Title: Juan E. Ceballo, Et Al. v. Citizens Property Insurance Corporation

State: florida

Issuer: Florida Supreme Court

Document:

Supreme Court of Florida 
 
 
____________ 
 
No. SC06-1088 
____________ 
 
JUAN E. CEBALLO, et al.,  
Petitioners, 
 
vs. 
 
CITIZENS PROPERTY INSURANCE CORPORATION, 
Respondent. 
 
[September 20, 2007] 
 
ANSTEAD, J. 
This case is before the Court for review of the decision of the Third District 
Court of Appeal in Citizens Property Insurance Corp. v. Ceballo, 934 So. 2d 536 
(Fla. 3d DCA 2006).  The district court certified that its decision is in direct 
conflict with the decision of the Fourth District in Mierzwa v. Florida Windstorm 
Underwriting Ass’n, 877 So. 2d 774 (Fla. 4th DCA 2004).  We have jurisdiction.  
See art. V, § 3(b)(4), Fla. Const.  The Third District in Ceballo held that 
entitlement to a recovery under a supplemental ordinance and law provision of a 
homeowner’s policy was not affected by Florida’s Valued Policy Law (VPL), and 
such coverage required the insured to demonstrate an actual loss before payment 
was required.  Ceballo, 934 So. 2d at 538.  For the reasons stated below, we 
approve the decision of the Third District and hold that the VPL, section 627.702, 
Florida Statutes (2004), does not override the language of a policy as it relates to 
supplemental coverage.  
ANALYSIS 
In the present case, the Ceballos lost their home to a fire––a covered peril 
under their homeowner’s insurance policy with Citizens Property Insurance.  The 
home was declared a total loss, and Citizens paid the face value of the policy.  That 
coverage is not at issue herein.  However, payment under a supplemental coverage 
is in dispute.   
The relevant section of the Ceballos’ supplemental policy endorsement 
provides:   
11. Ordinance or Law  
a. You may use up to twenty-five percent (25%) of the limit of 
liability that applies to COVERAGE A for the increase [sic] costs you 
incur due to the enforcement of any ordinance or law which requires 
or regulates:   
(1) The construction, demolition, remodeling, renovation or repair of 
that part of a covered building or other structure damaged by a PERIL 
INSURED AGAINST; or 
(2) The demolition and reconstruction of the undamaged part of a 
covered building or other structure, when that building or other 
structure must be totally demolished because of damage by a PERIL 
INSURED AGAINST to another part of that covered building or other 
structure; or 
 
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(3) The remodeling removal or replacement of the portion of the 
undamaged part of a covered building or other structure necessary to 
complete the remodeling, repair or replacement of that part of the 
covered building or other structure damaged by a PERIL INSURED 
AGAINST.   
While the parties agree that the Ceballos are entitled to recovery under this 
supplemental ordinance and law provision of the policy, they disagree on whether 
the insured must first show proof of an actual loss in order to recover under that 
provision.  The Ceballos contend that because they have met the burden of 
demonstrating a total loss under the VPL, they should receive the policy limits of 
the supplemental coverage without establishing that they actually incurred any 
additional loss or expense.  In rejecting this position, the Third District concluded 
that “[t]he Ceballos are correct in their assertion that they are entitled to the 
Additional Coverage, for which they were charged and paid a premium.  However, 
as provided in the policy, they may receive a maximum of 25% of the limit of 
liability, only if they actually incur the covered expenses.”  934 So. 2d at 538 
(footnote omitted).  The district court certified that its decision as to the 
supplemental coverage was in conflict with the decision of the Fourth District in 
Mierzwa.  Id. 
 
In Mierzwa, the Fourth District first interpreted the plain meaning of the 
VPL statute to require a homeowner’s insurer to pay the face value of the policy, 
even when part of the total loss was caused by a non-covered peril, and even 
 
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though the insured was covered under another policy for that peril.  877 So. 2d at 
775-76.  As noted above, that issue is not before us in this proceeding.1  As in 
Ceballo, however, the Fourth District also considered the issue of supplemental 
coverage under the Mierzwas’ policy.  Specifically, as to that coverage, the Fourth 
District stated, “The owner has established beyond any question its entitlement to 
the additional 25% in benefits under the ordinance or law coverage.”  877 So. 2d at 
780.  Apparently, because the Fourth District decision contains no discussion of 
any requirement of the insureds to demonstrate an actual loss, the Third District 
interpreted this language from Mierzwa as conflicting with its holding that an 
insured must incur an actual loss in order to recover under a supplemental 
coverage.  The Third District certified conflict with this portion of the decision of 
the Fourth District.  Ceballo, 934 So. 2d at 538. 
Valued Policy Law 
Florida’s VPL was originally enacted in 1899 to promote clarity and 
predictability for property insurers and insureds alike by predetermining the value 
of insured real property and having that value set out in the policy of insurance.  
Ch. 4677, §§ 1-2, Laws of Fla. (1899).  The principal object and purpose of 
Florida’s VPL is to fix the measure of damages payable to the insured in case of 
                                          
 
 
1.  We have disapproved of that holding in Mierzwa in Florida Farm Bureau 
Casualty Insurance Co. v. Cox, No. SC06-2494, slip op. at 11-12 (Fla. Sept. 20, 
2007). 
 
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total loss.  Springfield Fire & Marine Ins. Co. v. Boswell, 167 So. 2d 780, 783 
(Fla. 1st DCA 1964).  The parties are in agreement here that the Ceballos have met 
the requirements under the statute to collect the face amount of the policy; 
however, they dispute whether the reference to face value in the statute also 
includes any supplemental coverages, thereby entitling an insured to automatic 
recovery of the face amount of the supplemental coverage without the need to 
demonstrate that a specific loss was incurred beyond the loss of the insured’s 
home. 
 
Black's Law Dictionary defines coverage as "[i]nclusion of a risk under an 
insurance policy."  Black's Law Dictionary 394 (8th ed. 2004).  A risk is defined as 
"[t]he type of loss covered by a policy; a hazard from a specified source.”  Id. at 
1353.  In the instant case, for example, the primary risk insured against is loss and 
damage to the home.  Typically, supplemental or additional coverage, however, is 
the addition to an insurance policy of a different type of loss beyond the primary 
risk already covered and for which the policy was designed.  Logically, before an 
insured can add additional coverage to a policy, that policy must contain some 
base, standard, or initial coverage that may be augmented by additional coverage.  
Though related, each coverage protects against a separate covered loss or hazard.  
Similarly, each coverage defines the “amount and extent” of the insurer’s liability 
for the covered risk.  See Black's Law Dictionary 365 (6th ed. 1990).  
 
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The plain language of Florida’s VPL, section 627.702, Florida Statutes 
(2004), requires an insurer to pay that amount listed on the face of the policy in the 
event of a total loss without the necessity of any additional proof of the actual 
value of the loss incurred.  Further, “face value” means the value which can be 
ascertained from the language of the instrument without aid from extrinsic facts or 
evidence.  Investors’ Syndicate v. Willcuts, 45 F.2d 900, 902 (D. Minn. 1930), 
rev’d on other grounds, 57 F.2d 811 (8th Cir. 1932).  Florida’s VPL specifically 
states that it does not apply to “any coverage or claim in which the dollar amount 
of coverage available as to the structure involved is not directly stated in the policy 
as a dollar amount specifically applicable to that particular structure.”  § 
627.702(5), Fla. Stat. (2004).  Since the supplemental coverage provisions in the 
Ceballos’ policy do not directly state a dollar amount, but instead state only the 
maximum percentage of the limit of liability, the VPL does not apply to that 
coverage.  Of course, the major purpose of the VPL is to require an actual dollar 
amount of coverage be designated in the policy as the value of a structure in order 
to remove any uncertainty as to the amount an insured is entitled to recover for a 
total loss of the structure.  That purpose is generally unrelated to additional or 
supplemental coverage that may be offered by an insurer to an insured.   
 
We conclude that the primary purpose and essential rationale of the VPL in 
bringing certainty to the value insured simply does not extend to supplemental 
 
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coverage that may be provided in the same policy.  In other words, the perceived 
need to bring certainty to claims for a total loss of an insured’s home does not 
extend to the resolution of claims under supplemental coverage.  In this case, for 
example, the obligation to pay a claim under the supplemental coverage may well 
vary depending on the specific requirements of the ordinances or laws governing 
the rebuilding or demolition of an insured structure, and those laws may vary from 
place to place.  Some insureds may incur such costs while others may not, and the 
costs themselves may vary.  Under these circumstances, and unlike the issue of 
establishing an agreed insurable value for a destroyed residence, it would make 
little sense for mandating the payment of the maximum limits of coverage 
provided for a supplemental coverage regardless of the actual loss.    
 
Further, supplemental insurance has not been considered by courts as being 
limited to or dependent upon the face value of the policy.  See Bonito v. 
Cambridge Mut. Fire Ins. Co., 780 A.2d 984, 988 (Conn. App. Ct. 2001) 
(replacement cost endorsement did not alter the policy limits, but provided 
additional coverage that could exceed the limit of liability); Marchman v. Grange 
Mut. Ins. Co., 500 S.E.2d 659, 660 (Ga. Ct. App. 1998) (replacement cost rider did 
not increase the face value of the policy; insured not entitled to $125,000 plus 
$70,000); Trible v. Tower Ins. Co., 168 N.W.2d 148, 157 (Wis. 1969) (stating that 
the VPL “applies only to the described premises and that the value of losses 
 
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covered by additional insurance must be proven”).  Further, “[c]ourts have almost 
uniformly held that an insurance company’s liability for replacement cost does not 
arise until the repair or replacement has been completed.”  State Farm Fire & 
Casualty Co. v. Patrick, 647 So. 2d 983 (Fla. 3d DCA 1994) (citing Leo John 
Jordan, What Price Rebuilding?, Brief, Fall 1990, at 17; Tamco Corp. v. Fed. Ins. 
Co. of N.Y., 216 F. Supp. 767 (N.D. Ill. 1963)).   
 
Instructively, the United States District Court in and for the Northern 
District of Florida in Langhorne v. Fireman’s Fund Insurance Co., 432 F. Supp. 2d 
1274 (N.D. Fla. 2006), has considered the issue before us and explained that 
“because to date plaintiff has not ‘actually expended’ any amount to repair, 
rebuild, or replace his dwelling, defendant has no obligation to pay him under the 
[Extended Replacement Cost Coverage] endorsement” that provided coverage of 
up to an additional 100% of the face value of the policy.  Id. at 1279.  Similarly, in 
the present case, the Third District ruled that Citizens has written the policy to 
require the insured to incur the loss before receiving additional payments under the 
supplemental law and ordinance coverage.  The district court explained: 
The Ceballos are correct in their assertion that they are entitled to the 
Additional Coverage, for which they were charged and paid a 
premium.  However, as provided in the policy, they may receive a 
maximum of 25% of the limit of liability, only if they actually incur 
the covered expenses.  Florida’s Valued Policy Law does not alter this 
conclusion.  To hold otherwise, and provide for damages in the 
absence of a loss, would be a windfall to the homeowners.  We 
 
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therefore reverse and remand for the Ceballos to present proof of 
incurred expenses consistent with the policy. 
Ceballo, 934 So. 2d at 538 (footnote omitted).  We agree with the Third District’s 
analysis.  The Ceballos were entitled to, and received, the face value of their 
insurance policy for the loss of their home, but that loss does not affect their 
obligation to show that they have incurred an additional loss in order to recover 
under the supplemental coverage.  Citizens’ counsel conceded in oral argument 
that “to incur” means to become liable for the expense, but not necessarily to have 
actually expended it.  We agree.  However, we also agree with Citizens that the 
VPL does not mandate the payment of the policy limits of the additional coverage 
without proof of loss where the unambiguous language of the policy requires such 
proof.   
Conclusion 
 
We approve the decision of the Third District below, and we disapprove of 
those portions of the decision in Mierzwa which conflict with this opinion.  
 
It is so ordered. 
LEWIS, C.J., and WELLS, PARIENTE, QUINCE, CANTERO, and BELL, JJ., 
concur. 
 
NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING MOTION, AND 
IF FILED, DETERMINED. 
 
 
 
 
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Application for Review of the Decision of the District Court of Appeal - Certified 
Direct Conflict of Decisions 
 
 
Third District - Case No. 3D05-2259 
 
 
(Dade County) 
 
Lauri Waldman Ross of Lauri Waldman Ross, P.A., Miami, Florida, and Keith A. 
Truppman of Mintz and Truppman, P.A., North Miami, Florida, 
 
 
for Petitioners 
 
James M. Fishman of James M. Fishman, P.A., Miami, Florida, 
 
 
for Respondent 
 
Louis K. Rosenbloum of Louis K. Rosenbloum, P.A., Pensacola, Florida, on behalf 
of the Academy of Florida Trial Lawyers; and Elizabeth K. Russo of Russo 
Appellate Firm, P.A., Miami, Florida, on behalf of State Farm Florida Insurance 
Company, 
 
as Amici Curiae