Codified as § 33-24-102, Montana’s Valued Policy Law provides that, in the event of a total loss, the limits in a real property insurance policy conclusively set the true amount of loss and measure of damages. In practice, value policy laws mandate that a total loss automatically triggers an insurer’s obligation to pay the full policy limits, often without the need for a proof of loss or other investigation. ¹ Any agreement to settle a claim for less than the total amount of applicable coverage is void as against public policy. ²

Less clear is the interaction between a value policy law and supplemental coverages, which are paid as incurred, such as extended dwelling or law and ordinance coverage. While Montana courts have not had cause to evaluate this interaction, other courts in value policy law states have. In Langhorne v. Fireman’s Fund Insurance Company, the Northern District of Florida held that the insurer was not obligated to pay extended replacement cost coverage until incurred.

In the court’s view, there is no conflict between the EERC [extended replacement cost coverage] endorsement in the policy and the plain, unambiguous language of the [value policy law]. The court therefore concludes 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 ERCC endorsement. ³

The Florida Supreme Court later considered and ultimately accepted the Langhorne reasoning when deciding Ceballo v. Citizens Property Insurance Corporation, a similar case. It found that the insureds 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.” ⁴

While Florida’s statute is slightly different than Montana’s, in Florida, the valued policy law does not apply to supplemental coverages. Langhorne and Ceballo provide insight into how courts interpreted and differentiated coverages that impose no conditions above and beyond sustaining a covered loss and supplemental coverages that are conditioned on incurring associated costs. While there is no guarantee that a Montana court would come to the same conclusion, these opinions from Florida would likely be considered persuasive should the issue arise.

¹ Britton v. Farmers Ins. Grp. (Truck Ins. Exch.), 721 P.2d 303, 307 (Mont. 1986) (citing Commercial Union Ins. Co. v. Stanmike Investment Co., 475 S.W.2d 295 (Tex.C.A.1971)).

² Stanmike Investment, at 307 (citing Coddington v. Safeguard Ins. Co. of N.Y., 373 S.W.2d 413 (Ark. 1963).

³ Langhorne v. Fireman’s Fund Ins. Co., 432 F. Supp. 2d 1274, 1279 (N.D. Fla. 2006).

⁴ Ceballo v. Citizens Prop. Ins. Corp., 967 So. 2d 811, 815 (Fla. 2007).

Codified as § 33-24-102, Montana’s Valued Policy Law provides that, in the event of a total loss, the limits in a real property insurance policy conclusively set the true amount of loss and measure of damages. In practice, value policy laws mandate that a total loss automatically triggers an insurer’s obligation to pay the full policy limits, often without the need for a proof of loss or other investigation. ¹ Any agreement to settle a claim for less than the total amount of applicable coverage is void as against public policy. ²

Less clear is the interaction between a value policy law and supplemental coverages, which are paid as incurred, such as extended dwelling or law and ordinance coverage. While Montana courts have not had cause to evaluate this interaction, other courts in value policy law states have. In Langhorne v. Fireman’s Fund Insurance Company, the Northern District of Florida held that the insurer was not obligated to pay extended replacement cost coverage until incurred.

In the court’s view, there is no conflict between the EERC [extended replacement cost coverage] endorsement in the policy and the plain, unambiguous language of the [value policy law]. The court therefore concludes 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 ERCC endorsement. ³

The Florida Supreme Court later considered and ultimately accepted the Langhorne reasoning when deciding Ceballo v. Citizens Property Insurance Corporation, a similar case. It found that the insureds 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.” ⁴

While Florida’s statute is slightly different than Montana’s, in Florida, the valued policy law does not apply to supplemental coverages. Langhorne and Ceballo provide insight into how courts interpreted and differentiated coverages that impose no conditions above and beyond sustaining a covered loss and supplemental coverages that are conditioned on incurring associated costs. While there is no guarantee that a Montana court would come to the same conclusion, these opinions from Florida would likely be considered persuasive should the issue arise.

¹ Britton v. Farmers Ins. Grp. (Truck Ins. Exch.), 721 P.2d 303, 307 (Mont. 1986) (citing Commercial Union Ins. Co. v. Stanmike Investment Co., 475 S.W.2d 295 (Tex.C.A.1971)).

² Stanmike Investment, at 307 (citing Coddington v. Safeguard Ins. Co. of N.Y., 373 S.W.2d 413 (Ark. 1963).

³ Langhorne v. Fireman’s Fund Ins. Co., 432 F. Supp. 2d 1274, 1279 (N.D. Fla. 2006).

⁴ Ceballo v. Citizens Prop. Ins. Corp., 967 So. 2d 811, 815 (Fla. 2007).