Author's response to valued policy law article.

• Author: Garaffa, John F.
• Position: Letters - Letter to the Editor

In "Florida's 'Valued Policy Law': Clarifying Some Recent Misconceptions" (Dec. 2005), Mr. Richards seems to miss the point of my earlier April 2005 article. In short, it is precisely the simplicity of the now amended valued policy law that militated against the position taken by the Fourth District Court of Appeal in Meirzwa v. Florida Windstorm Underwriting Ass'n, 877 So.2d 774 (Fla. 4th DCA 2004).

First, it is important to note that the aspect of F. S. [section] 627.702(1) (2004), defended by Mr. Richards, no longer provides double recovery for insureds with multiple insurance policies covering separate perils that combine to render a property a total loss. It was that novel interpretation of the law by the Mierzwa court that proved such a shock to carriers and the legislature acted swiftly to correct it during the 2005 legislative session.

While discussion of the earlier version of the valued policy law is largely an academic exercise, Mr. Richards is correct that there were cases that held insureds were entitled to multiple recoveries if they had multiple policies covering the same risk. What distinguishes those cases from Mierzwa is that the policies provided coverage for the same peril. Thus, as the valued policy law spoke of "a covered peril," the provision of double recovery made sense. While double payments for a property violate the basic principles of indemnity, the insurer who was aware of another policy covering the risk for same peril could not thereafter complain of the insured's windfall. Similarly, the insurer who issues a valued policy to an insured with a limited interest in the property could not thereafter complain about payment of limits under the valued policy law.

Putting aside the priciples of indemnity, the challenge of Mierzwa was the idea that an insurer would owe policy limits no matter how de minimus the damage caused by a covered peril. Consider the case of a skyscaper rendered a total loss as the result of a terrorist act. Under the interpretation of Mierzwa, the insurer who had excluded terrorism as a covered cause of loss would nonetheless have to pay policy limits if it happened to be raining...