Louisiana Valued Policy Law
When Total Loss Equals Total Payment
Louisiana Bar Journal, Vol. 55, No. 2, 2007
6 Pages Posted: 11 Feb 2010
Date Written: August/September 2007
Louisiana insurance attorneys should know the intricacies of Louisiana’s Valued Policy Law (LVPL). LVPL mandates full value recovery, without deduction or offset, where real property (inanimate immovables) was insured for a stated value and suffered a total loss. For example, if a fire destroyed a property insured for a stated value, the insurer must pay the policy’s stated insured value, without deduction or offset. Caveat: Despite the existence of this important, pre-emptory statute, it is rarely (if ever) recited in homeowners’ insurance policies. Parenthetically, while this explores LVPL through the lens of homeowners’ policies, LVPL also applies to commercial property policies. How courts apply LVPL to Hurricanes Katrina and Rita (Katrina) property insurance claims is a multibillion dollar issue.
While many Louisiana homeowners suffered a “total loss” due to Katrina, few have been paid their entire coverage amount. Some insurers claim that LVPL does not apply in three Katrina types of cases. The first case is where the total loss was due in while or in part to a non-covered peril (flood). The second case is where the total loss was due to “mixed causation,” a combination of a covered peril (wind) and a non-covered peril (flood). The third is where the total loss was offset by collateral sources such as National Federal Flood Insurance Program (NFIP) recovery, FEMA grants, SBA loans and the like.
This article explores LVPL jurisprudence and addresses seriatim three contentious LVPL issues. First, is LVPL limited to “fire” losses and, if not, who has the burden of proof as to its application? Second, if LVPL applies beyond fire losses, does it apply where the loss results from “mixed” causation (covered and non-covered perils)? Third, if LVPL applies beyond fire and mixed causation, is the stated value offset by collateral sources such as NFIP payments?
Keywords: Louisiana Valued Policy Law, LVPL, Louisiana insurance, commercial property policies, Louisiana homeowners' insurance policies, Hurricane Katrina, Katrina, Hurricane Rita, National Federal Flood Insurance Program, NFIP, FEMA grants
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