Florida Insurance Valued Policy Law

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In the Mierzwa case, Florida's Fourth District Court of Appeal had to interpret a statute known as the Valued Policy Law (a/k/a the "VPL"). The VPL requires that where a structure is a total loss, the insurer must pay the face value of the policy and nothing less. Do you know why? Because insurers had gotten into the habit of insuring structures for enormous sums (earning huge premiums); but when a structure was totally destroyed the insurer would argue that the structure really wasn't worth the amount for which it was insured. So, for example, a company would insure a home for $100,000; but when the home burned the insurer would argue that it really was worth only $50,000. The legislature put an end to this greedy and deceptive practice by passing the VPL, which says that if a structure is totally destroyed by any covered peril (e.g., fire, windstorm, etc.), the insurer must pay the face value of the policy.

In 2004, Florida's Fourth District Court of Appeal considered the Mierzwa case. Mr. Mierzwa's home was destroyed by a covered peril (windstorm), but a non-covered peril (flood) also contributed to the loss. The court said that the presence of flood did not change the fact that the VPL required payment of Mr. Mierzwa's policy limits. Analyzing the plain meaning of the VPL, the court held that when a building is "insured by [an] insurer as to a covered peril" and the building is a total loss, the insurer must pay the policy limits. Period. (See the "Mierzwa Summary" on this website for more detailed information on the case.)

Of course this is not what the insurers wanted to hear. So they ignored Mierzwa, stalled the claims process, and poured money into Tallahassee in hopes that the "tort reformers" in our legislature would come to their rescue as they have so many times in the past.

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Consider PCB IN-05 (now HB 1937)—the insurers' answer to Mierzwa. In two short sentences the insurers hope to wipe Mierzwa from memory (and make no mistake, they will argue in court that this change should apply to pending claims, no matter how ridiculous that argument may be). Here is the change:

The legislative intent of this subsection is not to require an insurer to pay for a loss other than one caused by the covered peril or one resulting from a covered peril. In furtherance of such legislative intent, when a loss was caused in part by or resulting from 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 or resulting from the covered peril.

As noted in the diary of events below, this language has made its way out of the House Insurance Committee. Similar language appears in a Senate version that also expressly claims to be remedial, i.e., the Senate wishes to apply the new language to pending claims although it dramatically alters the law as it existed when Ivan devastated the Panhandle. It changes a law of total liability to one of pro-rata liability.

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Take this example. John and Jane owned a home with a fair market value of $100,000. Being sensible people, they carried $100,000 in flood coverage and $100,000 in wind coverage (enough to cover their value of their home whether damaged by flood or wind). Their home sustained $52,000 in damage during Hurricane Ivan. Half the damage was due to flood. Half the damage was due to wind. Because the damage exceeded 50% of the value of their home, the home must meet the new building codes, which require that the home be elevated. Thus, it must be torn down and rebuilt. It is, therefore, a total loss. To rebuild to code will cost $200,000 in the post-hurricane market.

Under the VPL and the Mierzwa case, the home was insured against a covered peril (wind) and was a total loss. Therefore the wind carrier must pay its $100,000 limits. Period. Not so under the insurer's proposed changes. Instead, this would be the wind carrier's calculation:

$52,000 in damage x one-half due to wind = $26,000 paid to claimants.

So although John and Jane insured their home (and paid premiums) for $100,000 in wind coverage, and although their home was totally destroyed, they will receive barely more than one-fourth of the policy's value (a heck of a change to the Valued Policy Law, eh?).

But it is even worse. Under the insurer's language, one drop of flood waters would dramatically change what the wind carrier has to pay. Consider John and Jane's home again. Under the insurer's new version of the VPL, the wind carrier would owe policy limits ($100,000) if wind were the only cause of the total loss. But if even one-hundredth of one percent of the damage were caused by flood, the insurer will argue that it owes only its pro-rata share of the actual dollar amount of damage. This would be the wind carrier's calculation:

$52,000 in damage x 99.99% due to wind = $51,994.80 paid to claimants.

So even where wind is 99.99% of the cause of the loss, the insurer's version of the VPL requires payment of barely more than half the wind coverage John and Jane carried. Meanwhile, John and Jane are facing $200,000 in rebuild costs. A mere $5.00 in flood damage cost John and Jane more than $48,000 in coverage for which they paid. Now that is a law bought and paid for with your premium dollars.

The Academy of Florida Trial Lawyers offered new alternative language (applying only to future claims) that would require payment of the wind carrier's policy limits only when windstorm is a "substantial contributing factor" to the total loss. The insurers and their friends on the insurance committee would have none of that. The language, introduced by Representative Anne Gannon, was rejected.

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You will hear the insurers and their legislative patsies asking: "Why should wind insurers pay for flood damage?" That is the wrong question. No one has asked that a wind insurer pay for flood damage. We have asked only that the insurers pay in accordance with the Valued Policy Law as it existed when the policies were written, premiums were collected, and claims were made. The insurers knew full well of the Mierzwa decision before Ivan hit. Indeed, Citizens declined its chance to appeal the decision to the Florida Supreme Court, but now it has publicly declared (in a lawsuit against its own insureds, no less!) that it refuses to follow Mierzwa.

You will hear the insurers claim that policyholders want a "windfall" or to "double-dip." Balderdash! The cost of rebuilding destroyed structures is so astronomical that it is laughable to think policyholders will walk away with cash in their pockets. See the example above for a good explanation why this is so.

You will hear the insurers claim that by paying in accordance with the law they are encouraging people not to carry flood insurance. Have they any proof of such allegations or are they just making this up? Why do they ignore the fact that every person in a flood hazard area is required to carry flood coverage? Why do they ignore the fact that even with standard flood and wind coverage most homeowners found themselves underinsured in the wake of Ivan (just like John and Jane in our example)? Do they think that every loss is a total loss in which wind coverage might be available? Of course not; homeowners will carry flood coverage to protect themselves against all potential flood losses, total and otherwise.

You will hear the insurers claim that the 50% Rule, rather than windstorm, is the real cause of the total loss. This ignores a 39 year-old court decision that rejected this very argument (Netherlands Ins. Co. v. Fowler, 181 So. 2d 692 (Fla. 2d DCA 1966)). The insurers were well aware of the Netherlands decision and the current VPL when they calculated and collected your windstorm premiums. Why are they now playing dumb (even worse … playing victim).

Very simply, the insurance lobby does not believe its own hype. These are the sorts of mischaracterizations made on a daily basis in the industry's never-ending quest for tort reform.

What are the insurers not saying? They are not saying why they chose to ignore Mierzwa though it indisputably was (and remains) the law for the entire State of Florida. How nice it must be simply to ignore the laws one doesn't care for!

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Call and write your legislators!! Let them know that they must LEAVE THE VALUED POLICY LAW ALONE!!! Have friends and family members do the same. Our legislators will take the insurance money and run unless you give them a reason not to!! Tell your Representatives to vote NO on HB 1937 and tell your Senators to vote NO on SB 1488 unless they remove the provisions attacking the Valued Policy Law.

Contact all of your local Senators and Representatives. Here is how:

  • Sen. Charlie Clary (parts of Escambia, Santa Rosa, Okaloosa, Bay & Walton)
    Email Sen. Charlie Clary now!

  • Sen. Durell Peaden (parts of Escambia, Santa Rosa, Okaloosa & Walton)
    Email Sen. Durell Peaden now!

  • Rep. Holly Benson (parts of Escambia & Santa Rosa)

  • Rep. Don Brown (parts of Okaloosa & Walton)
    Email Rep. Don Brown now!

  • Rep. Greg Evers (parts of Escambia, Santa Rosa, Okaloosa & Walton)
    Email Rep. Greg Evers now!

  • Rep. Dave Murzin (part of Escambia)
    Email Rep. Dave Murzin now!

  • Rep. Ray Sansom (parts of Santa Rosa & Okaloosa)
    Email Rep. Ray Sansom now!

The Levin, Papantonio firm intends to ask each of our local senators and representatives to take a formal, public position on this important local issue. Check here to find out what your legislators have to say.

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Attorneys from Levin, Papantonio are monitoring the progress of this latest, most odious bit of tort reform. We will update the website as things progress, so please return and check with us on a regular basis.

March 24, 2005:

House Insurance Committee workshops proposal for changes to hurricane laws (PCB IN 05-02). Proposals include consumer-friendly provisions but also language drafted by insurance industry that would alter the Valued Policy Law to gut the Mierzwa holding. Levin, Papantonio attorneys Jack Graff and Bobby Loehr attend. Bobby Loehr gives a presentation explaining how the new law would harm consumers. The Senate is considering a companion version with similar language.

March 29, 2005:

Levin, Papantonio attorney Jack Graff flies to Tallahassee to address the Senate Insurance Committee, which is considering a bill with language identical to the house version. The committee chair (Sen. Rudy Garcia) announces upon opening the hearing that the matter will not be addressed during the meeting.

March 31, 2005:

House Insurance Committee is to vote on adopting PCB IN 05-02, which includes harmful changes to the Valued Policy Law. More than 30 area residents travel to Tallahassee to attend the hearing. Levin, Papantonio attorneys Matt Schultz and Bobby Loehr lobby committee members throughout the day and Bobby Loehr gives a presentation to the committee. Consumer-friendly versions of the proposal are stripped. Representative Anne Gannon's compromise language regarding the Valued Policy Law is disapproved. The committee adopts the PCB including the language harmful to the Valued Policy Law. The proposal is reported favorably for consideration by the full House. Representative Evers (Santa Rosa/Escambia Counties) is the only vote on the committee to reject the harmful language.

April 5, 2005:

Senate Banking & Insurance Committee approves the senate version of the bill (SB 1488) by a vote of 9 to 1, with a committee substitute. The resulting bill is substantially similar to the house version (HB 1937) but includes language stating that its anti-Mierzwa provisions will apply retroactively. The bill is expected to go to the Senate Judiciary and Senate Ways & Means Committees.

April 6, 2005:

The senate bill (SB 1488) is withdrawn from the Senate Judicary and Ways & Means Committees and is placed in the General Government Appropriations Committee chaired by local Senator Charlie Clary! The bill is expected to appear as early as Monday April 11 on the agenda of Senator Clary's Committee. CONTACT SENATOR CLARY AND TELL HIM TO OPPOSE ANY CHANGES TO THE VALUED POLICY LAW: Email Sen. Charlie Clary now! 850/487-5009

The house version of the bill (HB 1937) will be considered by the State Administration Appropriations Committee on Monday April 11. Committee members are: Kim Berfield (Chair), Baxter Troutman (Vice-Chair), Mary Brandenburg, Audrey Gibson, Wilbert Holloway, Stan Jordan, John Legg, Carlos Lopez-Cantera, Ron Reagan, Julio Robaina, Franklin Sands.

April 11, 2005:

Consumers counterpunch the industry! The State Administration Appropriations Committee meets.  Attorney Bobby Loehr of the Levin,  Papantonio firm travels to Tallahassee to lobby members of the committee.  Representative Julio Robaina (Miami-Dade) introduces an amendment to strip the anti-Mierzwa language from the House version of the bill (HB 1937), meaning that the Valued Policy Law would not be changed! The amendment passes  by a vote of 6-2 and the bill passes favorably out of committee without the anti-Mierzwa language in it.

The bill now moves to the Commerce Council where the industry could propose an amendment to reintroduce the anti-Mierzwa language. Contact members of the Commerce Council and tell them you oppose any change to the Valued Policy Law.  Members are: Frank Farkas (Chair), Dick Kravitz (Vice-Chair), Frank Attkisson, Gus Bilirakis, Ellyn Setnor Bogdanoff, Terry Fields, Kenneth Gottlieb, Charlie Justice, Kenneth Littlefield, Dennis Ross.  The council next meets on April 14, 2005 at 12:45.

Click here to visit the Commerce Council web page. From this location you can click on the name of each and every representative and send an email telling them to LEAVE THE VALUED POLICY LAW ALONE!!

April 19, 2005:

The House Commerce Council is to meet tomorrow (April 20) at 3:45 p.m.  The property insurance bill (HB 1937) is not currently on the Council's agenda but could be carried over and addressed when the Council meets Thursday, April 21.  To view the meeting notices and contact Council members, visit the Commerce Council web page (see link above). To view the current House version the bill (which no longer contains the anti-Mierzwa language), click here.

The Senate General Government Appropriations Committee (chaired by local Senator Charlie Clary) has the property insurance bill (S 1488) on its meeting agenda for Thursday, April 21 at 9:15 a.m.  Email Senator Clary (see the link above) and tell him to that YOU OPPOSE THE CURRENTLY PROPOSED CHANGES TO THE VALUED POLICY LAW!  To view the current Senate version of the bill click here: The proposed changes are found at page 58, line 17.

April 20, 2005:

A big day on the property bill as both the Senate and House versions were heard in committee. Levin, Papantonio attorney Bobby Loehr again traveled to Tallahassee to take on the insurance lobbyists in front of the committees.

The House version of the bill (CS/HB 1937) was approved by the House Commerce Council. Representative Dennis Ross again proved his hostility to consumers by introducing the worst language yet into the bill. Representative Ross declared publicly that the law could not be applied retroactively, but consumers should remember Ross's name when he runs for CFO (Insurance Commissioner) next year as anticipated. He has been the leading advocate for the insurance industry throughout this affair. The House bill, with Ross's newly introduced anti-consumer language, passed favorably out of committee and now is ready for house floor action. CONTACT ALL OF OUR AREA LEGISLATORS AND TELL THEM YOU OPPOSE HB 1937 BECAUSE OF ITS ANTI-CONSUMER CHANGES TO THE VALUED POLICY LAW! (See links above for contacting your legislators.)

The Senate version of the bill (S 1488) went before Senator Charlie Clary's General Government Appropriations Committee. Senator Clary introduced an amendment ensuring that the bill will not apply retroactively. CONTACT SENATOR CLARY AND TELL HIM THANKS FOR DOING THE RIGHT THING! (See his email link above.) The bill was approved by the committee and will move on for further consideration in the Senate.

Hats off to attorney Bobby Loehr for making such extraordinary efforts to fight this legislation! Thanks to Reggie Garcia at the Academy of Florida Trial Lawyers for continuing to fight the good fight on behalf of consumers. Email the Academy (aftl@aftl.org) and tell them how much you appreciate their efforts!

April 26, 2005:

The House moved CS/HB 1937 to third reading after adding several amendments. Most notably, the amendments require insures to offer policies to pay the replacement value up to 50% over coverage limits. However, insurers only have to pay this if a homeowner chooses to rebuild their house in the same place and condition and presents the insurer with the receipts after the rebuilding is complete. This would mean that a homeowner who loses a home in a high-risk area cannot choose to relocate and still collect the full policy they paid for. An amendment also was added providing that it is the legislative intent of the legislature that the anti-Mierzwa provisions of the bill will not apply retroactively. Several consumer-friendly amendments were proposed but failed.

This is a bad bill for consumers, but at least Mierzwa remained intact for the time being!

April 28, 2005:

The House passed CS/HB 1937 by a vote of 96 to 20. Here is how your local reps voted on this anti-consumer bill (that at least no longer seeks to apply retroactively): Holly Benson: Yea; Don Brown: Yea; Greg Evers: Yea; Dave Murzin: Yea; Ray Sansom: Yea. It is difficult to understand why every one of our local representatives would support a pro-insurance hurricane bill in light of what happened here and elsewhere in the state last year. But at least Mierzwa is safe from congressional clutches for the moment.

May 3, 2005:

CS/SB 1488 is ready for Senate Floor Action. It has been read twice and has been placed on the Special Order calendar. It still contains unfavorable language for consumers in many respects, including the Valued Policy Law, but it no longer claims to be retroactive. Thus neither the House nor the Senate version claims to apply retroactively.

May 6, 2005:

The House amended CS/SB 1488's provisions onto CS/SB 1486. CS/SB 1488 died on the Senate Second Reading Calendar. The related bill, CS/HB 1937 died in the Senate Committee on Banking and Insurance. The House approved a strike-all amendment that added the language of CS/SB 1937 onto CS/SB 1486. The resulting bill, while it included a few pro-consumer measures, also included a legislative repeal of Mierzwa. (See CS/SB 1488 for full explanation.) The bill's Mierzwa provisions apparently will still require a windstorm carrier to pay the full value of a home destroyed by both flood and wind if the wind resulted in a majority of the damage done to the home. The bill does not apply retroactively but indicates that it will apply to all "claims" that are "filed" after it becomes law.

The House passed CS/SB 1486 by a vote of 99 to 17. The Senate passed CS/SB 1486 by a vote of 38 to 1. CS/SB 1486 will now go to the Governor.

This remains an anti-consumer bill concocted by the insurance lobby. House Insurance Committee Chairman DENNIS ROSS shepherded this pro-insurer bill into enactment. He almost certainly will be running for CFO (Insurance Commissioner) in the near future. Remember his name and the negative role he played in this process.

June 2, 2005:

Governor Bush signs the legislation into law. For stories describing the effect of the new legislation, click here or here.