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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.
New York's Latest Cybersecurity Commitment
On Aug. 9, 2023, Gov. Kathy Hochul introduced New York's inaugural comprehensive cybersecurity strategy. In sum, the plan aims to update government networks, bolster county-level digital defenses, and regulate critical infrastructure.
Law Firms are Reducing Redundant Real Estate by Bringing Support Services Back to the Office
A trend analysis of the benefits and challenges of bringing back administrative, word processing and billing services to law offices.
Bit Parts
Summary Judgment Denied Defendant in Declaratory Action by Producer of To Kill a Mockingbird Broadway Play Seeking Amateur Theatrical Rights
How AI Has Affected PR
When we consider how the use of AI affects legal PR and communications, we have to look at it as an industrywide global phenomenon. A recent online conference provided an overview of the latest AI trends in public relations, and specifically, the impact of AI on communications. Here are some of the key points and takeaways from several of the speakers, who provided current best practices, tips, concerns and case studies.