AIA Strongly Disagrees With Florida Circuit Court Ruling

The American Insurance Association strongly disagrees with yesterday’s Florida Circuit Court ruling confirming the Fourth Circuit Court of Appeals’ 2004 decision in Mierzwa v. Florida Windstorm Underwriting Association, which misinterpreted the valued policy law.

In a ruling from the bench, Leon County Circuit Judge Kevin Davey granted the plaintiffs’ motion for summary judgment in the case, Scylla Properties LLC vs. Citizens Property Insurance Corp., effectively upholding the misguided Mierzwa decision, which requires insurers to pay policy limits for homes with both wind and flood damage from the 2004 hurricanes, even if flood losses were excluded from coverage. AIA filed an amicus brief in the Scylla case in support of Citizens’ position.

“To side with the plaintiffs in support of the Mierzwa decision represents a complete distortion of the valued policy law,” said Eric Goldberg, AIA assistant general counsel, “and results in negative consequences for the Florida property insurance market and poor public policy. Unfortunately, unless yesterday’s decision is overturned on appeal, that will be the likely outcome.

“The Circuit Court judge repeated the same mistakes made by the First District Court of Appeal in its 2004 Mierzwa decision in misinterpreting the purpose of the valued policy law. The court has disregarded the insurance policy, providing coverage and an undeserved windfall for thousands of policyholders who never paid for it. Insurance policies are contracts, and the courts should uphold them.

“Also, homeowners insurance policies generally exclude flood losses, and the court’s decision – which forces insurers to pay for flood losses that are not covered – undermines a basic premise, which is that Florida’s homeowners need to make sure that they have adequate flood insurance coverage. Although the Florida Legislature has approved legislation that corrects the valued policy law misinterpretation for future losses, yesterday’s decision sends the wrong message to policyholders regarding their responsibility to secure adequate coverage for both flood and windstorm damage, ” Goldberg concluded.

Citizens Property Insurance Corp. is expected to appeal the decision.