Florida Supreme Court: Insurers Not Liable for Policy Limits Under Certain Circumstances

By Maria Elena Abate, Shareholder

Colodny Fass

In two unanimous decisions issued today, September 20, 2007, the Florida Supreme Court has directly disapproved a 2004 Fourth District Court of Appeals opinion, Mierzwa v. Florida Windstorm Underwriting Association, 877 So.2d 774, (4th DCA 2004), which had interpreted Florida’s Valued Policy Law (“VPL”) to require payment of policy limits when multiple perils combined to cause a total loss. 

The 2004 Mierzwa opinion had mandated such payment regardless of the amount of damage caused by the covered peril and had suggested that insurers had to pay for supplemental coverage (ordinance and law) in a total loss situation even if the insured did not incur any additional expense.

Indeed, in light of the extraordinary 2004 storm season, the Mierzwa decision had placed all Florida wind carriers at great risk of multiple court actions for policy limits by insureds who had suffered a total loss from a combination of wind and flood damage.

Florida Farm Bureau v. Cox

The first of the two Supreme Court opinions issued today, Florida Farm Bureau v. Cox., — So.2d —-, 2007 WL 2727072, Fla., September 20, 2007 (NO.SC06-2494), held that property insurers are not required to pay policy limits if the damage from a covered peril does not cause a total or constructive total loss, regardless of whether the covered peril combined with a non-covered peril to cause such a loss. 

In the Florida Farm Bureau case, the Coxes had a homeowner’s policy valued at $65,000 which provided protection from wind damage but excluded losses based on flood damage.  The Coxes demanded policy limits of $65,000 plus additional coverage for personal property and other provisions for a total of $117,000.  Farm Bureau had adjusted the claim and determined that $11,583 of the damage to the home and $3,277.14 of damage to other structures was caused by wind, and that the Coxes were entitled to $2,000 for living expenses.

The trial court granted a motion for judgment on the pleadings in favor of the Coxes finding that “Mierzwa’s interpretation of the VPL did not require that a covered peril be the peril causing the entire loss so long as it caused some of the loss.”  The First District affirmed the trial court and this in turn was quashed today by the Florida Supreme Court, who remanded the case for further proceedings.

Significantly in Footnote 6 of the opinion, the Supreme Court limits its holding to “only those cases in which a covered peril did not cause a total loss or constructive total loss.” 

What does, or does not constitute a constructive total loss can vary from county to county and is based on the interpretation of county ordinances, some of which require a property to be declared a constructive total loss if the damage is greater than 50% of the “value” of the home.  The “value” can be defined in various ways and may be pegged to market value or the tax value times a set multiplier.

Ceballo v. Citizens Property Insurance Corporation

The second opinion, Ceballo v. Citizens Property Insurance Corporation, — So.2d —-, 2007 WL 2727092, Fla., September 20, 2007 (NO. SC06-1088), did not deal with a multi-peril situation, but rather a total loss from fire. 

Citizens had paid the face value of the policy, but had not made a payment under the ordinance and law provision of the policy inasmuch as the insured had not provided any proof that they had incurred any expenses under such coverage.  The Third District Court of Appeal had ruled in favor of Citizens but had certified a conflict with the Fourth District’s Mierzwa  decision.

In Mierzwa, the Court stated that “the owner has established beyond any question its entitlement to the additional 25% in benefits under the ordinance or law coverage” but provided no discussion regarding any requirement of the insured to demonstrate an actual loss.

Once more disagreeing with Mierzwa, the Florida Supreme Court held in Ceballo, “that the VPL does not mandate the payment of the policy limits of additional coverage without proof of loss where the unambiguous language of the policy requires such proof.”

An in-depth evaluation of the Florida Supreme Court decisions written by Colodny Fass& Abate Shareholder Maria Elena Abate, along with both Florida Supreme Court opinions are attached for your review. 

 

Should you have any comments or questions, please do not hesitate to contact this office.