Insurance Law Hawaii

Insurer's Motion for Summary Judgment to Dispose of Hail Damage Claim Fails

    The court denied the insurer's motion for summary judgment seeking to dismiss the insured's complaint requesting coverage for hail damage and a claim for bad faith. Rodriquez v. State Farm Lloyds, 2024 U.S. Dist. LEXIS 160007 (W.D. Tex. Sept. 5, 2024).

    Mr. Rodriquez sought coverage under his homeowners policy after a hail and wind storm damaged his roof. After inspection, State Farm agreed that some minimal loss caused by hail was covered, but determined that the covered loss was less than the amount of the deductible. State Farm further determined that any hail damage to the roof was excluded by an endorsement, Exclusion of Cosmetic Loss to Metal Roof Coverings Caused by Hail. State Farm also determined that some damage was caused by previous faulty workmanship or wear and tear, both of which were excluded from coverage.

    Mr. Rodriquez filed suit alleging breach of contract and breach of the insurer's duty of good faith and fair dealing,. State Farm moved for summary judgment. 

    The court first noted that the Exclusion of Cosmetic Loss to Metal Roof Coverings Cause by Hail was not included in the policy. The endorsement stated, "this endorsement is void unless signed by a named insured," and there was no indication that Mr. Rodriquez accepted the endorsement as part of the policy. It appeared that the endorsement was part of a different policy issued to a different insured. Although the cosmetic loss exclusion would likely bar coverage, it was not part of the policy in this case. Therefore, State Farm's motion on the breach of contract claim was denied.

    Turning to the extra-contractual claim, to the extent that some of the claimed loss may have been caused by faulty workmanship or deterioration, a bona fide coverage dispute existed. However, State Farm denied the most costly part of the clam based on a cosmetic loss exclusion that, on its face, was not part of the policy. Based on the current record, the cosmetic loss explanation for denial does not appear to be valid. Therefore, summary judgment on the extra-contractual claim was also denied.

 

Motion for Reconsideration Challenging Appraisal Determining Cause of Loss Denied

    The court rejected the insurer's motion for reconsideration attempting to set aside the appraisal award that determined the cause of loss. Mesco Mfg., LLC v. Motorists Mut. Ins. Co., 2023 WL 5334659 (S.D. Ind. Aug. 18, 2023). 

    Mesco suffered a loss to the roofs of its facilities due to hail damage. Mesco sued Motorists alleging it breached the policy by failing to pay the full amount of the claim. The claim went to appraisal. The policy's appraisal provision reserved Motorists' right to deny the claim despite an appraisal going forward. The appraisal award noted that the loss was caused by hail.

    Cross-motions for summary judgment were filed. The court found that Motorists had breached the policy by failing to pay the arbitration award and granted summary judgment to the insured. The "right to deny" clause did not give Motorists the unfetterd right to disregard the umpire's award if it disgreed about the amount of loss caused by hail. The only dispute was whether the damage was caused by hail, and the umpire found that it was. 

    In seeking reconsideration, Motorists relied on prior cases from the district court holding that causation was an issue preserved for the court to determine after appraisal. However, the cases predated a Seventh Circuit decision upholding the umpire's award, and the scope of loss decision, as binding. 

    The motion for reconsideration was denied, as it was based on arguments that the court previously rejected and arguments that could have been raised in Motorists' summary judgment briefs.

    

Insurer's Appeal of Jury Verdict Rejected by Tenth Circuit

    After a jury awarded damages related to the insurer's delayed payment under the claim and the insurer's post trial motions to set aside the verdict were denied, the Tenth Circuit affirmed. US General, LLC v. GuideOne Mut. Ins. Co., 2022 U.S. App. LEXIS 34066 (10th Cir. Dec. 12, 2022). 

    Crossroads American Baptist Church submitted a claim to GuideOne for hailstorm damage. Crossroads hired US General as the general contractor to perform the repairs and later assigned its interest in the insurance policy to US General.

    Numerous disputes arose between Crossroads and GuideOne regarding the cost of the repairs. There were delayed payments and portions of the repairs were never paid for. The delayed payments meant GuideOne's ability to begin making the repairs was hindered because it was more expensive to start and stop a project. 

    Crossroad brought suit. It alleged breach of contract based on GuideOne's refusal to pay $70,000 requested for electrical and HVAC work, and for unreasonable delay of payment under a Colorado statute. US General was joined as a plaintiff.

    The case proceeded to a jury trial. The district court drafted jury instructions and the verdict form. GuideOne said it had no objections. The jury verdict form required the jury (1) to indicate whether GuideOne was liable on each of US General's two claims, and (2) to state the amount of damages for each claim on which it found liability.

    The jury returned a verdict in favor of US General on both claims. On the breach of contract claim, the jury found that US General had not suffered any general damages, but awarded $1 in nominal damages. On the unreasonable delay claim, the jury found that GuideOne had unreasonably delayed payment of $155,700 in insurance benefits before the date the complaint was filed and $136,700 after that date. GuideOne did not object or argue that it was inconsistent.

    In GuideOne's motion to amend the judgment under Rule 59 (e), Fed. R. Civ P., it argued that (1) US General could obtain only $1 for unreasonable delay damages because the jury found only $1 of nominal damages on the breach of contract claim, and (2) insufficient evidence supported the unreasonably delay claim. The district court denied GuideOne's motion to amend the judgment and awarded US General's motion for double damages and attorney fees under the Colorado statute. GuideOne appealed.

    The Tenth Circuit first found that GuideOne waived the argument on damages for unreasonable delay by failing to object to the verdict when the jury rendered it. When a jury returned its verdict, a party that believed the verdict was inconsistent had to object before the jury was discharged. 

    The Tenth Circuit also affirmed the award of attorneys fees. The district court accepted US General's calculation of fees based on the hours billed and the proposed hourly rates. On appeal, GuideOne did not show that the district court erred in finding the fees to be reasonable. Therefore, the fees award was affirmed. 

Fifth Circuit Certifies Questions to Texas Supreme Court on Concurrent Causation Doctrine

    The Fifth Circuit certified unanswered questions on the concurrent causation doctrine to the Texas Supreme Court. Overstreet v. Allstate Vehicle & Prop, Ins. Co., 2022 U.S. App. LEXIS 13582 (5th Cir. May 19, 2022).

    The insured alleged that a hail storm damaged his roof. The roof was three years old when he purchased a policy from Allstate. An adjuster sent by Allstate valued the loss at $1,263.123, less than the policy deductible. Allstate contended that the roof damage was due to uncovered causes, namely a combination of wear and tear and earlier hail storms that hit the roof before the insured purchased the policy. The insured disagreed because the roof had never leaked before the hail storm, but only after the storm. The insured's expert inspected the roof and determined it had been damaged by hail. The district granted Allstate's motion for summary judgment because the insured had not carried his burden of proving how much damages came from the hail storm alone. 

    On appeal, the Fifth Circuit noted that Texas's concurrent causation doctrine instructed that "when covered and excluded perils combine to cause an injury, the insured must present some evidence affording the jury a reasonable basis on which to allocate the damage." But questions remained about when the doctrine applied, and what plaintiffs had to prove when it did.

    The Fifth Circuit therefore certified three questions to the Texas Supreme Court:

1) Whether the concurrent cause doctrine applied where there was any non-covered damage, including "wear and tear," but such damage did not directly cause the particular loss eventually experienced by plaintiffs.

2) If so, whether plaintiffs alleging that their loss was entirely caused by a single, covered peril, bore the burden of attributing losses between that peril and other, non-covered or excluded perils that plaintiffs contended did not cause the loss; and

3) If so, whether plaintiffs could meet that burden with evidence indicating that the covered peril caused the entirety of the loss.

Appraisal Ordered After Carrier Finds Loss Even if Cause Disputed

    The court ordered an appraisal when the parties differed on the amount of loss to the dwelling even when the carrier contended the dispute was over the cause of the loss. Khaleel v Amguard Ins. Co., No. 21 C 992, Memorandum Opinion and Order (N.D. Ill. Feb. 11, 2022). The order is here.

    Plaintiffs home was damaged by wind and hail. A claim was submitted to Amguard for damage to the roof. Amguard found there was hail damage to the soft metal vents on the roof and estimated repair costs to be $3,815.16. Amguard found no damage to the roof itself. Plaintiffs contended there was additional damage to the roof. Plaintiffs demanded an appraisal. Amguard rejected the appraisal demand, claiming that the damage to the roof was due to wear and tear, and therefore constituted an excluded cause under the Policy. 

    Plaintiff filed suit. After Amguard answered, plaintiffs moved for judgment on the pleadings. 

    Under the policy, if the parties disagreed as to the "amount of loss," either party could request an appraisal. A coverage dispute was handled by the court, but a dispute for loss was for the appraiser to determine. Plaintiffs asserted that when the insurer admitted there was a covered loss, finding the extent and causation of the damage was part of the "amount of loss" determination and was subject to the appraisal clause. Amguard framed the dispute as whether the damage to the roof was caused by hail or by wear and tear (the latter being excluded from coverage). Amguard contended that it had not admitted coverage for the hail damage to the roof, and thus, this was a coverage dispute and appraisal was inappropriate. Amguard had acknowledged hail damage to the soft metal vents on top of the roof, but denied that the roof itself was damaged by hail.

    Numerous courts within the district agreed with plaintiffs and routinely rejected the argument that issues implicating damage causation were not appropriate for resolution by appraisal.This court agreed with those cases and plaintiffs' reading of the policy. Because Amguard agreed that some portion of the dwelling was damage by hail and constituted a covered loss, this suit was not a coverage dispute but a dispute over the amount of loss. Consequently, appraisal was appropriate,. Otherwise, the insurer could separate its coverage based on individual components of the building such as each roof shingle, gutter, or vent cover. The policy did not permit such a reading because it granted coverage to the dwelling as a whole. 

    The court granted plaintiffs' motion for judgment on the pleadings. 

Appraisal May Include Cause of Loss Issues

    The federal district court determined that an appraisal can include causation issues when determining the amount of loss. B&D Inv. Grp., LLC v. Mid-Century Ins. Co., 2021 U.S. Dist. LEXIS 246853 (N.D. Ill. Dec. 28, 2021).

    B&D commercial building was damaged by hail. B&D submitted a claim to Mid-Century, but the parties disagreed as to the damage. Mid-Century found there was hail damage to metal vents on the roof and estimated the repair costs to be $4,271.95. Mid-Century found no hail damage to the roof itself. B&D disagreed and insisted that there was additional damage to the property, specifically the roof.

    B&D requested an appraisal, but Mid-Century denied the request. Mid-Century found that the condition of the roof was due to wear and tear and therefore constituted an excluded cause under the policy. B&D filed suit seeking a declaratory judgment compelling the parties to proceed with an appraisal.

    The policy authorized an appraisal if the parties disagreed as to the "amount of loss." B&D argued that when an insurer admitted there was a covered loss, determining the extent and causation of the damage was part of the "amount of loss" determination and subject to the appraisal clause, and not a coverage dispute. Mid-Century, on the other hand, framed the dispute as whether damage to the roof was caused by hail or by wear and tear and deterioration. 

    The policy did not define "amount of loss." The parties agreed there was a covered hail loss to the metal vents on the roof. Because Mid-Century maintained any additional damage to the roof was due to wear and tear and deterioration, a disagreement existed as to whether the damage to the roof was caused by hail or by wear and tear. The court agreed with B&D that because damage to the roof was also caused by hail, an appraisal should be conducted to resolve the disagreement as to the "amount of loss" from the hail. 

    The initial determination by Mid-Century found that the amount of loss to the roof vents was based on the fact that the damage was due to hail. Mid-Century then ruled out any loss for the roof itself based on its view that the damage to the roof was caused by wear and tear and deterioration. This analysis inherently involved causation determinations. It logically followed that the causation for all of the damage would be part of the amount of loss analysis by an appraiser.

Insurer's Late Notice Defense Fails on Summary Judgment

    The insurer's motion for summary judgment to dismiss the claim because the insurer did not provide notice "as soon as practicable" was denied. Vintage Hospitality Group LLC v. Nat'l Trust Ins. Co., 2021 U.S. Dist. LEXIS 192651 (M.D. Ga. Oct. 6, 2021). 

        Vintage owned hotels, one of which was struck by a severe hailstorm on July 21, 2018. Vintage was not aware of roof damage until two months after the storm, and did not make the connection between the hailstorm and roof damage until February 2020, when it reported the damage to National. The claim was denied because it was not reported "as soon as practicable" as required by the policy.

    Vintage sued and National moved for summary judgment. 

    Vintage did not notice the leaks until September 2018. The focus was on fixing the leaks, and connection to the hailstorm did not register. The leaks persisted over the next year and a half. A construction company was called in to evaluate the leaking roof. The construction company advised that the roof had experienced previous hail damage which was causing the leaks. At this point, Vintage connected the damage to the hailstorm. A claim was promptly submitted to National, which denied the claim.

    The National policy did not place a hard deadline for reporting a claim. Georgia law interpreted the phrase "as soon as practicable" as within a reasonable time considering all the circumstances. Vintage reported the claim within a few days of being informed by the roofing contractor that the leaky roof was caused by previous hail damage.

    The court found there was a genuine factual dispute as to whether Vintage gave notice as soon as practicable. The court denied National's motion. 

Tenth Circuit Finds Appraisal Can Decide Causation of Loss Under Colorado Law

    The Tenth Circuit determined that the Colorado Supreme Court would agree with other state courts that appraisers can decide the causation of a loss. Bonbeck Parker, LLC v. The Travelers Indem. Co. of Am., 2021 U.S. App. LEXIS 29607 (10th Cir. Oct. 1, 2021). 

    A hailstorm damaged three buildings owned by BonBeck. A claim was submitted to Travelers under BonBeck's commercial property policy. Travelers acknowledged that some hail damage occurred to all the buildings except for the roofs. Travelers paid $34,200 for damage to the buildings. Coverage for the roof damage was denied because it resulted not from the hail damage but from uncovered events like wear and tear, deterioration, and improperly installation. 

    BonBeck requested an appraisal. Travelers insisted that the appraisal would only determine the amount of loss of covered claims. BonBeck rejected these conditions and Travelers filed suit.

    On the first round of summary judgment motions, the district court sided with BonBeck, concluding that the appraisal provision authorized the panel to make cause-of-loss determinations. The appraisal then took place and the panel estimated the total loss from hail damage to be about $216,000. Travelers paid BonBeck the appraisal award, minus the $34,000 it had already paid.

    In a second round of motions for summary judgment, the court again agreed with BonBeck that Travelers had breached the policy by not agreeing to an appraisal. The district court awarded BonBeck nominal damages of $1 and statutory interest of $36,142.63. Travelers appealed.

    The appraisal provision stated, in part,

If we and you disagree on the value of the property, the amount of Net Income and operating expense, or the amount of loss, either may make written demand for an appraisal of the loss. . .

If there is an appraisal, we will still retain our right to deny the claim.

    The district court focused on the first sentence, which stated a party could request an appraisal based on "the amount of loss." The district court determined that "the amount of loss" encompassed causation disputes. Dictionary definitions of "loss" all included a causation component, making clear that "loss" refers to damage resulting from a covered event.

    The Tenth Circuit concluded that the Colorado Supreme Court would join other courts in recognizing that in the insurance context, the ordinary meaning of the phrase "amount of loss" encompassed causation.

    Travelers argued that allowing the appraisal panel to determine what caused BonBeck's damage prevented Travelers from later denying coverage based on its view that something other than the hailstorm caused the damage. The court disagreed. The last sentence  of the appraisal provision covered Travelers' right to deny a claim after an appraisal. For example, Travelers could still deny coverage for failure of the insured to provide prompt notice or to cooperate.

    Therefore, the Tenth Circuit affirmed the grant of summary judgment to BonBeck.

    Thanks to Robert Joslin, Hawaii Public Adjusters, for flagging this case. 

     

Eighth Circuit Affirms Finding of Bad Faith, Award of Costs and Prejudgment Interest

    The Eighth Circuit affirmed the district court's finding of bad faith and award to the insured of taxable costs and prejudgment interest. Selective Ins. Co. v. Sela, 2021 U.S. App. LEXIS 26062 (8th Cir. Aug. 30, 2021). 

    The insured suffered two hail storms that damaged his home. In 2010, the first storm caused over half a million dollars in loss. Before submitting a claim to his original insurer or beginning any repairs, the insured secured a new policy with Selective. The policy did not exclude pre-existing damage, it did preclude coverage if the insured "willfully and with intent to defraud, concealed or misrepresented any material fact or circumstance relating to the insurance."

    Before issuing the policy, Selective appraised the property and assigned a $1.6 million value to the home. The insured then filed a claim with his original insurer and received $510,787.23 for actual cash value of his loss. Neither the terms of this settlement nor this new policy with Selective required the insured to repair all of the 2010 damage. 

    A second storm hit in 2015, damaging the insured's roof. Selective sent an adjuster, who found the damage was "significant." Selective then received an anonymous letter claiming the insured was a serial fraudster who was falsifying claims, Selective brought in its special investigation unit to look into potential fraud. Selective was concerned that the insured said he had repaired all of the 2010 damage while only providing documentation for about $200,000 of work. Selective eventually denied the claim based on fraud.

    Selective then filed suit for a declaration of no coverage. The insured filed a counterclaim for breach of the policy and bad faith. The court determined that the jury would decide coverage, an appraisal panel would determine damages, and the court would decide bad faith. The jury found no fraud, the damage issue went to appraisal, and a date for the bench trial was set.

    A week before the appraisal was finished, Selective moved for summary judgment, arguing the Minnesota statute would bar the bad faith claim because the claim would be resolved by appraisal. The district court denied the motion, held a bench trial and found that Selective denied the claim in bad faith. It awarded judgment for $1,024,233.10, which included the actual case value award, taxable costs, and prejudgment interest. Selective appealed.

    The Eighth Circuit noted that the Minnesota statute allowed an insured to recover taxable costs if an insurer lacked a reasonable basis for denying benefits and did so knowing of or in reckless disregard of the lack of a reasonable basis. The Eighth Circuit agreed with the district court that there was no reasonable basis to deny the insured benefits. Selective recklessly disregarded the lack of a reasonable basis to deny the claim. Prejudgment interest was also properly granted by the district court. Under Minnesota precedent, the district court found that Selective had enoguht information in the property loss notice to assess its potential liability. Prejudgment interest was due from this point forward.

Endorsement Excludes Replacement of Undamaged Property with Matching Materials

    The court approved the insurer's endorsement which stated the insured would not pay for undamaged property in order to match damaged property. Noonan v. Am. Family Mut. Ins. Co., 2019 U.S. App. LEXIS 15545 (May 24, 2019).

    After hail and wind damaged part of the roof in the insureds' home, American Family inspected the roof and determined that it had suffered $12,000 in damage. The insureds disputed this amount and demanded an appraisal to provide a binding estimate of the amount of loss. American Family asked the appraisers to divide their estimate into two categories - one for replacing damaged shingles and another for replacing undamaged shingles that would not match those needed to replace the damaged ones. The appraisers did not do so. They instead found that replacing the entire roof would cost $141,000 and noted there was a matching issue because alternative products did not match the current shingles on the roof.

    Of the $141,000 needed to replace the entire roof, American Family estimated that $87,232.98 was due to the costs of matching. The insureds sued. The district court remanded the case to the appraisers to clarify the award by differentiating the costs attributable to the actual roof damage from those attributable to shingle matching. The appraisers clarified the award and reported that actual damages were $66,619, meaning that $74,381 was attributable to matching. American Family then paid the actual damages, less the deductible, but refused to pay the rest. 

    An endorsement stated that American Family would "not pay to repair or replace undamaged property due to mismatch between undamaged material and new materials used to repair or replace damaged material." The district court denied American Family's motion for summary judgment. The court found that the endorsement did not apply to the policy because the endorsement did not say it applied to a prior endorsement which deleted and replaced the portion of the policy titled "Loss Value Determination." 

    The Eighth Circuit reversed and found that the matching exclusion did apply. The first page of the policy explicitly said that the endorsement applied and a copy of the endorsement was physically attached to the policy.