Florida homeowners considering coverage for their residence have a number of options. One of those options is “Valued Policy” coverage, which is intended to reduce litigation and disputes in the event of a total loss. This form of coverage can provide significant benefits for policyholders by facilitating prompt payments of claims when a total loss is suffered because of a covered peril. However, the Florida legislature succumbed to insurance industry lobbying efforts and undermined some of the benefits of this form of coverage.
Florida’s Valued Policy law is characterized by a predetermined amount of the value of a claim when the policyholder suffers a total loss. The purpose of the coverage is to eliminate the need for the insured to prove the value of the property when the policyholder suffers a total loss. This theoretically preempts guesswork and litigation expenses involved in establishing the value of loss. This is accomplished by establishing the value of the property when the policy is issued.
Under a Valued Policy, the insurer is obligated to pay the face value of the policy when a total loss occurs even if the property could be rebuilt for less than the value of the policy. The prerequisites for policy limits include (1) the loss is the result of a covered peril; and (2) the damage amounts to a total loss. If both of these factors are present, the insurance carrier that elects not to repair the property must pay the established policy limits regardless of other factors that might exist relating to the cost of replacement or repair.
There are limits to what is covered by a Valued Policy. This form of policy does not cover personal property inside the residence. Structures other than the residence on the property also are not covered by this form of insurance. In other words, this type of coverage does not apply to detached garages, storage sheds and similar buildings. These structures are not included because they are not assigned a value under the policy.
The decision by the Fourth Circuit Court of Appeals in Mierzwa v. Florida Windstorm Underwriting Association addressed the obligation to pay the face value of the claim when a peril is expressly excluded by the policy. In Mierzwa, the policyholder had both a Valued Policy covering wind and a separate flood policy. The Valued Policy expressly excluded perils other than wind damage.
The property of the policyholder was determined to be a constructive total loss following Hurricane Irene. Pursuant to the policy, the insured submitted a claim to the insurance company for the face value of the policy. The insurance company contended that it only owed a pro-rata contribution to the loss because some of the damage was caused by flooding rather than wind.
The appellate court agreed with the insured’s reasoning that the policy was “simple and straightforward” in entitling the policyholder to the full value of the policy when a total loss occurs and a covered peril causes damage. The court indicated when these two factors exist, the insurance company must pay the full value of the policy regardless of the presence of other factors.
While this judicial decision preserved the full benefit of Valued Policy coverage for policyholders, the Florida Legislature essentially gutted this decision. The legislature amended Florida’s valued policy statute to indicate that when damage is caused partially by a covered peril and partially by an uncovered peril, the insurer is only obligated to pay the portion of the loss related to the covered peril.
This change in Florida’s Valued Policy Law certainly poses potential problems for homeowners with this form of coverage. If you have this form of coverage and the insurer fails to pay the face value of your policy after a total loss, you should seek prompt legal advice. My law firm represents policyholders in claims disputes in Miami and throughout Florida. The Law Firm of J.P. Gonzalez-Sirgo, P.A. offers free consultations and case evaluations. No Recovery, No Lawyer Fees. Call 305-461-1095 or Toll Free 1-866-71-CLAIM.