Our third and final article on Florida’s Valued Policy Law (“VPL”) focuses on the interaction of VPL claims and anti-concurrent causation clauses. The plaintiff’s bar frequently argues that Florida’s VPL invalidates a policy’s anti-concurrent causation clause when a covered and a non-covered peril act concurrently to cause a total loss to an insured’s property. This argument, however, is inconsistent with the plain language of Florida’s VPL and legal authorities interpreting earlier versions of § 627.702, Fla. Stat.
What is the concurrent cause doctrine?
Concurrent causation is a legal doctrine relevant to property insurance. This doctrine may apply when two or more events have contributed to a loss and one of them is a covered peril, while the other cause is excluded from coverage. The events may occur simultaneously or one after the other. When the doctrine is applicable, the insurer must pay the entire loss if at least one of the causes is covered by the policy.
What do concurrent cause clauses look like?
An anti-concurrent causation clause generally applies to property insurance perils that can cause catastrophic losses. Many Florida homeowner’s insurance policies include an anti-concurrent causation clause substantially similar to the following:
“We do not insure for loss caused directly or indirectly by any of the following. Such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss.”
Policies then typically list causes such as flood, storm surge, earthquake, and mold as excluded under the anti-concurrent clause language in the policy.
Florida’s Valued Policy Law
Florida’s VPL includes a section that discusses the scenario of damage resulting from two causes of loss — one covered by the policy and the other excluded. This language was added to the statute in 2005. Under such circumstances, an insurance company is only liable for the amount of the loss caused by the covered peril, unless the covered peril alone caused a total loss to the property. This section states as follows:
(b) The intent of this subsection is not to deprive an insurer of any proper defense under the policy, to create new or additional coverage under the policy, or to require an insurer to pay for a loss caused by a peril other than the covered peril. In furtherance of such legislative intent, when a loss was caused in part by a covered peril and in part by a non-covered peril, paragraph (a) does not apply. In such circumstances, the insurer’s liability under this section shall be limited to the amount of the loss caused by the covered peril. However, if the covered perils alone would have caused the total loss, paragraph (a) shall apply. The insurer is never liable for more than the amount necessary to repair, rebuild, or replace the structure following the total loss, after considering all other benefits actually paid for the total loss.
§ 627.702(1)(b), Fla. Stat.
The statute’s legislative history does not provide significant insight into the Florida Legislature’s intent behind this added language. Florida appellate courts, in interpreting the VPL prior to the 2005 revision, recognized that its purpose is “to set the valuation of the insured property.” Florida Farm Bureau Cas. Ins. Co. v. Cox, 967 So. 2d 815, 820 (Fla. 2007), see also Florida Farm Bureau Cas. Ins. Co. v. Mathis, 33 So. 3d 94, 97 (Fla. 1st DCA 2010) (“In short, the VPL is simply a valuation statute.”). However, this new language has been used to create arguments for expanding coverage and setting aside policy defenses.
Valued Policy Law vs. Concurrent Cause Doctrine
The plaintiff’s bar often attempts to argue that the language: “if the covered perils alone would have caused the total loss, paragraph (a) shall apply,” overrides a policy’s anti-concurrent causation clause by stating that an insurer must pay the full face value of the policy if a covered peril, acting alone, would have caused the total loss. For example, in a loss involving both wind and flood damage to a property, if the winds were strong enough to cause a total loss of a dwelling, the insurer would have to pay the entire dwelling limit even if the non-covered peril of flood actually washed away the property before the wind caused the total loss. The argument is also sometimes framed in the context of the covered peril (wind) causing the total loss before the non-covered peril (flood) occurred, even though in many total loss cases it can be difficult to separate covered damage from uncovered damage. This type of argument arises more frequently when the dwelling is significantly damaged or completely demolished.
Contrary to the plaintiff’s bar’s argument, the Florida Legislature clearly intended to preserve insurers’ defenses under their respective polices (i.e. “The intent of this subsection is not to deprive an insurer of any proper defense under the policy, to create new or additional coverage under the policy, or to require an insurer to pay for a loss caused by a peril other than the covered peril.”). An anti-concurrent causation clause should still prevail in a VPL claim when both covered and non-covered perils combine to cause a total loss. This is consistent with several appellate court holdings that the VPL is intended only to set the valuation of claims, not to expand coverage.
How to Evaluate a Valued Policy Law Claim when Concurrent Cause Issues Arise
Nicole and Brian handle high-exposure property damage claims involving the interplay between the VPL and anti-concurrent causation clauses. These are high stakes claims that can often mean the difference between a finding of no coverage and the payment of the entire dwelling coverage. Requiring an insurer to pay the full dwelling coverage limit when covered and non-covered perils combine to cause the loss, particularly where the policy includes anti-concurrent causation language, is an improper expansion of coverage. Until the courts provide clarification, we expect to continue seeing these arguments over the intent of the 2005 revision to the VPL and will continue to advocate for the preservation of insurer’s defenses.