lacked evidentiary support, the judge said in her confirmation of the appraisal award to Biscayne Beach Club Condominium Association Inc.
Westchester had argued that the appraisal award should be vacated because Biscayne’s appraiser Blake Pyka was partial to the condo association and his misbehavior prejudiced the insurer’s rights.
“The bulk of these arguments are built upon [Westchester’s] unsupported premise that Mr. Pyka had a financial interest in the appraisal awards due to his purported contingency fee arrangement with [Biscayne]. This premise, however, lacks evidentiary support,” Judge Cooke wrote. “As such, defendant’s vacatur arguments collapse upon themselves when evaluated against the evidence adduced through the parties’ limited discovery in this case.”
Biscayne sued the insurer in June 2018 for breach of contract, claiming Westchester did not fully pay for the losses that the condo association’s properties sustained. Biscayne invoked its right to an appraisal, abating the lawsuit, and was awarded a total of $13.8 million when the appraisal was completed in March 2020.
The court denied Westchester’s first motion to vacate the award, but reopened the case to permit a limited discovery because the insurer raised concerns that Pyka had a contingency fee arrangement with Biscayne through which he would receive a portion of the award, according to court filings.
Under the Florida Arbitration Code, an appraisal award may be set aside because of evident partiality, which Westchester has not established, Judge Cooke said.
Pyka repeatedly testified at his deposition that he mistakenly sent a contingency fee agreement to an adjuster for Biscayne, the judge said. The insurer has not offered evidence contradicting Pyka’s testimony, Judge Cooke said, adding that Westchester’s argument is based upon speculation and assumptions.
The insurer further stated that the appraisal award was obtained by corruption, fraud or undue means, and that the appraisal panel exceeded or imperfectly executed its power because of Pyka’s determination. Because Westchester has not shown that Pyka had a financial interest in the appraisal award, the insurer’s other arguments fail as well, Judge Cooke said.
To accept Westchester’s corruption argument, which alleged that Pyka fabricated time logs in a conspiracy to conceal the contingency fee arrangement, the court “would have to make unsupported leaps in its analysis,” the judge said. Even if the time logs were incorrect, she added, it does not mean that Pyka had a financial interest in the outcome of the appraisal or that there was a valid agreement between the appraiser and Biscayne.
Judge Cooke also noted that the insurer’s argument regarding the appraisal panel’s execution of its powers is not a basis for vacating an appraisal award under Florida law.
Even if Westchester provided evidence of Pyka’s alleged bias, the insurer waived those grounds for vacatur, the judge said. Despite arguing otherwise, the insurer was aware of the unsigned contingency fee agreement and failed to object to Pyka serving as an appraiser before the appraisal panel issued the award, Judge Cooke noted.
“A party cannot strategically use silence in an appraisal proceeding and then request that a court later save it from its strategic choices when that strategic choice of silence fails to garner the desired result in the appraisal proceeding,” Judge Cooke said.
The judge also denied Westchester’s motion to dismiss the action with prejudice and enter sanctions against Biscayne, saying that the motion “lacks legal merit because it lacks evidentiary support.”
Jesmany Jomarron, counsel for Biscayne, told Law360 on Wednesday that he was pleased with the judge’s ruling and hopes the insurer will “do the right thing” and pay the award.
“Everything that they were accusing the insured of, they didn’t have an evidentiary basis to accuse them of, and it just seems like it was designed purely to delay payment,” Jomarron said.
Counsel for Westchester did not immediately respond to a request for comment on Wednesday.
Biscayne is represented by Jesmany Jomarron and William P. McCaughan Jr. of Farrell Patel Jomarron Law and by Gonzalo R. Dorta and Matias R. Dorta of Dorta Law.
Westchester is represented by John David Dickenson and Chad A. Pasternack of Cozen O’Connor.
The case is Biscayne Beach Club Condominium Association Inc. v. Westchester Surplus Lines Insurance Co., case number 1:18-cv-23105, in the U.S. District Court for the Southern District of Florida.