Florida Supreme Court Rejects Hurricane Claims

In a ruling that reverses last year's court of appeals decision in Florida Farm Bureau Casualty Co. v. Cox, the Florida Supreme Court on Thursday unanimously rejected a Santa Rosa County homeowners' claim for policy limits under a flood insurance policy when the home was destroyed by a combination of wind and water. The full opinion is here [pdf format].

The court also expressly "disapproved" of the so-called Mierzwa doctrine, upon which thousands of home owners in Northwest Florida, alone, have been counting in hopes of being able to rebuild their homes after Hurricane Ivan devastated the region in 2004. The Mierzwa doctrine got its name after a case decided by a South Florida district appeals court, which as St. John explains, "had ruled that under Florida's valued policy law, insurers must pay policy limits when a covered property is destroyed, even if the damage was partly caused by an uncovered peril."

"Score one for the insurance industry," writes Paige St. John in the Ft. Myers News-Press. And it's a huge one. Industry lobbyists already are crowing that the ruling makes them "very, very happy."

In addition to the Cox's, who live near Milton, an estimated 400 homeowners on Pensacola Beach are likely to be adversely affected by yesterday's court decision. Another 15,000 policyholders elsewhere in the Panhandle and mid-Florida are potentially affected, at least as of 18 months ago according to one attorney who was handling a class action based on the same Mierzwa doctrine.

As reporter St. John explains --

As a result of the law change, homeowners today must collect separate loss payments from wind and flood insurers, who do not always agree on their share of the damage.

Lawyers who handle those cases say it is often difficult to prove, when there is nothing left but a foundation, how much damage the wind did.

The state supreme court's opinion fails to acknowledge what every Floridian who has been through the hurricane claims process knows all too well: Adjusters for wind insurers typically say, as local attorney Robert M. Heath wrote some time ago, 'Sorry, ma'am, your damage was caused by flood and we don't cover flood.' Adjusters for the flood insurer will say, contrariwise, 'Sorry, ma'am, your damage was caused by wind and we don't cover wind.'

Almost certainly the court's ruling will further empower casualty insurance companies who've grown fat in the past two years on gargantuan premium increases which were approved, in part, in response to their argument that larger reserves would be needed to cover future Mierzwa claims. Yet, if a casualty insurance company has ever made a settlement offer to resolve a claim, it's a sure bet they'll offer even less, now, than before.

No doubt, the Florida Supreme Court assumes that insurance companies will be reasonable when it comes to demanding proof of what was destroyed by wind and what was destroyed by water. But as Dickens' Mr. Bumble says in Oliver Twist, "If the law supposes that, then the law is a ass."

We've heard something else from a number of coastal residents that's very worrisome. Quite a few of those who have been, shall we say, skeptical about the eventual outcome of any Florida court decision that pits the insurance industry against individual homeowners, have said they simply will not evacuate when the next killer hurricane approaches. Only then, so they hope, will they have a fightin' chance to satisfy the courts' demand for precise proof about what, when, and how specific damage was done by the twin hurricane forces of wind and water.

They will be their own eye witnesses. That is, if they manage to live through the storm.