Judge voids $187M Hurricane Sally appraisal, tightening rules for insurance loss estimates

Photo illustration of a hurricane with $187M superimposed, and a judge banging a gavel. Judge voids $187M Hurricane Sally appraisal, tightening rules for insurance loss estimates.

By Doug Bailey

It was the largest damage award in insurance appraisal history. Then it collapsed. The case could have ripple effects across the industry, reshaping how appraisals are conducted and challenged.

The case, Westchester Surplus Lines Insurance Co. v. Portofino Master Homeowners Association, centered on damage from Hurricane Sally to the Portofino Towers in Pensacola Beach. Portofino’s appraiser, George Keys, filed a $233 million “statement of loss” that was eventually reduced to $187 million. However, the court found that he never determined the “amount of loss” as required by the insurance policy.

Keys admitted his figure was only a “starting point,” based on pricing data from a contractor who described his estimate as “à la carte pricing.”

“No thinking person would use his price list as a stand-in for the total dollar value of the damage,” the contractor testified.

New appraisal ordered

U.S. District Judge M. Casey Rodgers agreed, concluding that the appraiser “never established a final scope for the proposed repair work” and therefore “did not fulfill his raison d’être.” The judge granted summary judgment to the insurers and ordered a new appraisal before a new panel.

The decision effectively nullified one of the largest appraisal awards in property insurance history and, according to industry attorneys, underscored how narrowly courts interpret appraisal clauses.

“This ruling reinforces that appraisal is a creature of contract,” wrote attorney Zachary D. Sonenblum in a client alert from Clausen Miller. “If the policy says the appraiser must state the amount of loss, then the appraiser must do exactly that.”

Insurance appraisal is sometimes seen as a streamlined, less adversarial alternative to litigation. But as the Portofino case shows, courts will step in if the process strays from the letter of the contract.

'Cautionary tale for policyholders'

Merlin Law Group’s Chip Merlin, writing in Property Insurance Coverage Law Blog, called the case “a cautionary tale for policyholders and their advocates,” emphasizing that an appraisal award can “collapse in the courtroom” if it does not strictly follow policy terms. The court’s decision may embolden insurers to challenge other large or loosely documented awards — particularly in catastrophe claims where repair scopes are complex or evolving.

“If an appraiser cannot articulate the specific amount of loss tied to the damage, the award risks invalidation,” said one Florida insurance attorney following the case.

The homeowner’s association was ordered to obtain another appraisal that conforms to the terms of the insurer’s contract, but it may appeal the decision.
Policyholder advocates warn this ruling could make the appraisal process more cumbersome, forcing appraisers to over-document estimates and discouraging creative valuation methods. Others argue it adds needed discipline to an area long criticized for inconsistency.

The Portofino decision aligns with a growing body of case law emphasizing procedural precision in appraisal clauses. Similar rulings have invalidated awards where appraisers exceeded their authority, did not sign properly, or delegated key tasks to third parties.

For insurers, the takeaway is clear: challenge appraisal awards where form and function diverge. For policyholders, it is a reminder that the “amount of loss” must be more than a concept; it must be a number grounded in the contract’s language.

The $187 million Portofino award may be gone, but its echoes will likely shape the next generation of appraisal disputes across the insurance landscape.