Roof Damage Insurance Disputes Resolved
Post 4836
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Roof damage insurance disputes are common. April Point South Property Owner’s Association, claims that the insurer, Third Coast Insurance Company, owes over $1.8 million to repair hailstorm damage to 31 separate buildings in a condominium project. Third Coast investigated the claim and denied coverage. April Point disputed the denial. Both parties retained adjusters and experts. After the parties failed to reach resolution, April Point sued.
In April Point South Property Owner’s Association, Inc v. Third Coast Insurance Co., Civil Action No. H-23-2654, United States District Court, S.D. Texas, Houston Division (July 15, 2024) the USDC resolved competing motions for summary judgment.
ANALYSIS
Third Coast did not pay anything under the policy in the year after the storm damage. April Point has presented evidence that Third Coast’s coverage denial deprived April Point of the funds it needed to make the repairs. Although April Point may recover on a replacement cost value despite the one-year deadline, subject to the limitations discussed below, April Point must make the repairs in order to obtain coverage on a replacement value basis.
The Age of the Roofs
Third Coast also argues that April Point can recover no more than the actual cash value of the repairs because the damaged roofs are over 15 years old. The policy states that “[a]ny damage to existing roof coverings that have been in place . . . for more than fifteen (15) years and one (1) day will be valued at ‘Actual Cash Value[.]’”
April Point asserts that that it can show that at least two roofs were replaced within the 15 years before the date of loss and therefore qualify for replacement cost value. Third Coast responds that while it does not dispute that 4,400 square feet of the damaged roofs are less than 15 years old, April Point has not shown that the other 186,400 square feet of the roofs are under 15 years old. The court agreed.
Coverage for Cosmetic Damage
The policy excludes payment for “cosmetic loss or damage” which it defines as damage “that alters only the physical appearance of any such item . . . but does not result in the failure of the item to perform its intended function for the remain[d]er of its original, useful life.” The parties agree that cosmetic work is not covered. April Point may not seek cosmetic damages to replace dented but functional parts of the property.
Replacement Cost as of the Date of Loss
The policy provision limiting Third Coast’s obligation to pay repair costs to the prices at the date of loss is unambiguous. Third Coast is entitled to summary judgment limiting the damages to the costs of repair as of the date and place of loss.
The Exclusion of General Contractor Overhead and Profit
The Third Coast insurance policy excludes recovery of “General Contract Overhead and Profit” for the “roof system or any component thereof[.]” Since neither party has submitted or pointed to evidence as to whether the “roof system or any component thereof” includes HVAC units or lattice work the court denied summary judgment because, while the policy excludes recovery for the general contractor’s overhead and profit for the “roof system or any component thereof,” the present record does not show what costs or work this policy language excludes.
The Exclusion of Loss from the Diminution of Value
The insurance policy states that Third Coast “will not pay for loss to Covered Property due to any ‘Diminution in Value[.]’” April Point may not recover damages for diminution of market value based on the appearance of the roofs after repair as opposed to replacement.
The Extracontractual Claims
Texas law imposes on insurers a common law duty to deal fairly and in good faith with its insured in the processing and payment of claims. The record shows that Third Coast’s inspector initially reported evidence of hail damage to the property and recommended payment of the claim. After the initial investigation, Third Coast brought in independent engineering and weather consultants who disagreed with the inspector’s determination. April Point has not submitted or pointed to evidence that these consultants made their findings in an unobjective or unfair matter. A bona fide controversy is sufficient reason for failure of an insurer to make a prompt payment of a loss claim. The evidence shows a bona fide controversy between various experts as to whether the damage was covered, precluding liability for bad faith. The extracontractual claims were dismissed.
CONCLUSION
Third Coast’s motion for partial summary judgment was granted to limit recovery to the actual cash value for roofs except the 4,400 square feet that were less than 15 years old and to the costs of repair as of the date of loss, and to exclude coverage for diminution of value and repair of cosmetic damage. The court also granted summary judgment on the extracontractual claims. Third Coast’s motion was denied as to the work covered by the general contractor overhead provision. The court granted summary judgment that the policy excluded coverage for cosmetic damage and diminution of value.
ZALMA OPINION
Insurance policies that contain provisions that are clear and unambiguous will always be affirmed and applied by a trial court. This court worked for fairness applying some of the insured’s arguments and applied some of the insurer’s position. Importantly it rejected the bad faith claim because the insurer’s position was fairly debatable.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
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Notice of Claim Later than 60 Days After Expiration is Too Late
Post 5089
Injury at Massage Causes Suit Against Therapist
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Hiscox Insurance Company (“Hiscox”) moved the USDC to Dismiss a suit for failure to state a claim because the insured reported its claim more than 60 days after expiration of the policy.
In Mluxe Williamsburg, LLC v. Hiscox Insurance Company, Inc., et al., No. 4:25-cv-00002, United States District Court, E.D. Missouri, Eastern Division (May 22, 2025) the trial court’s judgment was affirmed.
FACTUAL BACKGROUND
Plaintiff, the operator of a massage spa franchise, entered into a commercial insurance agreement with Hiscox that provided liability insurance coverage from July 25, 2019, to July 25, 2020. On or about June 03, 2019, a customer alleged that one of Plaintiff’s employees engaged in tortious ...
ZIFL – Volume 29, Issue 11
The Source for the Insurance Fraud Professional
Posted on June 2, 2025 by Barry Zalma
Post 5087
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Read the full article and the full issue of ZIFL June 1, 2025 at https://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-06-01-2025.pdf
Zalma’s Insurance Fraud Letter – June 1, 2025
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ZIFL – Volume 29, Issue 11
The Source for the Insurance Fraud Professional
Read the full article and the full issue of ZIFL June 1, 2025 at https://lnkd.in/gTWZUnnF
Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at ...
No Coverage if Home Vacant for More Than 60 Days
Failure to Respond To Counterclaim is an Admission of All Allegations
Post 5085
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In Nationwide Mutual Insurance Company v. Rebecca Massey, Civil Action No. 2:25-cv-00124, United States District Court, S.D. West Virginia, Charleston Division (May 22, 2025) Defendant Nationwide Mutual Insurance Company's (“Nationwide”) motion for Default Judgment against Plaintiff Rebecca Massey (“Plaintiff”) for failure to respond to a counterclaim and because the claim was excluded by the policy.
BACKGROUND
On February 26, 2022, Plaintiff's home was destroyed by a fire. At the time of this accident, Plaintiff had a home insurance policy with Nationwide. Plaintiff reported the fire loss to Nationwide, which refused to pay for the damages under the policy because the home had been vacant for more than 60 days.
Plaintiff filed suit ...
ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional
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Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
This issue contains the following articles about insurance fraud:
Health Care Fraud Trial Results in Murder for Hire of Witness
To Avoid Conviction for Insurance Fraud Defendants Murder Witness
In United States of America v. Louis Age, Jr.; Stanton Guillory; Louis Age, III; Ronald Wilson, Jr., No. 22-30656, United States Court of Appeals, Fifth Circuit (April 25, 2025) the Fifth Circuit dealt with the ...
Professional Health Care Services Exclusion Effective
Post 5073
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This opinion is the recommendation of a Magistrate Judge to the District Court Judge and involves Travelers Casualty Insurance Company and its duty to defend the New Mexico Bone and Joint Institute (NMBJI) and its physicians in a medical negligence lawsuit brought by Tervon Dorsey.
In Travelers Casualty Insurance Company Of America v. New Mexico Bone And Joint Institute, P.C.; American Foundation Of Lower Extremity Surgery And Research, Inc., a New Mexico Corporation; Riley Rampton, DPM; Loren K. Spencer, DPM; Tervon Dorsey, individually; Kimberly Dorsey, individually; and Kate Ferlic as Guardian Ad Litem for K.D. and J.D., minors, No. 2:24-cv-0027 MV/DLM, United States District Court, D. New Mexico (May 8, 2025) the Magistrate Judge Recommended:
Insurance Coverage Dispute:
Travelers issued a Commercial General Liability ...
A Heads I Win, Tails You Lose Story
Post 5062
Posted on April 30, 2025 by Barry Zalma
"This is a Fictionalized True Crime Story of Insurance Fraud that explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is designed to help everyone to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the Perpetrators than any Other Crime."
Immigrant Criminals Attempt to Profit From Insurance Fraud
People who commit insurance fraud as a profession do so because it is easy. It requires no capital investment. The risk is low and the profits are high. The ease with which large amounts of money can be made from insurance fraud removes whatever moral hesitation might stop the perpetrator from committing the crime.
The temptation to do everything outside the law was the downfall of the brothers Karamazov. The brothers had escaped prison in the old Soviet Union by immigrating to the United...