How Extensive Must Hurricane Damage Be To Constitute a Total Loss under Florida’s Valued Policy Law?

J.P. Gonzalez-Sirgo
Founder of J.P. Gonzalez-Sirgo, P.A.

Homeowners need to brace for the approach of the hurricane and tropical storm season.  When people suffer severe damage to their residence because of a storm or other peril like fire, extensive damage to a structure can amount to a “total loss”.  The concept of what constitutes a “total loss” under Florida’s “valued policy” law is one that is confusing for many property owners.  While many Florida policyholders presume that a total loss is related to the cost to repair or replace the premises, this is actually a misperception about the definition of a “total loss” under Florida’s valued policy law.

The purpose of Florida’s valued policy law is to ensure that when a covered peril causes damage to the subject property, the insurer will be required to pay the policy limit in the event of a total loss.  In other words, a policyholder is entitled to the face value of the policy if the insurance company elects not to repair or replace the property.  However, the determination that a total loss has occurred is more complicated than many policyholders recognize.

The Florida Supreme Court in Lafayette Fire Ins Co. v. Camnitz, 111 So. 653 (Fla. 1933) established the “identity test” as the standard for determining if an insured has experienced a total loss.  The identity test provides that a total loss has occurred if a structure is so disintegrated that it essentially loses its specific character as a building.  However, this does not mean that every part of the structure must be decimated.

Although this test might seem to provide a fairly narrow set of circumstances under which a total loss will entitle a policyholder to the face value of the policy, there are other scenarios where damage can be considered a total loss.  Sometimes the expense of compliance with government regulations or codes may make the cost of repairing the structure so exorbitant that the government ordinances, regulations or codes justify the finding of a “constructive” total loss.

A case from the 2nd District Court of Appeals provides an example of how the cost of compliance with legal requirements can constitute a total loss despite the fact that the damage to the structure fails to satisfy the identity test.  In Netherlands Ins. Co. v. Fowler, 181 So.2d 692 (Fla. 2nd DCA 1966), a building owned by the policyholder suffered significant damage in a fire.  For safety reasons, the municipality indicated that the building had to be demolished because the structure could not be safely repaired.  The insured rejected the insurance company’s tendered settlement amount of approximately half the face value of the policy, which was based on an appraisal.  Because the building could not be lawfully repaired, the court agreed that the insured had suffered a constructive total loss.

You can reach Miami Hurricane Insurance Claims Lawyer J.P. Gonzalez-Sirgo by dialing his direct number at (786) 272-5841, calling the main office at (305) 461-1095, or Toll Free at 1 (866) 71-CLAIM or email Attorney Gonzalez-Sirgo directly at [email protected].

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