A co-insurance clause can operate to reduce the recoverable loss once a loss is sustained. What about in a claim under Florida’s Valued Policy Law (“VPL”)? Would a co-insurance clause reduce the recovery? This question has to do with the appropriate measure of damages under Florida’s VPL. As I have written previously, the VPL is meant to address the measure of damages for claims that fall within its terms.

Florida’s Valued Policy Law, § 627.702(4), provides as follows:

(4) The amount of any loss referred to in subsection (1) or subsection (2) shall be subject to any co-insurance clause contained in the policy pursuant to §627.701.

As a result, the existence of a co-insurance clause can prevent full recovery in the event of total loss or a partial loss by fire or lightning.

As this provision of the Florida VPL demonstrates, insuring to value is an important aspect of insurance. If a policy has a coinsurance penalty, any loss benefit reduction will certainly feel significant to the policyholder. It is imperative that policyholders periodically review their coverage to determine they are sufficiently insured to value and that they have the appropriate coverage.