[StBernard] Homeowners decked by Katrina still wait for insurers to pay up

Westley Annis westley at da-parish.com
Mon Aug 28 21:36:06 EDT 2006

I wrote the following article in January, 2006.

As noted, the Valued Policy Law was very effective against insurance
providers in Florida. It may be just as applicable in Louisiana and

Unfortunately, time is running out for hurricane/insurance victims.

Brian J. Donovan


For More Information Contact:
Brian J. Donovan
Attorney at Law
P.O. Box 13272
Tampa, Florida 33681
Phone: 813-943-8127
Fax: 813-831-4788
E-mail: donovanb at gte.net

Mierzwa & Proximate Causation: A Ray of Hope for Insurance Victims in
Louisiana and Mississippi ______________

Florida Court Decision Remains a Matter of Concern for Insurance Providers
in Louisiana and Mississippi by Brian J. Donovan, Esq.

TAMPA, FL (January 31, 2006) - Although not binding on courts in Louisiana
and Mississippi, the Florida decision in Mierzwa v. Florida Windstorm
Underwriting Association, 877 So.2d 774 (Fla. App. 4th Dist. 2004) is
instructive and a matter of concern for those insurance providers that have
collected premiums from their Gulf Coast policyholders for decades and now,
in their time of need, refuse to pay the claims of these very same
policyholders for damage caused by Hurricanes Katrina and Rita. Under
Florida's Valued Policy Law, Mierzwa held that if any portion of a total
loss was caused by a covered peril under a standard policy, then the insurer
was required to pay the face amount of the standard policy, even if the
majority of the damage to the insured building, structure, mobile home or
manufactured building resulted from an excluded peril, such as water damage.

The principal purpose of Florida's Valued Policy Law is to establish the
measure of damages in case of total loss. In order to achieve this purpose,
the Valued Policy Law requires the insurance provider to ascertain the
insurable value at the time of writing the policy. The Valued Policy Law
serves to remove what would otherwise be a very troublesome and difficult
issue to resolve either between the parties by negotiation or by the courts
in litigation. In short, when a policyholder pays for full coverage on
their home and they suffer a total loss, they ought to be reimbursed for the
total loss.

In Mierzwa, the Florida appellate court found that the meaning of Florida's
Valued Policy Law was "simple and straightforward." If the building is
insured by an insurer for a covered peril and the building is deemed to be a
total loss, the Valued Policy Law mandates that the insurance provider is
liable to the owner for the face amount of the policy, no matter what other
facts are involved as to the cost of repairs or replacement.
According to this Florida appellate court, once there is a determination
that there is a covered peril and a total loss, the actual cause of the
total loss is not relevant.

Not surprisingly, in response to Mierzwa, the insurance industry used its
substantial wealth and political influence to lobby the Florida Legislature
to either repeal or amend the Valued Policy Law. The Florida legislators
appeared almost human as they dangled from invisible strings attached to the
skillful hands of their insurance industry puppeteers. Senate Bill 1486 was
signed into law by Governor Bush on June 1, 2005.

Now, as a result of the insurance industry lobbyists' efforts, Florida's
Valued Policy Law states that if a loss is caused in part by a covered peril
and in part by a non-covered peril, the insurance provider's liability is
limited to the amount of the loss caused by the covered peril. However, if
the covered perils alone would have caused the total loss, then the Valued
Policy Law applies and the insurance provider must pay policy limits, not
exceeding the amounts necessary to repair, rebuild or replace the insured
structure. Initially, proponents of this Bill attempted to include
retroactive language that would have relieved insurance providers from
liability resulting from Florida's 2004 hurricanes. Fortunately, the
legislators, in a feeble attempt to demonstrate a slight degree of backbone
to their homeowner-constituents, pulled the retroactive language from the
Bill prior to passage.

Louisiana and Mississippi each have a Valued Policy Law similar to Florida's
statute. Although neither state has interpreted the language of the
statute, courts in Louisiana and Mississippi would probably concur with
Florida's Mierzwa decision and determine that the meaning of the Valued
Policy Law is "simple and straightforward."

Many structures damaged by Hurricane Katrina and Hurricane Rita were insured
under homeowner's insurance and commercial property insurance policies,
which arguably excluded storm surge as a covered peril. It was storm surge
that caused the majority of damage to these structures.
However, these structures also sustained damage from wind (which is a
covered peril). Under Louisiana's Valued Policy Law, La. R.S. 22:695(a), an
insurer must pay the full value of the loss, without deduction or offset, if
a valuation was placed on the property and such valuation was used to
calculate the premiums. If an insurer provided clear notice in the policy
of a different method of calculating the loss, then the insurer would not be
required to pay the full value of the loss. In other words, the insurer
must pay the policy limits for a total loss unless a different method of
computation was clearly set forth in the application and policy.

Courts in Mississippi may further find that the water damage exclusion
provisions are void and unenforceable as violations of state public policy
in that such exclusion provisions attempt to invalidate long-standing state
law and judicial precedents governing the issue of proximate causation.
Moreover, the water damage exclusion provisions attempt to immunize the
insurance providers from contractual liability on insured perils, i.e.,
wind, which is a proximate cause or contributing cause of loss, all in
contradiction of state law.

In conclusion, notwithstanding the insurance industry's ability to
successfully lobby the Florida Legislature to undermine Florida's Valued
Policy Law, the courts in Louisiana and Mississippi will probably concur
with the Florida appellate court's well-reasoned ruling in Mierzwa.
However, Louisiana and Mississippi courts may determine that the better rule
is to require that a covered peril, i.e., wind, be the proximate cause of
the total loss in order to trigger the Valued Policy Law.
In Louisiana and Mississippi, it is undisputed that the property would not
have been damaged but for the hurricane winds of Katrina and Rita.

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