Some insurance coverage issues never really go away. They disappear for a while, then another court is asked to decide them. Deductible absorption is one of those issues.
We have discussed this subject several times on this blog, including When Calculating Insurance Payments, Take the Deductible From the Repair Value and Not the Policy Limits, Subtract Deductibles From Repair or Replacement Values. Not From Policy Limits, What Is a Sublimit in Insurance?, and Take the Deductible from the Loss and Not the Coverage Limit.
The traditional adjusting rule is familiar: apply the deductible to the covered loss, then apply the policy limit or sublimit. I first learned the concept from Property Loss Adjusting, a treatise that is part of the property portion of the Associate in Claims curriculum. My first-edition copy, edited by James J. Markham, is dated June 1990. 1 The basic lesson was simple. The deductible ordinarily comes off the loss, not the limit.
That remains a useful starting point. But it is not a substitute for reading the policy. The recent ruling in 16500 Captiva LLC v. QBE Specialty Insurance Company, 2 illustrates the point exceptionally well.
Captiva suffered Hurricane Ian damage. The appraisal determined $853,408.05 in dwelling damage, $492,924 in Fair Rental Value loss, and $136,405.73 in Personal Property damage. The policy provided a $2 million Dwelling limit, a $450,000 Fair Rental Value limit, a $100,000 Personal Property limit, and a $200,000 named-storm deductible. Captiva argued that the amounts above the Fair Rental Value and Personal Property limits should absorb part of that deductible.
The dispute turned on the Windstorm Percentage Deductible endorsement. It stated:
B. Deductible
Unless otherwise noted in this Policy, the following deductible provision applies:
With respect to any one loss:
1. Subject to the applicable limit of liability, we will pay only that part of the total of all loss payable that exceeds the deductible amount shown in the Declarations…
QBE made the wording the centerpiece of its summary judgment argument. The policy did not say that QBE would pay the portion of the total physical damage exceeding the deductible. It said QBE would pay only the portion of the “loss payable under COVERAGES” exceeding the deductible.
The easiest way to understand the provision is to picture two points on a line. The deductible is the starting point of the insurer’s payment obligation. The applicable coverage limit is the ending point. The amount between those two points is the most the policy promises to pay.
That is what mattered in Captiva. Personal Property coverage ended at $100,000, and Fair Rental Value coverage ended at $450,000. Once the losses exceeded those amounts, the excess did not increase the “loss payable under COVERAGES.” The court therefore determined the amount payable under the applicable coverages first and then applied the $200,000 deductible to that payable amount. The excess appraisal amounts could not be used to reduce the deductible.
The result becomes even more interesting when read with the Florida Second District Court of Appeal’s earlier decision in General Star Indemnity Co. v. West Florida Village Inn. 3 General Star rejected an effort to use excluded damage to satisfy a deductible, but it carefully distinguished that situation from the “normal insurance claims adjusting practice” of absorbing a deductible when the total loss caused by a covered cause exceeds the limit of insurance for that type of loss. In other words, Florida authority recognizes the traditional adjusting concept. Captiva shows that the particular policy wording can nevertheless dictate a different calculation.
That is the point worth remembering. There is a familiar method for adjusting losses involving deductibles and limits, and our prior posts explain it in greater detail. But the calculation must begin with the actual deductible provision. “Loss,” “amount of loss,” “loss payable,” and “loss payable under COVERAGES” are not necessarily interchangeable phrases.
In Captiva, the policy told the reader where QBE’s obligation began and where it ended. Once the court followed those instructions, the arithmetic followed. That is why it is always worth going back to the policy before relying on the adjusting rule we learned years ago.
1 Markham, James J. Property Loss Adjusting, Insurance Institute of America, 1990.
2 16500 Captiva LLC v. QBE Specialty Insurance Company, 2025 WL 3753960 (M.D. Fla. Dec. 29, 2025).
3 General Star Indemnity Co. v. West Florida Village Inn, Inc., 874 So. 2d 26 (Fla. 2d DCA 2004).
