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Hurricanes, tornadoes, fires, and other events can cause so much damage to a home or building that the cost of making repairs is simply too high. The logical choice is not to fix the roof, add on aluminum siding, or empty out the basement from water damage. The logical choice is to declare the home or building a total loss. In states, such as Florida, that have a value policy law, the property owner should be paid the policy limits when applicable. A value policy law means the homeowner can rebuild, take the money and buy a new home, or pocket the money and move to an apartment or elsewhere.

When homes are declared a “total loss,’ then pursuant to Florida statute 627.702, the insurance company that covered the peril that caused the damage is required to pay the homeowner or property owner the full policy limits – and not just the actual cash value or replacement value. The law applies to any “building, structure, mobile home as defined in s. 320.01(2), or manufactured building.”

There are a few conditions:

  • The peril has to be covered and the peril must be the cause of the damage. For example, if a hurricane rips off your roof, siding, and damages the fundamental structure of the home; property owner policies normally cover that peril and related damage. However, if flooding caused the damage and you didn’t have separate flood insurance, then the homeowner’s policy will normally not cover any damage due the flood.
  • There are adjustments if you had multiple insurance policies for the same peril. Typically, the amount of the damage is pro-rated.
  • The insured can’t have done anything to cause the damage. A classic example is a homeowner who sets his home on fire can’t recover for any damages.

Other statutory requirements must also be met.

Total loss tests

There are different ways to determine if a home/building is a total loss, after any natural disaster or accident:

  • The first test is the “identity” test. This test examines whether the identity of the building (as a home for a family) still exists – or is the damage so severe that it’s not reasonable to think of the building as a home. The case law definition of the identity test is whether the property “los[es] its identity and specific character as a building, and becomes so far disintegrated it cannot be possibly designated as a building, although some part of it may remain standing.” Greer v. Owners Ins. Co., 434 F.Supp.2d 1267 (N.D. Fla., 2006)
  • Another test, called a “constructive total loss,” examines whether the building or the home, even though a standing structure, would violate local regulations and building codes due to the damage. This test, according to case law, means that there must be an “unequivocal demolition order.” Magaldi v. Safeco Ins. Co. of America, 2009 WL 10668553 (S.D. Fla. Feb. 9, 2009)

A key consideration for homeowners is whether the policy limits provide enough coverage. If the policy limits are $250,000 but your home’s value is $300,000, then you are only entitled to the policy limit of $250,000. For this reason, it is critical to continually reevaluate whether you have enough coverage as the value of your home/building increases.

The experienced Florida insurance lawyers at Warhurst Law understand the precise definitions of loss that apply. In particular, we understand the word-by-word language of insurance policies, the applicable statutes, and the current case law. We work with building and engineering professionals to verify the damage to your home and whether it meets the definition of a “total loss.” We have a strong record of success holding insurance companies accountable for payment of policy proceeds or actual damages. For help getting the insurance proceeds you deserve, call Warhurst Law at 251-207-1296 or complete our contact form to review your claim. We represent homeowners and building owners across the Southeast including the Florida panhandle and the Gulf Coast. Our Florida office is located in Panama City.

* Warhurst Law cannot and does not guarantee an outcome to any case.


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