Fla. Judge Slams SFR for Misrepresentations in Appraisals

SFR Services, a Florida restoration firm made famous by its volume of claims litigation and its charges that United Property & Casualty Insurance Co. had instructed desk adjusters to alter their estimates, now finds itself in some legal trouble of its own.

A circuit judge in Lee County recently found that SFR had intentionally concealed and misrepresented material facts during the appraisal process in a Fort Myers-area condominium claim dispute with Tower Hill Prime Insurance Co. after Hurricane Irma in 2017. The firm stuck with an estimate of $233,000 and failed to disclose a contract with a roofing company, which charged less than half of that for the actual work, Judge Michael McHugh wrote in his May 9 order.

“SFR Services was aware that the cost of the scope of roof work was $99,000, at least as of March 20, 2020,” the judge noted. “Despite knowing this information, SFR Services continued to present an estimate generated by Elite Claims and continued to represent that the value of the roof replacements for the clubhouse and both gatehouses was more than $230,000, while simultaneously indicating that its overhead and profit fell in line with the industry standard of 20%.”

Members of an appraisal panel, assigned to resolve differences between two other estimates, said they were unaware of the lower price from Castillo Roofing when they awarded the higher amount on the claim. The judge found that SFR, as an assignee of the condominium association, had violated the concealment and misrepresentation provision of the insurance policy and was “tainted by fraud.”

McHugh ruled in favor of Tower Hill and vacated the higher appraisal award, voided part of the coverage and agreed to Tower Hill’s request for a new umpire on the appraisal.

SFR, based in Stuart, Florida, has already asked Florida’s 6^th District Court of Appeals to review the decision.

“Unfortunately we are appealing this egregious ruling,” SFR’s principal, Ricky McGraw, said in an email to Insurance Journal. “We have moved to disqualify the judge presiding over the case. Florida has made it hard for contractors that help their clients.”

SFR’s attorney, Melissa Giasi, asked the judge to disqualify himself, arguing that he was prejudiced by his concerns about McGraw’s allegedly fraudulent activity; the judge did not hold a jury trial; and he adopted a final order drafted by Tower Hill that contained numerous errors. When that motion failed, Giasi asked the appeals court to step in and prohibit McHugh’s order. The appeals judges declined.

In its answer to Tower Hill’s 2020 motion in Lee County, which asked the court to vacate the high-end appraisal award, the SFR attorney also argued that Tower Hill had “unclean hands,” had acted in bad faith and had improperly adjusted the claim amount.

Judge McHugh did not see it that way. He also pointed out that the insured, Rookery Pointe Homeowners Association, did not participate in the alleged fraud.

“In fact, the condo association, through its former president, Debbie Kiel, testified they were so concerned with the estimate provided by SFR Services, they got their own estimates which were in line with Castillo Roofing’s estimate,” the judge wrote.

McGraw and SFR Services for years have been thorns in the sides of several insurance carriers in Florida. Court records show that the firm has filed hundreds of lawsuits against insurers over AOB claims in recent years. Most famously, in early 2022 SFR charged in a federal lawsuit that United Property & Casualty had conspired with adjuster firms to systematically deny and underpay thousands of roof claims after Hurricane Irma.

The lawsuit, charging anti-racketeering law violations, purported to show copies of text messages by a desk adjuster, sent at the behest of UPC, to field adjusters directing them to avoid estimating roof damages altogether because the insurer planned to issue blanket denials.

A federal judge dismissed the suit in October, noting that a federal statute leaves it up to states to regulate the business of insurance, so the federal racketeering law did not apply.

Florida regulators this year deemed UPC insolvent and have placed the company into liquidation, likely making claims suits against the insurer a long shot.

Meanwhile, SFR has made similar allegations in state court against individuals associated with the insurer. In a suit filed last week in Pinellas County, SFR charges that a number of adjusters, UPC officials and UPC board members engaged in a scheme to underpay claims from Irma, “no matter how badly people’s roofs were damaged.” The complaint cites deposition testimony from a field adjuster who said that UPC officials demanded that he remove portions of his damage estimates.

In the Lee County case, the judge said SFR was the party that engaged in misrepresentation, a judgment that has left some insurance defense attorneys with a strong sense of schadenfreude. They said that the alleged tactics by SFR have not been uncommon in the years of claims litigation against insurers, and have helped drive exorbitant defense costs.

The Rookery Pointe case began in 2019, when the condo association signed an AOB agreement with SFR. The restoration contractor initially provided an estimate of $355,759 for replacement of three common-area roofs – on the gatehouses and the clubhouse, plus a fourth building that was not clearly identified.

SFR contracted with Elite Claims Consulting as its public adjuster on the condos, and in 2020 Elite submitted its own estimate of $314,828, the court explained. The next day, SFR contracted with Castillo Roofing to replace the three roofs for $99,000. McGraw confirmed that in his own testimony during the court proceedings, the judge’s order said.

McGraw also signed a sworn proof-of-loss statement, based on the Elite Claims estimate of $314,828. SFR also directed Castillo Roofing to submit a permit application with a declared value of $233,525, something the judge said was intentionally misleading.

In response to Elite’s estimate, Tower Hill in March 2023 requested that the parties submit their differences to an appraisal panel. The insurer also requested information on any bids by roof contractors on the Rookery Pointe structures.

“Without question, the Castillo Roofing bid submitted to SFR Services would have been responsive to this request,” Judge McHugh wrote. “Yet, SFR Services did not approve it, nor did it provide the documentation to Rookery Pointe or Elite Claims to produce to Tower Hill.”

SFR argued in court that it was not obligated to provide the Castillo bid, because it was party to an AOB agreement: It had been assigned the rights and benefits of the policies, but not the duties or obligations.

The judge noted that in years’ past, court rulings have found that assignees did not have to uphold certain duties of the insured. But that case law was superseded by a 2019 AOB reform law passed by the Florida Legislature. That statute also requires assignees to provide up-to-date and revised estimates of repair work, the judge said.

SFR also failed to provide the Castillo price during the appraisal process, the judge wrote, citing a 1999 Florida appeals court opinion that held that there must be a “meaningful exchange of information” for an appeals panel to accurately arrive at a fair number. But SFR’s chosen appraiser for the appraisal panel had testified that he was unaware of the Castillo price and based his conclusions on the higher estimates. Tower Hill’s chosen appraiser said the same. McHugh acknowledged that Tower Hill on its own could have solicited more estimates.

“Without the Castillo Roofing invoices and information, there was never a meaningful exchange of information necessary for a proper appraisal,” the judge noted. McHugh acknowledged that Tower Hill, on its own, could have solicited more estimates on the work.

A Tower Hill representative testified in the trial that the insurer would have paid the Castillo $99,000 price, plus standard overhead and profit, if the company had known about it – thus avoiding months of litigation.

The attorney for Tower Hill in the case, Michael Monteverde, could not be reached for comment for this article.