Solving One of the Greatest Mysteries of Florida Property Law—Florida’s Valued Policy Law

By Michael A. Packer, Esq.*

Florida Statute 627.702 is one of the least known and least understood property damage laws in Florida. Yet, it is the statute that can impose the greatest liability on an insurer, especially in times of catastrophic events or when a fire destroys or damages an insured structure. Claims professionals handling fire or catastrophic losses in Florida must be aware of this statute when adjusting claims. Florida Statute 627.702, better known as Florida’s Valued Policy Law, in a nutshell, provides that when any building or structure sustains a total loss as a result of covered peril or a partial loss as a result of fire, the liability for said loss shall be the amount of money for which the property was insured. Florida Statute 627.702 provides in part:

(1)(a) 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(13), 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 under the policy for such total loss, if caused by a covered peril, 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.

§ 627.702, Fla. Stat. (2008). In Freeman v. Amer. Integ. Ins. Co. of Fla., 2015 Fla.App. LEXIS 18553 (Fla.Dist.Ct. App. Dec. 11, 2015), the First District Court of Appeals explained the purpose of the Florida Valued Policy Law:

The purpose of Florida Valued Policy Law “is to fix the measure of damages payable to the insured in case of total loss,” and the statute’s plain language “requires an insurer to pay that amount listed on the face of the policy in the event of a total loss without the necessity of any additional proof of the actual value of the loss incurred.” Ceballo, 967 So. 2d at 813-14. As the Florida Supreme Court has explained:

[T]he Valued Policy Law was intended only to set the valuation of the insured property: “The statute requires the insurer to fix the insurable value of the building, and to specify such value in the policy, and the measure of damages in case of total loss is fixed at the amount mentioned in the policy upon which a premium is paid. The statute does not undertake to deprive the insurer of any proper defense it may have to an action upon the policy, except in respect to the measure of damages and the authority of certain agents. Its principal object and purpose is to fix the measure of damages in case of loss total, or partial; and, to this end, it requires the insurer to ascertain the insurable value at the time of writing the policy, and to write it therein.”

Cox, 967 So. 2d at 820 (quoting Hartford Fire Ins. Co. v. Redding, 37 So. 62 (Fla. 1904)); see also Fla. Farm Bureau Cas. Ins. Co. v. Mathis, 33 So. 3d 94, 97 (Fla. 1st DCA 2010) (“In short, the Valued Policy Law is simply a valuation statute.”).

Freeman, supra, 2015 Fla.App. LEXIS 18553, at *8-9.

So, how does the Valued Policy Law operate in practice? By way of an example, lets assume a dwelling in Miami, Florida was completely destroyed as a result of a tornado and the Coverage A (or dwelling) limits were $750,000. Pursuant to the statute, the value of the dwelling is set at $750,000, and, absent any applicable coverage defenses or exclusions, the insurer will be liable in the amount of $750,000. The purpose or intent of the statute is to relieve the insured of the burden of not only establishing the value of the dwelling, but the cost to replace or rebuild the structure.

Rest assured, the insurer does not lose its right to deny coverage based upon applicable exclusions. If the structure is destroyed as a result of an excluded cause, Florida’s Valued Policy Law does not apply. Further, if the building is partially destroyed by a covered peril and partially by a non-covered peril, Florida’s Valued Policy Law will only apply if the covered peril in and of itself would have caused a total loss. By way of example, if the aforementioned $750,000 dwelling sustained significant damage due to the tornado which caused $500,000 in damage, but then ultimately became a total loss due to a non-covered water event, the insurer’s liability would only be $500,000 for the damages caused by the covered tornado.

The only time Florida’s Valued Policy Law will apply to a partial loss is when the cause of loss is fire or lightning. Pursuant to subsection (2) of Florida’s Valued Policy Law, the insurer’s liability (assuming coverage is afforded) for a partial loss caused by fire or lightning will be the actual amount of such loss, but it shall not exceed the amount of insurance in the policy. Arguably, depreciation should not be withheld pending proof of repairs under these circumstances. Lastly, generally speaking, Florida’s Valued Policy Law will not apply to personal property claims.

* Michael is a shareholder in our Fort Lauderdale, Florida office who can be reached at 954.847.4921 or mapacker@mdwcg.com.

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_{Defense Digest, Vol 22, No. 1, March 2016}

_{Defense Digest is prepared by Marshall Dennehey Warner Coleman & Goggin to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2016 Marshall Dennehey Warner Coleman & Goggin. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact tamontemuro@mdwcg.com.}