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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.
Since Mierzwa, the Florida legislature has amended its VPL so that it no longer applies to total losses resulting from both covered and uncovered perils. Nevertheless, the inherent danger of Mierzwa to the insurance industry underscores the importance of fully understanding the purpose, construction, interpretation, and operation of VPLs in jurisdictions particularly susceptible to multi-peril disasters.
Major Differences In UK, U.S. Copyright Laws
This article highlights how copyright law in the United Kingdom differs from U.S. copyright law, and points out differences that may be crucial to entertainment and media businesses familiar with U.S law that are interested in operating in the United Kingdom or under UK law. The article also briefly addresses contrasts in UK and U.S. trademark law.
Strategy vs. Tactics: Two Sides of a Difficult Coin
With each successive large-scale cyber attack, it is slowly becoming clear that ransomware attacks are targeting the critical infrastructure of the most powerful country on the planet. Understanding the strategy, and tactics of our opponents, as well as the strategy and the tactics we implement as a response are vital to victory.
The Article 8 Opt In
The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.
Removing Restrictive Covenants In New York
In Rockwell v. Despart, the New York Supreme Court, Third Department, recently revisited a recurring question: When may a landowner seek judicial removal of a covenant restricting use of her land?