Proof of Accidental Direct Physical Loss Shifts Burden to Insurer on an All Risk Policy

Post 5024

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Insured Must Prove Actual Loss Causing Peril to Claim on Named Peril Policy

In Mark Alan Barger, Jr.; Margie Barger v. State Farm Fire and Casualty Company, No. 24-60178, United States Court of Appeals, Fifth Circuit (March 7, 2025) the difference between the burden of proof needed for an “all risk” coverage and named peril coverage.

Mark Alan Barger, Jr., and Margie Barger (“the Bargers”) appealed the district court’s grant of summary judgment in favor of their homeowners’ insurer, State Farm. The Bargers contended that the district court, in evaluating their insurance claim, erroneously assigned them the burden of proving that a specified “named peril,” or “covered event,” caused damage to their roof and necessitated its replacement.

FACTS

In June 2021, a storm in Greenwood, Mississippi, caused significant rainfall, leading to rainwater leaking through the Bargers’ roof and interior ceilings, causing damage to multiple rooms in their house. State Farm refused to cover the cost of replacing the entire roof, concluding that only nine wind-damaged shingles and a small area of roofing membrane were covered by the policy. The Bargers eventually paid for a new roof in March 2022 and subsequently sued State Farm for breach of contract.

The district court granted summary judgment in favor of State Farm, reasoning that the Bargers failed to prove that a covered event caused the additional damage.

ANALYSIS

Under Mississippi law, when an insured makes a claim under an “all-risk” coverage the insured (the Bargers) only needed to prove that an “accidental direct physical loss” occurred to their dwelling. Once established, the burden shifted to the insurer (State Farm) to prove that a policy exclusion applied.

State Farm maintained that the district court’s reference to Coverage B, rather than Coverage A, had no impact on the application of the burden of proof and was nothing more than a clerical error [that] did not affect the outcome of the case and should be disregarded as harmless.

The language of the “Coverage A-Dwelling” section of the Bargers’ State Farm policy unquestionably provided “all-risk” coverage, whereas the “Coverage B- Personal Property” section only covered property loss caused by certain specified perils the “named perils” coverage of “Coverage C-Personal Property.” The Bargers were required to prove, by a preponderance of the evidence, that the “direct physical loss” to the property described in Coverage C was caused by wind.

The Fifth Circuit was convinced that the district court improperly allocated the burden of proof regarding causation to the Bargers, rather than to State Farm. The Fifth Circuit was not convinced that the error had no impact on the district court’s summary judgment decision and, therefore, the Fifth Circuit reversed the district court’s summary judgment ruling, vacated the dismissal of the Bargers’ breach of contract claim, and remanded the case for further proceedings.

ZALMA OPINION

The State Farm policy contained two different types of coverage: (1) an all risk policy for the structure and (2) a named peril coverage for the contents. The District Court erroneously applied the named peril coverage to the entire claim when it should have applied the “all risk” requirements to structure and named peril requirements to the contents. The Bargers fulfilled the all risk requirement but may not have fulfilled the named peril requirement for loss to their contents so the court reversed and returned the case to the District Court to rule on both aspects of the policy.

(c) 2025 Barry Zalma & ClaimSchool, Inc.

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