Louisiana Value Policy Law Does Not Control Amount of Insurance Loss

In Landry v. Louisiana Citizens Property Insurance Co. (La. 2008), the Louisiana Supreme Court rejected a homeowner’s breach of contract claim against the insurer for failure to pay the face value of the policy after their house was totally destroyed by Hurricane Rita. The parties did not dispute that the insurance in question covered any loss caused by wind and rain, and that the policy specifically excluded damages caused by flood waters. Even so, the homeowner claimed that Louisiana’s statutory law (R.S. 22:695) obligated the insurer to pay the face value of the policy. The insurer responded, asserting several defenses, including damages caused by flood, high tides, and storm surge. The statute in question was the Louisiana Value Policy Law (R.S. 22:695), that sets forth the methodology to compute loss and that its provisions are not altered due to concurrently causing damages, even if one of such damages is not covered.

In a case of first impression, the court recognized that the statute allows an alternative method of loss computation, but requires the insurers to provide notice in the application that an alternative method is stated in the insurance policy. Because the statute did not set a limit on the different methods that may be used by the insurer, a valid change is established in the statutory provisions for valuations are not applicable.