In a greatly anticipated opinion, the Florida Supreme Court recently clarified the Valued Policy Law (“VPL”), §627.702(1), Fla. Stat. (2004). Florida Farm Bureau Casualty Ins. Co. v. Cox, No. SC06-2494, 2007 WL 2727072 (Fla. S. Ct. Sept. 20, 2007). The Court considered whether the VPL required an insurer to pay the face value of the policy for a “total loss” caused, in part, by a covered peril and, in part, by a non-covered peril.
A lower appellate court previously had considered a similar question in Mierzwa v. Florida Windstorm Underwriting Ass’n, 877 So. 2d 774 (Fla. 4th DCA 2004). Construing the 2003 version of the VPL, that court held: “if the insurance carrier has any liability at all to the owner for a building damaged by a covered peril and deemed a total loss, that liability is for the face amount of the policy.” Id. at 775-76 (emphasis in the original). (After Mierzwa, in 2005, the Florida Legislature amended the VPL to limit an insurer’s liability to the amount of loss caused by the covered peril.)
In Cox, the Supreme Court disapproved of Mierzwa, finding that the appellate court had misinterpreted the VPL. The Court held that the VPL was a valuation statute, whose primary purpose was to establish, and thus foreclose the insurer’s ability to challenge, the value of an insured property in the event of a total loss. Quoting the VPL, “[i]n the event of a total loss of any building...insured by any insurer as to a covered peril..., the insurer’s liability, if any, under the policy for such total loss shall be in the amount of money for which such property was so insured as specified in the policy and for which a premium has been charged and paid” (emphasis in original), the Court decided that the statute intended for an insurer to be liable only for a loss caused by a covered peril.
Simultaneously with Cox, the Florida Supreme Court issued a second opinion concerning the VPL. Ceballo v. Citizens Property Insurance Corporation, No.SC06-1088, 2007 WL 2727092 (Fla. S. Ct. Sept. 20, 2007). The Court held the VPL did not override the supplemental ordinance and law provisions of a homeowner’s insurance policy. Accordingly, the insureds could not recover under the supplemental coverage provision of their policy without proving that they had incurred a loss, in excess of the total loss, owing to an ordinance or law related to rebuilding. The appellate court had certified Ceballo as being in direct conflict with Mierzwa. Thus, by affirming that court’s decision in Ceballo, the Florida Supreme Court again disapproved of Mierzwa.