Key Issues Remain Unsolved As Fla. Passes HB 1937

April 29, 2005

House Bill 1937 passed with a vote of 96-20 on Thursday, despite opposition about exemptions on paying policy limits.

One of the key issues still under consideration is a legislative remedy for a 2004 Florida court decision requiring insurers to pay policy limits for homes with both wind and flood damage from the 2004 hurricanes, according to the American Insurance Association.

“If a legislative solution is not found, the negative impact of last year’s Florida 4th District Court of Appeal decision in Mierzwa vs.FWUA on insurers and their policyholders could be profound,” according to Cecil Pearce, AIA vice president, Southeast Region.

“The judge in the Mierzwa case wrongly interpreted Florida’s longstanding valued policy law, which requires insurers to pay the full value of a policy on property determined to be a constructive total loss,” Pearce explained. “But the Mierzwa judge ruled that even when more than half of the damage was caused by a peril not covered by the homeowner’s policy (in this case flooding), the policyholder could still recover the full limits of the homeowner’s policy.”

The decision forces insurers to pay for flood losses that are not their responsibility and for which no premium was charged. Coverage for flood losses is provided by the federal Flood Insurance Program.
In addition, under Mierzwa, policyholders with both windstorm and flood insurance policies whose property is deemed a total loss can recover twice – both the full policy limits under the windstorm policy, as well as the potential to recover additional amounts under the flood policy.

“Insurers, forced to pay out unexpectedly large settlements, will have no choice but to pass along the increased costs to all policyholders,” Pearce said. “In addition, lawsuits over unsettled claims involving both flood and wind damage from the 2004 hurricane season are already being filed. This trend can only be expected to continue if Florida lawmakers don’t approve legislation to invalidate the Mierzwa decision.

“The House property legislation passed yesterday addresses important issues for the industry that we fought hard to keep in the bill during floor deliberations,” Pearce explained. “The trial lawyers made a strong run at trying to convince House members to take those provisions out.”

Pearce said these include the fix to the valued policy law court decision and strong sinkhole claims reform.

In the Senate, SB 1488 was removed from the agenda by its sponsor Banking and Insurance Chairman Rudy Garcia, R-Hialeah, and began talks with House Insurance Chairman Dennis Ross, R-Lakeland. The final product most likely won’t appear until next week, in the final days of the session.

“The Senate took no action on its property bill this week, a bill that we believe is much more onerous than the House bill and if passed, would provide no additional incentive for carriers to write property insurance in Florida,” Pearce explained. “AIA will spend the final week of the session trying to get those bad provisions out of the Senate bill and get it more in line with the House bill.

“The measures approved by the Florida House assure homeowners can continue to reap the benefits of a competitive insurance,” Mark Delegal, a State Farm lobbyist said. “Without legislative action, private insurers would have been forced to either stop writing policies in Florida or increase their rates.”

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