Texas Federal Court Upholds Summary Judgment In Favor Of Insurer On Hail Damage Claim

Hamilton Props. v. Am. Ins. Co., No.: 12-cv-5046-B, 2014 U.S. Dist. LEXIS 91882 (N.D. Tex. July 7, 2014) was an insurance dispute over coverage for hail damage to the roof of the insured’s commercial property.  The insured, Hamilton Properties, operated a residential property in Dallas, Texas.  On July 8, 2009, a hailstorm impacted the Dallas area.  The caretaker of the property testified in an affidavit that “ping-pong” sized hailstones rained down on the insured property on that day.  Within a month of the subject storm, the caretaker testified to a pattern of falling ceiling tiles and water dripping on the twelfth floor of the property.

The property was insured by The American Insurance Company under a policy whose coverage ended on September 24, 2009.  The American Insurance Policy provided coverage for “all risks of direct physical loss or damage, except as excluded or limited elsewhere” in the coverage section of the policy.  The policy contained several exclusions, including exclusions for wear and tear and gradual deterioration.  American Insurance denied coverage, in part, on the basis that American Insurance could not determine if the damage occurred during the coverage period.

The court first focused on the insured’s breach of contract claim.  American Insurance argued that there was no breach because the insured could not establish that the insured property suffered a covered loss without evidence to allocate damages between the July 2009 hailstorm and other excluded factors.  The insured, on the other hand, argued that it supported its claim with the following: (1) affidavits from the caretaker and owners regarding the severity of the subject storm and the large size of the hail stones; and (2) testimony from an expert who inspected the property in 2013 and determined that the July 2009 hailstorm damaged the roof.

The court held the insured’s evidence was “insufficient to support a reasonable jury finding in favor of [the insured’s] claims.”  The court reasoned that American Insurance satisfied its burden of showing the lack of evidence to support the insured’s claim that the damage to the insured property was “solely caused” by the July 2009 storm.  While the affidavits from the residents demonstrated the severity of the storm, the affidavits were silent as to the condition of the roof before or after the storm.  In addition, the evidence from the insured’s expert only shows that the July 2009 hailstorm contributed to the destruction of the roof rather than that the July 2009 storm was the sole cause of the harm.  The court also relied on evidence proffered by American Insurance that the damage to the roof could have been the result of non-covered perils (e.g., a hailstorm prior to the policy period or lack of maintenance).

Once American Insurance established that pre-policy storms and lack of maintenance are not covered losses under the policy, the court shifted the burden to the insured to provide “evidence to allow the trier of fact to segregate covered losses from non-covered losses.”  The court concluded that the insured failed to sustain its burden, as neither the insured nor its experts pointed to evidence that would allow a jury to distinguish between damage caused by the July 2009 storm and damage caused by other sources.  The court ultimately granted summary judgment in favor of American Insurance on the insured’s breach of contract claim.

While not analyzed in detail in this entry, the court also upheld the insurer’s denial of coverage based on late notice in light of the insured’s nineteen to twenty-seven month delay in contacting American Insurance about damage to its property, and the prejudice American Insurance sustained in its inability to determine whether and to what extent the July 2009 hailstorm damaged the property.  The court also granted American Insurance summary judgment as respects the insured’s bad faith claims (Sections 541 and 542 of the Texas Insurance Code), breach of fiduciary duty claim, and negligent and intentional misrepresentation claims.

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Hamilton Props. v. Am. Ins. Co., No.: 12-cv-5046-B, 2014 U.S. Dist. LEXIS 91882 (N.D. Tex. July 7, 2014) was an insurance dispute over coverage for hail damage to the roof of the insured’s commercial property.  The insured, Hamilton Properties, operated a residential property in Dallas, Texas.  On July 8, 2009, a hailstorm impacted the Dallas area.  The caretaker of the property testified in an affidavit that “ping-pong” sized hailstones rained down on the insured property on that day.  Within a month of the subject storm, the caretaker testified to a pattern of falling ceiling tiles and water dripping on the twelfth floor of the property.

The property was insured by The American Insurance Company under a policy whose coverage ended on September 24, 2009.  The American Insurance Policy provided coverage for “all risks of direct physical loss or damage, except as excluded or limited elsewhere” in the coverage section of the policy.  The policy contained several exclusions, including exclusions for wear and tear and gradual deterioration.  American Insurance denied coverage, in part, on the basis that American Insurance could not determine if the damage occurred during the coverage period.

The court first focused on the insured’s breach of contract claim.  American Insurance argued that there was no breach because the insured could not establish that the insured property suffered a covered loss without evidence to allocate damages between the July 2009 hailstorm and other excluded factors.  The insured, on the other hand, argued that it supported its claim with the following: (1) affidavits from the caretaker and owners regarding the severity of the subject storm and the large size of the hail stones; and (2) testimony from an expert who inspected the property in 2013 and determined that the July 2009 hailstorm damaged the roof.

The court held the insured’s evidence was “insufficient to support a reasonable jury finding in favor of [the insured’s] claims.”  The court reasoned that American Insurance satisfied its burden of showing the lack of evidence to support the insured’s claim that the damage to the insured property was “solely caused” by the July 2009 storm.  While the affidavits from the residents demonstrated the severity of the storm, the affidavits were silent as to the condition of the roof before or after the storm.  In addition, the evidence from the insured’s expert only shows that the July 2009 hailstorm contributed to the destruction of the roof rather than that the July 2009 storm was the sole cause of the harm.  The court also relied on evidence proffered by American Insurance that the damage to the roof could have been the result of non-covered perils (e.g., a hailstorm prior to the policy period or lack of maintenance).

Once American Insurance established that pre-policy storms and lack of maintenance are not covered losses under the policy, the court shifted the burden to the insured to provide “evidence to allow the trier of fact to segregate covered losses from non-covered losses.”  The court concluded that the insured failed to sustain its burden, as neither the insured nor its experts pointed to evidence that would allow a jury to distinguish between damage caused by the July 2009 storm and damage caused by other sources.  The court ultimately granted summary judgment in favor of American Insurance on the insured’s breach of contract claim.

While not analyzed in detail in this entry, the court also upheld the insurer’s denial of coverage based on late notice in light of the insured’s nineteen to twenty-seven month delay in contacting American Insurance about damage to its property, and the prejudice American Insurance sustained in its inability to determine whether and to what extent the July 2009 hailstorm damaged the property.  The court also granted American Insurance summary judgment as respects the insured’s bad faith claims (Sections 541 and 542 of the Texas Insurance Code), breach of fiduciary duty claim, and negligent and intentional misrepresentation claims.

 

Topics:  Property Damage, Property Insurance, Severe Weather

Published In: Civil Procedure Updates, Insurance Updates, Personal Injury Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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