The Ceballos had purchased a homeowner’s insurance policy and purchased a supplemental policy through Citizens Property Insurance (“Citizens”). When they lost their home to a fire, Citizens paid the face value of the policy. However, Citizens argued that the Ceballos first had to show proof of actual loss before they could recover additional damages under the supplemental policy.
The Ceballos argued that because they met their burden of demonstrating a total loss under Florida’s Valued Policy Law §627.702 (“VPL”), they should receive the policy limits of the supplemental coverage without establishing any additional loss. Florida’s Supreme Court disagreed and held that the Ceballos must first actually incur those expenses before any additional pay out can be made.
The purpose of Florida’s VPL is to fix the measure of damages in the event of a total loss. The benefit of the VPL is to eliminate the guesswork associated with trying to ascertain the value of the loss since that amount has been pre-determined and agreed upon.
To accomplish the objective of facilitating prompt settlement of claims the insurer must ascertain the insurable value of the property at the time of writing the policy – and before the loss occurs. In other words, the insurance company is agreeing to pay the agreed upon face value of the policy in the event of a total loss.
A simple illustration of how the valued policy works is as follows: an insured owns a property and the insurance company agrees that the property is valued at $100,000. The insured purchases a VPL insurance policy from that insurance company for $100,000 of coverage. The insured suffers a total loss from a covered peril. The insurance company is therefore obligated to pay the pre-determined agreed upon amount of $100,000.
In Ceballos, Citizens paid the VPL portion of the claim. But the Ceballos were seeking additional funds pursuant to the terms of the supplemental policy they had purchased.
The Third Circuit Court of Appeal found that, pursuant to the language of the policy, the insureds may receive 25% of the limit of the liability only if they actually incurred the covered expense in addition to the pay-out they received pursuant to the VPL. The Supreme Court of Florida agreed and stated that VPL does not apply to any coverage in which the dollar amount of coverage available is not directly stated in the policy.
The Florida Supreme Court held that the purpose of the VPL is to require a specified dollar amount to remove any uncertainty about the amount an insured is entitled to recover from a loss and that this purpose is generally unrelated to supplemental coverage. Moreover, Florida’s high Court stressed that supplemental coverage is not considered to be limited to or dependent upon the face value of the policy.
The Florida Supreme Court held that although the Ceballos received the face value of the insurance policy for their loss pursuant to the VPL, the Ceballos still had an obligation to show an additional loss to recover under the supplemental coverage of their policy.
The Court further held that VPL does not mandate payment of the policy limits of additional coverage where the unambiguous language of the policy requires such proof.