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Florida’s Valued Policy Law and Its Impact on a Total Loss Claim – Changes in the Law, the Battle of Causation, and Its Impact on My Claim? Part 2

Mentioning laws the insured’s property suffered extensive wind and flood damage caused by Hurricane Irene. The insured had separate insurance policies provided by different insurance companies. They had one policy that covered wind damage, and another policy that covered flood damage. However, the wind damage policy specifically excluded any and all damage not caused by wind.

After Hurricane Irene, the property at issue was rendered a constructive total loss. As a result, the insured brought suit against the insurance company claiming that Florida’s valued policy required that the windstorm insurer tender the full policy limits due under the policy. The insurance company, however, argued that it was only liable for its pro rata share of the damage caused since flooding had also caused some damage to the property.

The Fourth District Court of Appeal agreed with the insured and ruled that the insurance company must pay the face value of the policy regardless of its pro rata share of the damage. The court opined that the meaning of the valued policy law to be “simple and straightforward.” The court reasoned that two elements were necessary to apply Florida’s valued policy law. First, the property must be insured by an insurer as to a covered peril. Second, the building must be a total loss.

The court reasoned that if both of those elements were present, then the valued policy law applied without regard to any other fact that may be present in the case.

The ruling resulted in Florida’s legislature making a significant change to Florida’s valued policy law shortly after the Mierzwa case was decided. Florida’s valued policy law was amended to state that “when a loss is covered by a peril and in part by a noncovered peril … the insurer’s loss shall be limited to the amount of the loss caused by the covered peril.”

This change is potentially problematic for Florida homeowners. As we saw with the widespread litigation in the Gulf states following Hurricane Katrina, insurance companies in Florida are now free to limit their payouts in the event of a total loss if they are able to prove that some pro rata portion of the loss was caused by a non-covered peril. In other words, insurance companies will now attempt to minimize their payouts in total loss claims, or even deny them outright, when a loss is caused by an excluded event (flood), regardless of whether a covered peril also contributed to the same loss (wind.)

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