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Evaluating Valued Policy Law After Katrina
Since first enacted in 1874 in Wisconsin, Valued Policy Law ('VPL') has become an important regulatory fixture in the insurance law of many states. At least 19 states have enacted some version of a traditional VPL. In its original formulation, VPL obliges an insurer that collected premiums for an insurable interest based on an assigned value to pay that predetermined value to the insured in the event of a total loss. That statutorily imposed obligation prevents insurers from collecting premiums on artificially inflated property values on the front end while paying insureds less than that amount after a total loss, based on actual values. VPL thus encourages insurers to investigate the actual value of the insurable interest and to collect premiums on that amount, thereby avoiding the hazards of over-insurance. Furthermore, by encouraging insurers to minimize variance between assigned values and actual values, VPL theoretically reduces insurance fraud by policyholders.
In recent years, however, multi-peril disasters, such as hurricanes, have strained the rationale behind VPL. In 2004, a Florida District Court sent shockwaves through the insurance industry when it decided Mierzwa v. Florida Windstorm Underwriting Association, 877 So.2d 774 (Fla. App. 2004). In Mierzwa, the court ruled that a policyholder's insurer had to pay its homeowner's policy limits for the constructive total loss of a home damaged by Hurricane Ivan even though a significant portion of the damage was caused by an uninsured peril ' flood ' and had already been paid for by a flood carrier. At that time, Florida's VPL provided in relevant part:
In the event of the total loss of any building ' insured by an insurer as to a covered peril ' the insurer's liability, if any, under the policy for such total loss shall be in the amount of money for which such property was so insured as specified in the policy. '627.702(1), Fla. Stat. (2003).
The Mierzwa court reasoned that the VPL applied if only two facts were true: 1) a total loss occurred to certain property, and 2) that property was insured as to a covered peril. On that basis ' wind ' the covered peril, need not have been the covered peril that caused the entire loss. Arguably, under the Mierzwa interpretation, an insurer that may have covered a peril that merely contributed ' no matter how slightly ' to a total loss could be held liable for its policy limits even though the total loss was actually caused by an uncovered peril. It could also be argued that an insured who underinsured his or her property for a flood peril with another carrier could recover the face value of his or her homeowner's policy if wind or another covered peril caused any damage. While Mierzwa did not specifically address those scenarios, as discussed below, the danger in Mierzwa lies in its potential to statutorily rewrite specific policy exclusions and to convert policies covering specific perils into all-risk policies, even though insurers did not collect premiums for certain risks.
Bankruptcy Sales: Finding a Diamond In the Rough
There is no efficient market for the sale of bankruptcy assets. Inefficient markets yield a transactional drag, potentially dampening the ability of debtors and trustees to maximize value for creditors. This article identifies ways in which investors may more easily discover bankruptcy asset sales.
Judge Rules Shaquille O'Neal Will Face Securities Lawsuit for Promotion, Sale of NFTs
A federal district court in Miami, FL, has ruled that former National Basketball Association star Shaquille O'Neal will have to face a lawsuit over his promotion of unregistered securities in the form of cryptocurrency tokens and that he was a "seller" of these unregistered securities.
Why So Many Great Lawyers Stink at Business Development and What Law Firms Are Doing About It
Why is it that those who are best skilled at advocating for others are ill-equipped at advocating for their own skills and what to do about it?
Blockchain Domains: New Developments for Brand Owners
Blockchain domain names offer decentralized alternatives to traditional DNS-based domain names, promising enhanced security, privacy and censorship resistance. However, these benefits come with significant challenges, particularly for brand owners seeking to protect their trademarks in these new digital spaces.
Coverage Issues Stemming from Dry Cleaner Contamination Suits
In recent years, there has been a growing number of dry cleaners claiming to be "organic," "green," or "eco-friendly." While that may be true with respect to some, many dry cleaners continue to use a cleaning method involving the use of a solvent called perchloroethylene, commonly known as perc. And, there seems to be an increasing number of lawsuits stemming from environmental problems associated with historic dry cleaning operations utilizing this chemical.