Promptly Reporting Hail Damage

Fort Worth insurance attorneys tell their clients to report all claims immediately. A 2015, 5th Circuit Court of Appeals case is a good illustration of why. The opinion is styled, Carlos Alaniz v. Sirius International Insurance Corporation.
This is a summary judgment case granted in favor of Sirius.
Alaniz owns four rental properties. Each property contains four apartment units.
On March 29, 2012, there was a substantial hailstorm in the area of the properties. Alaniz was aware of the storm and its severity as well as reports that it caused damage to vehicles. He did not notice any hail damage, inspect the properties for hail damage, or have them inspected by a professional.
In the summer of 2013, a tenant notified Alaniz of a leaking and wet ceiling in one of the units at the 1519 Orlando Street property. Alaniz attempted to repair the ceiling by applying spackling. He inspected the roof himself but did not notice any visible damage. A week later, the tenant reported that the repair had failed, so Alaniz reapplied spackling. Shortly thereafter, a tenant in a different unit reported the same problem, and Alaniz attempted to repair it in the same manner.
A few weeks later, an owner of a neighboring property suggested to Alaniz that the leaks and water damage might be attributed to hail damage from the March 2012 hailstorm. The neighbor told Alaniz that he had similar damage and did not initially realize it was from the hailstorm until he contacted an attorney and had the property inspected.
A few months after this conversation, Alaniz visited with an attorney regarding the damage to the property. Alaniz signed a representation agreement with that attorney on September 5, 2013. A little over five months later, on February 14, 2014, Alaniz faxed notice of hail damage and an insurance claim to Sirius regarding each of his four properties. Alaniz had the roofs of the properties inspected by a professional on February 24, 2014. After failing to receive a response from Sirius, on March 27, 2014, Alaniz filed suit against Sirius. Sirius responded stating that Alaniz could not recover under the insurance policy because he did not satisfy its requirement of providing “prompt notice of the loss or damage.”
The policy required that Alaniz provide “prompt notice of the loss or damage” and, “as soon as possible,” provide a “description of how, when and where the loss or damage occurred.” An insurer has a right to demand notice as a condition to liability under the policy.
A provision requiring that notice of the accident be given the insurer as soon as practicable is a condition precedent to liability. In the absence of waiver or other special circumstances, failure to perform the condition constitutes an absolute defense to liability on the policy. However, Texas law has qualified this right in various contexts by requiring the insurer to prove that the lack of notice prejudiced it.
Construing the facts in the light most favorable to Alaniz, he provided notice to Sirius on February 14, 2014. Alaniz was aware of the March 2012 hailstorm, its severity, and damage that it caused in general, but, according to him, he did not initially realize it caused damage to his properties. In the summer of 2013, Alaniz was notified by tenants of wet ceilings and leaks in two separate units of the same apartment complex. He attempted interior repairs on the ceiling, which were initially unsuccessful. A few weeks later, an owner of a neighboring property suggested that the leaks and water damage might be attributed to hail damage from the March 2012 hailstorm. The neighbor told Alaniz that his neighboring property had similar damage, which was caused by the hailstorm, but that he did not initially realize that he had hail damage from the storm. At this point, Alaniz was aware of facts necessary to conclude that he should notify his insurer of the damages to his properties or have the properties inspected by a professional for hail damage.
Nevertheless, it was not until a few months after this conversation that Alaniz took any action. He contacted an attorney regarding the damage to his property and a representation agreement was signed with that attorney on September 5, 2013. Alaniz’s actions thus confirm that he was aware of damage to his properties that he believed required professional attention. At that time, the hailstorm had occurred more than 17 months earlier, but Alaniz still did not provide notice to Sirius of the damage to his properties. Instead, he delayed five and a half additional months before providing notice to Sirius.
The prejudice requirement is grounded in the principle that one party is excused from performing under a contract only if the other party commits a material breach. Accordingly, when an insurer must prove it was prejudiced by the insured’s failure to comply with the notice provisions, the recognized purposes of the notice requirements form the boundaries of the insurer’s argument that it was prejudiced; a showing of prejudice generally requires a showing that one of the recognized purposes has been impaired. The primary purpose of a prompt notice and proof of loss provision in a policy such as this one is to allow the insurer to investigate the incident close in time to the occurrence, while the evidence is fresh, and so that it may accurately determine its rights and liabilities under the policy (and take appropriate remedial action.
Sirius argues that Alaniz’s delay in providing notice prejudiced it by depriving it of the ability to promptly investigate damage to the properties at a time when the evidence of any hail damage would be less likely to be altered by time and continuing deterioration of the property and to provide for the repair of any such damage before further deterioration occurred. Sirius states that because the roofs were not timely fixed, the intrusion of water that purportedly caused damage to the interiors of the properties has been allowed to continue, thus causing further damage. Indeed, Sirius states that Alaniz now alleges that all sixteen apartment units have extensive property damage from water intrusion. Sirius also points out that during the period of delay, Alaniz did nothing to mitigate further deterioration of the properties by fixing the purported hail damage, but instead patched over water damage to the interior ceilings.
Significantly, Alaniz has completely failed to mention, much less contest, Sirius’s facts or arguments on prejudice. Construing the facts in the light most favorable to Alaniz, the Court concluded that Sirius has proven as a matter of law that Alaniz’s delay in providing notice prejudiced its ability to promptly investigate the circumstances of the accident while the matter is fresh and to enable it to form an intelligent estimate of its rights and liabilities under the policy. Further, it is evident that there has been continued deterioration of the properties due to water damage that could have been at least partially avoided by prompt action on Alaniz’s part. Alaniz estimates the damage at upwards of $650,000. This continued deterioration of the property prejudices Sirius’s ability to investigate to what extent any damage to the properties might be attributable to the March 2012 hailstorm and exacerbates the cost of any repairs.