Bad Faith Insurance Claim – Hail Damage

To show an insurance company has acted in “bad faith” an insured must first show that the insurance company has breached the insurance contract.  This is discussed in a 2022, opinion from the Western District of Texas, San Antonio Division opinion.  The opinion is styled, Rosemarie Wheeler v. Safeco Insurance Company of Indiana.

Wheeler had her home insured through Safeco.  Wheeler contends her home was damaged in a hail storm that occurred on or about May 28, 2020.  The claim was reported on May 30, 2020, and Safeco scheduled an inspection on June 13, 2020.  The adjuster, Doug Lehr, determined that there was hail damage but that most of the damage was cosmetic.  A small check was issued for the damage determined to be non-cosmetic.

Wheeler hired a public adjuster, Elvis Spoon, who prepared an estimate that totaled $140,617.62.  Spoon disagreed the roof damage was cosmetic but did not provide any additional information to dispute Lehr report.

Wheeler filed suit and later filed a motion for summary judgment on her breach of contract claim.  Specifically, Wheeler argues that Safeco has not met its burden to prove that the hail damage to her roof is cosmetic and therefore excluded under the Policy.

The burden of establishing coverage rests upon the insured. The burden of establishing an exclusion to coverage rests upon the insurer. If the insurer demonstrates that an exclusion arguably applies, the burden shifts back to the insured to show the claim does not fall within the exclusion or that it comes within an exception to the exclusion.

The parties do not dispute that the Policy is valid, and that the Policy provided
insurance coverage to the Wheeler’s residence, including the metal roof, in the event of damage from a wind or hailstorm.  Therefore, Safeco has the burden to show that an exception to coverage applies.  Safeco points to the Policy’s exclusion for any cosmetic loss or damage to the metal roof.  The Policy defines “cosmetic loss or damage” as “any loss that is limited to the physical appearance of a metal roof surface.”

Safeco has presented evidence that the cosmetic-damage exclusion may apply.  After his inspection of the roof, Lehr concluded that “the effects of hail on the metal roof panels were cosmetic in nature and did not cause functional/structural damage to the metal panels.”  After reviewing Valle’s report, Lehr applied Valle’s findings to the Policy’s language and determined that the damage to the metal roof panels was cosmetic and thus not covered by the Policy.  Whether such actions violated the Policy—in other words, whether the damage to the roof was non-cosmetic—is a question of fact that cannot be resolved on summary judgment.

The Court discussed this further and ultimately denied the motion for summary judgment.

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