Fla. House Debating HB 1937 on Tuesday; AIA Supports Legislative ‘Fix’

As the Florida Legislature moves into its final two weeks, one of the key issues still under consideration is a legislative remedy for a 2004 Florida court decision requiring insurers to pay policy limits for homes with both wind and flood damage from the 2004 hurricanes, according to the American Insurance Association. The Florida House of Representatives is scheduled to debate the issue today when it takes up HB 1937.

“If a legislative solution is not found, the negative impact of last year’s Florida 4th District Court of Appeal decision in Mierzwa vs.FWUA on insurers and their policyholders could be profound,” according to Cecil Pearce, AIA vice president, Southeast Region.

“The judge in the Mierzwa case wrongly interpreted Florida’s longstanding valued policy law, which requires insurers to pay the full value of a policy on property determined to be a constructive total loss,” Pearce explained. “But the Mierzwa judge ruled that even when more than half of the damage was caused by a peril not covered by the homeowner’s policy (in this case flooding), the policyholder could still recover the full limits of the homeowner’s policy.”

The decision forces insurers to pay for flood losses that are not their responsibility and for which no premium was charged. Coverage for flood losses is provided by the federal Flood Insurance Program.

In addition, under Mierzwa, policyholders with both windstorm and flood insurance policies whose property is deemed a total loss can recover twice – both the full policy limits under the windstorm policy, as well as the potential to recover additional amounts under the flood policy.

“Insurers, forced to pay out unexpectedly large settlements, will have no choice but to pass along the increased costs to all policyholders,” Pearce said. “In addition, lawsuits over unsettled claims involving both flood and wind damage from the 2004 hurricane season are already being filed. This trend can only be expected to continue if Florida lawmakers don’t approve legislation to invalidate the Mierzwa decision.”