Commercial Roof Hail Damage Claim

Fort Worth insurance attorneys who handle hail damage claims need to ready this recent opinion out of the United States District Court, Dallas Division. The style of the case is Hamilton Properties v. American Insurance Company. The opinion was issued in July 2014. Here is the relevant information.
This case arises out of a dispute regarding an insurance company’s decision to disclaim coverage and deny its client’s claim for property damage following a hailstorm. Plaintiffs are suing for: (1) breach of contract; (2) violations of the Texas Deceptive Trade Practices Act; (3) violations of the Texas Insurance Code; (4) breach of the duty of good faith and fair dealing; (5) breach of fiduciary duty; (6) misrepresentation; and (7) common law fraud by misrepresentation. Defendant The American Insurance Company (“AIC”) has moved for summary judgment with respect to all of these claims.
The Property was originally covered under an umbrella insurance policy through Hamilton Properties’ hospitality management company. However, on February 16, 2009 the Property was added to Hamilton Properties’ insurance policy number S 67 MXX 80895731, whose coverage ended September 24, 2009.
The Policy includes a section entitled Covered Causes of Loss, which indicates that the Policy insures “all risks of direct physical loss or damage, except as excluded or limited elsewhere” in the Coverage Section. Among the risks excluded from coverage are “wear and tear, gradual deterioration, inherent vice, latent defect, depletion, erosion, corrosion, mold, wet or dry rot” and “settling, cracking, shrinkage, bulging, or expansion of pavements, foundations, walls, floors, roofs, or ceilings.”
In the event of a Covered Cause of Loss, the Policy indicates that the insured must give “prompt notice of the loss or damage.” In addition, the insured must provide “a description of how, when and where loss or damage occurred” as soon as possible, and “take all reasonable steps to protect the Covered Property from further damaged by a Covered Cause of Loss.”
On July 8, 2009 there was a hailstorm. According to Tom Coughlin, who was living at the Property and serving as its caretaker at the time, ping-pong sized hailstones rained down. Within a month of the July Hailstorm, Coughlin started to notice a pattern of falling ceiling tiles and water dripping on the 12th floor of the Property. “Probably after a week or two had gone by but before a couple months” after the storm Coughlin notified a manager for Hamilton Properties, Ashley Farha, of the problems he observed. However, it was not until later that Larry Hamilton, corporate representative of Hamilton Properties,
became aware of the water and ceiling issues.
AIC’s roof consultant advised that the roof was about twelve to fifteen years old, that he saw no evidence of hail damage to its surface, and that the worst interior damage was over an area previously patched. The Denial Letter also noted that AIC reviewed historical weather data for the area and confirmed that inch-sized hail was reported on the date of the July Hailstorm. Further, there were three prior hail events between April 2007 and February 2008 that produced hail between 0.88 and 1.75 inches. There also three hail events after the July Hailstorm during May 2011 that produced hail between 0.75 and 1.5 inches. Ultimately, because Plaintiffs did not notice the damage until 2011, AIC could not determine if the damage occurred during the coverage period, which ended on September 24, 2009. Consequently, AIC disclaimed the coverage and made no payment for the claim.
AIC moves for summary judgment with respect to all of Plaintiffs’ claims. In particular, AIC avers that Plaintiffs cannot establish the causation element of any of their causes of action. In addition, AIC highlights deficiencies particular to each of Plaintiffs’ claims.
AIC argues that Plaintiffs cannot establish that the Property suffered a covered loss because they have no evidence to allocate damages between the July Hailstorm and other excluded factors.
Plaintiffs refute the claim that they cannot attribute the Property’s damage to a covered loss. Indeed, they maintain eyewitness and expert testimony show that the damage was solely attributable to the July Hailstorm. For support, they point to the resident caretaker Tom Coughlin’s discovery of “new and distinct” damage directly beneath the roof area where hail damage occurred. In addition, Plaintiffs note that owners of neighboring properties submitted affidavits regarding the severity of the storm and the large size of the hail stones. Plaintiffs also rely on their purported expert, Tom Shingler, who inspected the Property in 2013 and determined that the July Hailstorm ruptured the waterproofing skin of the roof’s cant and created flow paths for water into the Property that led to damage to the interior of the 12th floor.
“An insured cannot recover under an insurance policy unless facts are pleaded and proved showing that damages are covered by his policy.” To be sure, this does not mean that an insured cannot recover where he suffers damage from both covered and non-covered perils. However, “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.” “Failure to provide evidence upon which a jury or court can allocate damages between those that resulted from covered perils and those that did not is fatal to an insured party’s claim.”
Plaintiffs insist that damage to the Property was solely caused by the July Hailstorm. In support, they direct the Court to several exhibits-the affidavits of Douglas Caudill, Paul Cook and Tom Shingler, the deposition of Tom Coughlin and the expert report of Tom Shingler. AIC disagrees and insists that Plaintiffs cannot establish that the July Hailstorm caused their property damage. Specifically, AIC alleges Plaintiffs have no evidence to apportion damage between the July Hailstorm and other excluded factors, including a storm beyond the coverage period and normal wear and tear.
The Court concluded that AIC had satisfied its burden of showing the lack of evidence to support Plaintiffs’ claim that the damage to the Property was solely caused by the July Hailstorm. For example, the affidavits of Douglas Caudill and Paul Cook show that the July Hailstorm was significant, caused damage to the roofs of neighboring buildings, and was stronger than a prior hailstorm in the area. However, the affidavits are silent with respect to the condition of Plaintiffs’ hotel either before or after the storm. Thus, these exhibits do little more than support a point that is not in dispute-that the July Hailstorm could have damaged the Property. Whether the storm actually did-and to what extent-remains unclear.
Similarly, the testimony of Plaintiffs’ eye-witness Tom Coughlin and the testimony, affidavit, and expert report of Plaintiffs’ expert Tom Shingler do not demonstrate that Plaintiffs’ damage was “solely attributable to the hail storm.” Indeed, when taken in the light most favorable to Plaintiffs, the evidence from both men shows only that the July Hailstorm contributed to the destruction of the roof and interior of the Property. However, it does not establish Plaintiffs’ claim that the July Hailstorm was the lone cause of the harm. Nor does the evidence raise a genuine question of material fact on this point.
For example, Mr. Coughlin testified that before the storm he never noticed leaking on the 12th floor. Sometime thereafter-“after the beginning of July 2009”-he observed water dripping from the ceiling. Indeed, “if it was raining outside, Mr. Coughlin would for all intents and purposes, see leakage. Sometimes a day or two after it rained, it would still be continuing to leak.” Over time, the water damage became so bad that ceiling tiles started to fall. Certainly Mr. Coughlin’s observations indicate that the 12th floor deteriorated after the July Hailstorm. However, they fail to demonstrate what Plaintiffs allege-that the change was entirely the result of the event. Mr. Coughlin never clarified when before (or after) the storm he visited the 12th floor or what its condition was during his initial visit. In addition, Plaintiffs’ expert Tom Shingler testified that it could take anywhere from days to months after holes form in the roof and walls for water to be noticeable inside the Property. Mr. Shingler also acknowledged that two previous hailstorms, one of which pre-dated the Policy’s coverage period, could have caused the hail damage that allowed water to penetrate the 12th floor. Further, he conceded that a pre-existing crack in a patch on the roof, which he attributed to shrinkage and suggested a “lack of quality in the maintenance,” could have been a source of the water intrusion.
To be sure, Mr. Shingler did conclude that the July Hailstorm damaged the waterproofing skin of the cant and created paths for water to flow inside the Property, and that the ceiling on the 12th floor was damaged underneath the observed weaknesses on the roof. However, Mr. Shingler admitted that he did not believe the damage he observed inside the building in 2013 existed as of August 2009 because “it takes time for what he saw.” Instead, he explained “the process of damage initiated with the July Hail storm.” This view is consistent with Plaintiffs’ own Exhibit H, a 2009 Fireman’s Fund Roof Survey, that states the roof “was in decent conditions but showing signs of wear” as of July 27, 2009-less than three weeks after the July Hailstorm.
Far from establishing their claim that the storm was the sole cause of their loss, Plaintiffs’ evidence reinforces AIC’s point that other causes could have contributed to the damage. What’s more, AIC has adduced evidence to suggest that the damage to Plaintiffs’ roof and interior could have been the result of non-covered perils, such as a hailstorm from February 10, 2009 or lack of maintenance. Regarding the latter, AIC highlights Mr. Shingler’s testimony regarding the crack on the roof as well as the deposition testimony of Larry Hamilton, who indicated Hamilton Properties did nothing to maintain the roof before making its present claim for damage. (Q: “Prior to making this claim, is there anything that Hamilton Properties was doing to maintain the roof of this hotel?”A: “There was-we were doing what we were required to do which was nothing.”). As neither a prior storm nor lack of maintenance is covered by the Policy, the burden has shifted to Plaintiffs to provide “evidence to allow the trier of fact to segregate covered losses from non- covered losses.”
Based on the analysis above, the Court concludes Plaintiffs have failed to sustain their burden of establishing evidence to allow a jury to allocate damages between the July Hailstorm and noncovered perils.