The Florida Supreme Court has handed homeowners' insurers a major victory by upholding the state's value policy law, which states that insurers are only liable for damages covered under the policy, regardless of the total damages sustained by a homeowner. The court's ruling clarifies that private insurers issuing wind-only policies in coastal areas are only on the hook for damages due to wind and not flood damages caused by storm surge or flooding. The ruling also ratifies a 1995 law change, which reversed a lower court ruling that found in cases where a home is declared a total loss by any local or state ordinance, the carrier was required to pay the full face value of the policy, regardless of the causes of the damage.

Wind vs. Water

In hurricane-prone areas, drawing the line between wind damage and flood damage has always been a contentious issue. One need look no farther than the ravaged city of New Orleans, which was devastated by Hurricane Katrina. Was it the wind that pushed the water over the levies, flooding areas like the Ninth Ward? Or did the levies succumb solely to build-up of water along the river and coastal channels? It is the central legal question the courts are required to answer, especially in Mississippi where just 17 days after Katrina, regulators and lawmakers sought to effectively redefine wind policies to cover flood damage.