Doctrine Of Concurrent Causes

Lawyers handling roofing claims and damage to property need to know and understand 2020 case from the Eastern District of Texas, Beaumont Division.  The case is styled, Starco Impex, Inc. v. Landmark American Insurance Company.

The legal backdrop to the case and the facts need to be read in the opinion but here is a brief description of the issues.

Starco had a commercial policy with Landmark that was to cover damage caused by wind, hail, hurricane, etc.  Starco claims to have suffered damage in a storm that occurred on March 29, 2017.

Litigation began and Landmark eventually filed a motion for summary judgment based on its contention the policy did not cover pre-existing and excluded damage suffered by Starco and thus, the damages suffered by Starco are not covered.  Landmark points to evidence that the damage was pre-existing and due to deterioration rather than covered losses.  Landmark also asserts that Starco cannot produce evidence which segregates the non-covered losses from any covered losses.

Starco contends that the damage is a result of the March 29, 2017, storm and that “it has nothing to allocate because 100% of the damage it is claiming was caused by Hurricane Harvey.”.

The evidence in the case shows Landmark retained Engle Martin to adjust the claim.  During the inspection, Engle Martin found water damage to the interior of the building but no physical damage to the roofing material that could be attributed to Hurricane Harvey.  They also concluded that the roofing surface exhibited signs of wear and tear due to age and exposure over time.  The adjusters further noted a number of previous repairs.  There was also no observed wind-related damage.  Engle Martin concluded that the water damage to the interior of the Property resulted from openings caused by long-term maintenance and wear and tear as opposed to a sudden and accidental covered cause of loss.  Based on this determination, the adjusting firm recommended denial of coverage for the Starco’s claimed loss.

In a Pre-Litigation Demand Letter to Landmark, Starco contends it first discovered the damage in August of 2017, due to damage to the roof and resulting interior leaks.  In the letter, Starco attached a  CoreLogic Wind Verification Report to its Notice, listing estimated wind speeds at the Property for dates ranging from January 1, 2009, to September 13, 2018.  The CoreLogic Report lists 61 mph as the wind speed on March 29, 2017, but does not include the wind speeds associated with the Hurricane Harvey loss date in August 2017.

Starco retained Dr. Neil Hall of Groundtruth Forensics to do a building damage assessment as Starco’s causation expert.  Dr. Hall determined that based on evidence of prior roof repairs, it is likely that some water penetrated the roof causing interior damage prior to Hurricane Harvey.  He also noted that there rust as a general condition caused by condensation and not water leaks.  Hall further found that water penetrating the roof during Hurricane Harvey followed the same path as previous intrusions, thereby re-wetting previously damaged metal building insulation.  Dr. Hall further explains that the presence of “chronological repairs shows a concerted pattern of maintenance and repair[,] i.e.[,] every time it leaked, new patches were added.”  At his deposition, Hall also acknowledged that there were prior damage, leaks, and previous repairs to the Property.

Usman Akbar gave his deposition as the representative for Starco.  He acts as the corporate risk officer for Starco as well as overseeing some global distribution duties.  Mr. Akbar testified that employees of Starco had done repairs to the Property for leaks from the inside since 2015.  More specifically, Starco employees have done interior repairs and changed ceiling tiles five or six times since 2015 to address interior issues such as leaks and water damages.  Akbar acknowledged that he could not differentiate between old roof cracks and new roof cracks caused by storms March 2017 or August 2017.

Starco does not dispute that its Property had suffered prior damages and undergone maintenance in the past.  Starco argues, however, that all of the claimed damages to the Property are covered and, therefore, allocation is unnecessary.  Starco points to Dr. Hall’s opinion and Mr. Akbar’s testimony to support its position that Starco “has nothing to allocate because 100% of the damages it is claiming was caused by Hurricane Harvey.”  Starco relatedly contends that because it “properly mitigated” prior damage to the Property and, accordingly, the new damage is covered.

The doctrine of concurrent causes provides that when covered and non-covered events combine to create a loss, the insured may only recover the portion of the damage caused by the covered event.  An insured cannot recover under an insurance policy unless facts are pleaded and proven showing that damages are covered by its policy.  However, an insured can recover where he suffers damage from both covered and non-covered perils.  The doctrine is a rule which embodies the basic principle that insureds are entitled to recover only that which is covered under their policy.  Consequently, 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. It is essential that the insured produce evidence which will afford a reasonable basis for estimating the amount of damage or the proportionate part of damage caused by a risk covered by the insurance policy.

Starco contends that it has in fact produced some evidence – namely Dr. Hall’s opinion and Akbar’s testimony – that its claimed damages are covered.  The evidence cited by Starco, however, does not differentiate between covered and non-covered damages.  As noted above, Dr. Hall himself acknowledged that there was pre-existing damage to the Property and that any new damages (during the applicable Policy period) resulted, at least in part, from pre-existing cracks and previously damaged areas.  The evidence certainly shows that Starco’s Property suffered some new damage as alleged.  The problem is that Starco has failed to present summary judgment evident establishing what damage was caused solely by a covered peril, wholly separate from the previous damages, earlier repairs, and wear and tear dating back to at least 2015 (according to Akbar’s testimony).  Dr. Hall does indicate that covered events contributed to the alleged damage to the Property.  Even viewing the evidence presented in the most favorable light to Starco, however, Starco has not pointed to any testimony in which Dr. Hall rules out all other non-covered causes of the damage to the Property.  Starco’s own representative’s testimony indicates that Starco employees made several repairs to at least the interior of the Property due to water damage prior to the alleged covered events.  Mr. Akbar’s testimony did not set forth specific evidence indicating damages that were caused solely by either the March 2017 storm or Hurricane Harvey in August 2017.  The adjusting report from Engle Martin further supports the determination that the Starco’s claimed damages are excluded under the Policy because – based on the evidence presented – any damage sustained due to a covered event cannot be segregated from prior issues of wear and tear, earlier water damage, and inadequate repairs.

The burden of segregating the damage attributable solely to the coverage event is an issue on which the insured carries the burden of proof.  Because Starco has not adequately responded with specific evidence affording a reasonable basis for estimating the proportionate part of damage caused by a covered event, recovery is precluded as a matter of law.

Starco has not carried its burden of allocation on the concurrent causation doctrine.  The summary judgment record establishes that any covered damages claimed by Starco cannot be segregated from non-covered or excluded damages.  Landmark has therefore shown an absence of any genuine issue of material fact as to whether it breached the Policy by denying Starco’s claim for damages.  The summary judgment record supports a finding that the denial was proper under the terms of the Policy.

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