Home Totaled

Louisiana Valued Policy Law – LA R.S. 22:695

Has your home been totaled?

Your Homeowners Insurance Policy may owe you 100% of the full value of your policy. Under Louisiana’s Valued Policy Law, if the insurer places a valuation upon the covered property and uses that valuation for purposes of determining the premium charge made under the policy, in the case of total loss, the insurer shall compensate any covered loss or damage to the property. La. R.S. 22:695.

The topic of Valued Policy Law is becoming an increasingly hot topic among many southern states. In the wake of extreme natural disasters such as Hurricane Rita, Katrina, and Irene, it is critically important for homeowners to be aware of their options in the unfortunate event of a total loss. For instance, the District Court of Appeal of Florida held that Valued Policy Law really boils down to two essential characteristics. The first is that the property be insured against a covered peril. Second, is that the property must suffer a total loss. Mierzwa v. Florida Windstorm Underwriting Ass’n, 877 So.2d 744, 775 (Fla. Dist. Ct. App. 2004). In Mierzwa, the homeowner was entitled to full value of the total loss of the property due to wind and flood damage due to Hurricane Irene. Although the homeowner’s policy exclusively covered against wind damage and not flooding, the court reasoned that there was still a total loss resulting from a covered peril. In sum, Mierzwa is the pinnacle case for a homeowner suffering total loss due to extreme weather conditions. However, after Mierzwa in 2004, Valued Policy Law became much more complex.

As in Mierzwa, most most insurance policies in Louisiana expressly exclude flood coverage. However, wind coverage on the other hand is commonly included in most insurance policies. When a homeowner experiences a total loss exclusively from a covered peril such as wind, Valued Policy Law will apply. In Louisiana, the Valued Policy Law requires total loss to an immovable property. That begs the question of what constitutes a total loss? If the cost to repair your property exceeds the total value of that property, then the property is considered a total loss and Louisiana’s Valued Policy Law will apply. See Real Asset Management, Inc. v. Lloyd’s of London, 61 F.3d 1223 (5th Cir. 1995). 

If you experience total loss of your property in Louisiana, you may be entitled to full compensation if it is the result of a covered event. As previously mentioned, when total loss arises from an exclusively covered peril, the homeowner is likely entitled to recover 100% value of the damaged property. However, as promised, the sticky situation that appears in Mierzwa soon became much more complex than the Florida court made it out to be. Valued Policy Law is especially difficult to apply in cases where total loss is the result of partially covered and partially non-covered perils of the insurance policy. For instance, as in Mierzwa, if a hurricane hits and total loss is a result of the combination of wind, which would be covered under the policy, and flooding damage, not covered by policy, it is often difficult to determine if the Valued Policy Law applies.

The case of Landry v. Louisiana Citizens Property Insurance Company, 983 So.2d 66 (La. 2008) illustrates this specific issue within the Louisiana court system. In this case, a homeowner suffered total loss as a result of wind and flood damage from Hurricane Rita. The trial court concluded that the insurance company was liable for the full value of the homeowners policy. Taking a very similar approach to the Florida Court of Appeal in Mierzwa, it seemed that Louisiana too had opened the flood gates to billions of dollars of insurance claims resulting from hurricanes and extreme weather. However, upon appeal, the Louisiana Court of Appeal reversed this ruling and concluded that it must be determined whether the insurance carrier could prove that the flood water (the non-covered peril) was the “efficient or proximate cause” of the total loss of the homeowner’s home. Landry 983 So.2d at 9. The Court of Appeal went one step above the trail court and Mierzwa and placed a threshold on the applicability of Valued Policy Law in Louisiana. 

The case then went to the Supreme Court of Louisiana where the homeowner’s claim was ultimately struck down. The Supreme Court concluded that the insurer set forth a different method of computing the loss in the policy, which the homeowner agreed to in the contract. As set forth in Louisiana Valued Policy Law, if the insurer sets out a different method to be used in the computation of loss for the policy and provided clear notice of the different method, then the insurer may not be required to pay the full value of the loss. Valued Policy Law is a very complex and detailed topic and will likely become increasingly important in Louisiana after Hurricane Katrina.

If your house was totaled contact the Berniard Law Firm today to see if the Louisiana Valued Policy Law applies to your claim. All consultations with the Berniard Law Firm are Free. Let the Berniard Law Firm Help You.

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