The Seventh Circuit affirmed the district court's determination that cosmetic damage to the insured's roof was covered. Advance Cable Co., LLC v. Cincinnati Ins. Co., 788 F. 3d 743 (7th Cir. 2015).
The insured submitted a claim to its insurer, Cincinnati, for damage to the metal roof of its building caused by a hail storm. The insured inspected the roof with a claims representative for Cincinnati. Dents were spotted, but there was little other evidence of damage. The loss was estimated at $1,894.74. A check for this amount was sent to the insured.
Six months later, the insured considered selling the building. A potential buyer inspected the roof and found hail damage. At the request of the insured, Cincinnati conducted another inspection of the roof. Again, dents of approximately 1 inch in diameter were found. The inspector noted that the denting would not affect the performance of the roof panels or detract from their life expectancy.
The insured sued Cincinnati for breach of contract and bad faith. On cross-motions for summary judgment, the district court held the policy covered the hail damage, but that Cincinnati's refusal to acknowledge this was not in bad faith.
The Seventh Circuit affirmed. The policy promised to pay for "direct physical 'loss' to Covered Property." The dispute centered on the meaning of "physical," which was not defined by the policy. Cincinnati contended that "physical" meant "material." But the insured was claiming that the hail caused visible indentations to the surface of the roof. This denting changed the physical characteristics of the roof and satisfied the language of the policy.
Next, the court considered what "loss" meant. The policy covered loss or damage. This indicated that even without a measurable "loss" in value or in function, the policy expressly contemplated the possibility of there still being "damage," which gave it a different meaning from "loss." Cincinnati argued that "loss or damage" meant "harm." It then assumed that dents in the roof did not harm the roof enough to diminish its function or value. But this analysis bore no relation to the language of the policy. There was no exception to the definition of "loss" for cosmetic damage, or any other kind of particular damage. Had Cincinnati wished to exclude cosmetic damage from coverage, it should have written the policy that way. Granting summary judgment to the insured on the breach of contract issue was correct.
The Seventh Circuit also affirmed the denial of summary judgment on the bad faith issue. It was reasonable, even if incorrect, for Cincinnati to refuse to pay the insured's claim because it did not believe the insured suffered "loss or damage" from the hail damage. Cincinnati's reading of the policy was wrong, but was not unreasonable. There was some dispute over the meaning of the terms in the policy. Further, Cincinnati worked with the insured, making multiple visits to the property to inspect the roof and made a payment, even if it was less than what the insured believed was proper.
