Insurers Fight Flood Liability Suit

The property-casualty industry is fighting a Florida class action lawsuit based on the premise that insurers are responsible for flood as well as wind damage to insured properties.

The National Association of Mutual Insurance Companies along with State Farm Insurance Company has filed a friend of the court brief in the case of Citizens Property Insurance Corp. v. Scylla Properties, et al.

Industry lawyers filed the brief on Sept. 30 in the District Court of Appeals for the 1st District of Florida in Tallahassee.

The cases centers on the contention by Citizens­ Florida’s insurer of last resort­ that it is only responsible for damage to totally destroyed homes that results from windstorm.

A trial court has found that Citizens must pay for all damage under Florida’s valued policy law. The court relied on the 2004 Mierzwa vs. FWUA case ruling by the Florida 4th District Court of Appeals that found insurers must compensate for the entire loss, even though some of the damage resulted from an excluded peril of flooding.

Marsha Harrison, NAMIC regulatory affairs counsel, said that member companies felt that the state’s valued policy law cannot create liability for an insurer for losses covered by an excluded peril such as flooding.

Gov. Jeb Bush has signed legislation effectively nullifying the effect of the Mierzwa case, but only for claims filed after June 1 of this year.

“The adverse ramifications of the Citizens and Mierzwa cases remain immense since the decisions will apply to all losses prior to the effective date of the amendment,” Ms. Harrison said.