In Florida Farm Bureau Casualty Insurance Company v. Cox, 2007 WL 2727072 (Fla.), the question was: does section 627.702(1), Florida Statutes, referred to as the valued policy law, require an insurance carrier to pay the face amount of the policy to an owner of a building deemed a total loss when the building is damaged in part by a covered peril but is significantly damaged by an excluded peril?
In 2004, Hurricane Ivan struck Florida . The Coxes' home was considered a total loss due to both wind and flood damage. Florida Farm Bureau provided coverage for losses caused by wind but not from flood damage. The Coxes made a policy limits demand of $65,000, plus additional coverage for personal property and other additional provisions for a total of $117,000. Florida Farm Bureau asserted that the wind caused $11,583.93 of the damage to the home, the storm caused an additional $3,227.14 of damage to other structures, and the Coxes were entitled to $2000 for living expenses. The insurer said that its liability was not for the total loss of the home because the covered peril only caused $11,583.93 of the damage; the remaining loss was caused by flood and storm surge, both of which were excluded.
The Coxes claimed breach of contract and a violation of the Valued Policy Law (VPL). They filed a motion for judgment, relying on Mierzwa v. Florida Windstorm Underwriting Ass'n, 877 So.2d 774 (Fla. 4th DCA 2004). The trial court granted the Coxes' motion, finding that “Mierzwa is controlling and binding” and that the VPL does not require that a covered peril be the peril causing the entire loss so long as a covered peril caused some of the loss. Florida Farm Bureau appealed.
The Valued Policy Law (VPL) has been a part of Florida law since 1899. It requires insurers to set the value of property insured if a total loss occurred. Originally, the VPL applied to damages caused only from fire and lightning. In 1982, the Legislature extended the VPL to all covered perils. This version was essentially unchanged until 2005 when the VPL was amended, expressly providing that “when a loss was caused in part by a covered peril and in part by a non-covered peril … the insurer's liability under this section shall be limited to the amount of the loss caused by the covered peril.”
The Florida Supreme Court found that the plain language of the statute does not mandate the insurer to pay for the total loss if a covered peril causes only part of the total loss. The Court declared that the VPL does not establish a requirement for an insurer to pay for excluded or non-covered perils. The beginning phrase of the statute states: “In the event of the total loss … as to a covered peril…”, and the Court concluded from this that the statute intends that an insurer is only liable for a loss by a peril covered under the policy for which a premium has been paid.
The Supreme Court reaffirmed that the VPL prohibits an insurer from challenging whether the value of the insured property is less than the full amount of coverage as stated in the policy based on depreciation in value or any other cause. However, it concluded that the holding in Mierzwa was not the intended application of the VPL and did not give effect to all provisions of the VPL statute. The case was remanded back to the lower court for further proceedings.