Many states require that when a home is declared a “total loss,” that the insurance company pay the full policy limits (the value of the policy) and not the actual cash value of the home. Florida is one of the states that does have a valued policy law. The difference between policy value and actual cash value can be quite substantial.
Policy value is clear and precise. If you buy a homeowner’s policy that covers specific perils such as fires or hurricanes, then your coverage should have a policy limit – such as $200,000 or $1,000,000. When your home is declared a total loss, you receive that policy limit – even if the cost to rebuild the home or the fair market value of the home is arguably less than the upper policy limit.
What is “actual cash value”?
The actual cash value of your home is essentially the cost to replace your home, as of the date of the loss, minus depreciation. The problem for homeowners is that different home and financial experts may place different values on the cost to replace your home and the cost of depreciation. These different interpretations can lead to lengthy negotiations and lawsuits.
Many states enacted the value policy laws to avoid the disputes over how much actual cash value should be paid. It’s much easier just to say – the policy limits are $200,00. Since the home is a total loss, the insurance company should pay $200,000.
What is Florida’s “total loss” statute?
Florida’s valued policy law outlines what happens when a policyholder suffers a total loss. It is set forth in § 627.702:
Section (1)(a) providers that where there is a total loss a building or other qualified homes or structures – the insurer must pay “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.” This section helps the property owner get the policy coverage because it sets a lower limit on what the insurance company is required to pay.
Section (1)(b) provides that “the insurer is never liable for more than the amount necessary to repair, rebuild, or replace the structure following the total loss, after considering all other benefits actually paid for the total loss.” This section helps the property owner get the policy coverage because it sets an upper limit on what the insurance company is required to pay.
What types of events does Florida’s value policy statute cover?
The statute only applies to covered perils. This normally means the policy covers hurricanes (such as Hurricane Michael or Hurricane Irma), tornadoes, fires, and other natural disasters – but doesn’t cover flood damage or excluded coverages. Homeowners normally buy separate flood insurance. An experienced Florida value policy lawyer can explain when damage is considered hurricane damage and when it is considered flood damage.
The law doesn’t require payments in cases of fraud or criminal conduct by the homeowner.
How to meet the total loss requirement
The total loss requirement is generally met in one of two ways. The homeowner (usually with the help of professionals hired by a skilled Florida value policy lawyer) shows that the home:
- Can’t now be identified as a home. This means the home is “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)
- Or that the home is a “constructive total loss.” This means that local officials have ordered an “unequivocal demolition order.” Magaldi v. Safeco Ins. Co. of America, 2009 WL 10668553 (S.D. Fla. Feb. 9, 2009). Normally, a local building official decides whether an unequivocal demolition order should be entered.
At Warhurst Law, we understand the complexities of insurance contracts, case law and state statutes. We have developed a network of home valuation appraisers and other professionals to help assess the full damage to your home – and whether it should be declared a total loss.
If your home was severely damaged due to any disaster, call Warhurst Law at 251-207-1296 or fill out our contact form to make an appointment. We represent clients throughout Florida and the Southeast, including the Gulf Coast and the Florida panhandle. We see clients in our Mobile office and also schedule consults at their homes and buildings when necessary.
* Warhurst Law cannot and does not guarantee an outcome to any case.