Florida homeowners insurers scored what they called a victory in the wind-versus-flood debate when the state Supreme Court overturned previous appellate court decisions and ruled insurers are only responsible to pay claims for actual loss caused by wind.

The court further ruled in favor of state insurers when it affirmed the valued policy law, saying that "an insurer is liable for a loss by a peril covered under the policy for which a premium has been paid."

The statement translates simply: Insurers are not obligated to pay homeowners the limit under a homeowner’s policy when loss is primarily cause by flooding, said Sam Miller, executive vice president of the Florida Insurance Council.

"In essence, this puts an end to several hundred suits filed after the 2004 hurricane season," Miller said, who called the Supreme Court decision "very significant."

Florida Farm Bureau Insurance Co. brought its appeal to the Supreme Court after an appellate court ruled in favor of Eugene and Debra Cox, a couple whose home was destroyed as a result of Hurricane Ivan. Florida Farm Bureau Insurance Co. said the Coxes were eligible for about $11,500 in damages but the couple was seeking the policy limit of $65,000.

Insurer of last resort Citizens Property Insurance Corp, which insures many coastal properties, has about 200 pending lawsuits from the 2004 hurricane season that are impacted, said Perry Cone, the insurer’s general counsel, in a statement.

Cone added Citizens had paid all wind damages to policyholders involved in the litigation.

"This decision confirms that the valued policy law is a liquidated damages statute, and not a statute that grants coverage where none exists under the insurance contract," said Eric Goldberg, general counsel for the American Insurance Association.

State Farm Florida Insurance Co. spokesman Chris Neal said the ruling affects less than 100 claims for State Farm, but it "reconfirms what we believed all along."

The Supreme Court also disapproved of the Florida 4th District Court of Appeal's 2004 ruling in the Mierzwa vs. Florida Windstorm Underwriting Association case, which first exposed Florida insurers to losses because they were ordered to pay policy limits upon total damage even when the cause of the damage was not covered by the policy. The 4th District Court had ruled the valued policy law allowed the insured to recover policy limits under wind coverage, even though the insured received a substantial payment through federal flood insurance (BestWire, June 2, 2005).

Miller said the cases from 2004 were the only ones left outstanding because after the Mierzwa ruling, insurers lobbied the state Legislature to amend the value policy law. In 2005, the Legislature changed the law to explicitly state damage caused by flooding was not covered by windstorm policies but the measure was not retroactive.

Florida Farm Bureau Group currently has a Best's Financial Strength Rating of A (Excellent).

State Farm Florida Insurance Co. currently has a Best's Financial Strength Rating of B (Good).

In 2006, the top five writers of homeowners insurance in Florida, according to A.M. Best Co. state/line data, were: State Farm Group, with a 19.7% market share; Citizens Property Insurance Corp., with 17.7%; Allstate Insurance Group, with 7.2%; Tower Hill Group, with 4.7%; and Universal P&C Insurance Co., with 4.6%.

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