Worth, Wind & Water

As the Board of Directors of Florida Windstorm recognized during its October meeting, Hurricane Ivan, "while restricted to a more condensed region, presented staff with the issues of total loss of property and high frequency of combined wind/flood losses."

One reason this was notable for the board is that a few weeks before Ivan struck Pensacola Beach an important court ruling was published that addresses the very question so many beach residents are now facing: To what extent does my windstorm policy cover losses made "total" by enforcement of the "50% rule" when they are telling me flood damage was involved?

The SRIA has been circulating a legal memorandum that calls attention to the case, which is titled Mierzwa v. Florida Windstornm Underwriting Assn., 877 So.2d 774 (4th DCA 2004). Ask at the SRIA for a copy of the "Levin legal memo."

Also available on-line is a full copy of the entire decision (in pdf format). To access the full opinion, go to Fourth DCA Opinions Released 06-23-04 and click on "Zennon Mierzwa v. Florida Windstorm Underwriting Assn."

Finally, the general counsel for Florida Windstorm provided the board of directors with a summary of the decision at its July monthly meeting. That summary is on-line right here. Below, the same public report is repeated:

Zennon Mierzwa v. Florida Windstorm Underwriting Association
A recent opinion from the Fourth District Court of Appeal may impact payment of claims where there is a constructive total loss caused by multiple perils. We are in the process of evaluating the impact of this ruling and may seek Supreme Court review if rehearing is denied.

On June 23, 2004, the Fourth District Court of Appeal issued an opinion reversing a final summary judgment entered in favor of the FWUA and directing that judgment be entered for the insured. In this case, Mierzwa, the insured suffered a loss to his residence as a result of Hurricane Irene. The building was condemned by the local authorities upon a determination that the costs of repairs for the total damage exceeded half the value of the building – thus creating a constructive total loss.

The insured possessed windstorm coverage from FWUA in the amount of $281,000. The FWUA policy expressly excluded flood damage. The insured purchased separate flood insurance from another insurer. Claims were made under both policies.

The damage to the property was attributed to both windstorm and flood. FWUA decided that its liability for the wind damage repairs amounted to $64,807, plus $8,370 for debris removal, permits and repair inspection. The flood carrier paid $54,485.

The insured sued, seeking full policy limits under the valued policy law, Section 627.702, Florida Statutes, which provides in pertinent part:

In the event of the total loss of any building, structure, mobile home as defined in s. 320.01(2), or manufactured building as defined in s. 553.36(12), located in this state and insured by any insurer as to a covered peril, in the absence of any change increasing the risk without the insurer's consent and in the absence of fraudulent or criminal fault on the part of the insured or one
acting in her or his behalf, 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.

FWUA asserted that its anti-concurrent clause (“ACCC”) excluded its liability for the face amount of the policy under the valued policy law because the total loss was caused in part by a peril excluded under the FWUA policy. The Fourth District disagreed, holding that the valued policy law “does not require that the covered peril be the covered peril causing the entire loss; it need merely be a covered peril.” (emphasis added). Since the policy was silent on whether the FWUA’s liability under the ACCC becomes merely pro rata with other coverage, or whether the valued policy law takes precedence over the ACCC, the Fourth District found that there was a conflict between the ACCC and the valued policy law, creating an ambiguity in the policy which must be construed in favor of the insured.

The Fourth District also held that the insured was entitled to Ordinance and Law coverage, as the exclusion clause relied upon makes it clear that the exclusion does not apply to “other coverages.” The applicable Ordinance and Law coverage was found in the section of the policy labeled “other coverages.”

A motion for rehearing has been filed.

[Ed. - The motion to reconsider was denied in August. The case may be on appeal to the state supreme court.]