A court may consider whether the cost of repairing a damaged building would exceed its value in determining whether the structure is a “total loss” under the 2004 version of Florida’s Valued Policy Law (“VPL”),1 according to a recent decision by the first district court of appeal in State Farm Florida Insurance Company v. Ondis.2 In Ondis, the court noted that in Mierzwa v. Florida Windstorm Underwriting Ass’n,3 the fourth district characterized the VPL as consisting of only two significant inquiries:
(1) whether the building was insured as to “a” covered peril; and
(2) whether the building is a “total loss.”
If yes to both, the carrier is liable to the owner for the face value of the policy, no matter what other facts are involved as to the cost of repairs or replacement. Under this interpretation of the VPL, the actual cause of the total loss is irrelevant.
A building is an “actual total loss” under the “identity test” when it no longer retains its identity and the specific characteristics that define it as a building.4 A building is considered a “constructive total loss” when the building, although still standing, is damaged to the extent that ordinances or regulations in effect prohibit or prevent the building’s repair, such that it has to be demolished.5
The Ondis court found that the VPL does not require a building to pass the “identity test” or constitute a “constructive total loss” to qualify as a “total loss” under the VPL. Other “reasonable definitions” may be applied. In Ondis, the trial judge granted summary judgment in favor of the insured homeowner on the undisputed fact that the cost to repair the home exceeded its value.6 The appellate court found that this was a “reasonable factor” and that the trial court was free to make a determination of total loss based on all the evidence in the record.
In an earlier case, Florida Farm Bureau Cas. Ins. Co. v. Cox7 , the first district noted that the VPL has been significantly revised. Effective June 1, 2005, the VPL was amended to specify that the “total loss” must be “caused by a covered peril” to trigger the statute. Further, the amended VPL does not apply where the loss was caused in part by a covered peril and in part by a noncovered peril.
The court acknowledged that considerations such as ease of actuarial analysis, the economics of the insurance industry, and even its own notions of fairness might have lead to an interpretation of the 2004 statute not unlike the 2005 revision. However, the 2005 amendment specifies that it is not retroactive and applies only to claims filed after its effective date. Thus, the court was not free to interpret the 2004 VPL as if it were the 2005 VPL.
Nevertheless, the Florida Farm Bureau certified the following question to the Florida Supreme Court:
DOES SECTION 627.702(1), FLORIDA STATUTES (2004), 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?
On January 11, 2007, the Florida Supreme Court granted review in Florida Farm Bureau. 8 The appeal is currently pending. In Ondis, the parties conceded that the home sustained damage from flood (which was excluded under the policy) in the amount of $322,601.88, while wind (the covered peril) was responsible for only $14,073.65 of the damage. The Ondis court certified the same question as in Florida Farm Bureau.