| Q&A of the Week |
Wind Damage to Roof
A Maryland subscriber recently asked the following question:
I have a homeowners claim in Maryland with an HO 03 10 00 policy.
The risk sustained wind damage to the roof, fascia, soffits, and gutters on April 2, 2016, and a claim was filed April 17. Prior to my involvement the insured's contractor met the independent adjuster for the inspection. The adjuster allowed for replacement of the back slope of the roof and some damaged soffits, fascia, and gutters.
The contractor and homeowner thought the entire roof should have been covered due to damage. The contractor advised me that he pointed out wind damage to the front slope of the structure and the adjuster told him that wind could not simultaneously damage both front and back slopes of a structure.
My initial inspection showed wind damage on the front slope and a failure of a brittle test that would show whether a roof was reparable.
After submitting my supplemental estimate the independent adjuster contacted me to schedule a re-inspection. He stated that he had photos of the front slope and that it did not have damage at the time of the initial inspection. He also agreed that the roof was not reparable.
At the re-inspection on September 20, 2016, I showed the adjuster additional damage on the front slope. He stated that it was "prejudiced" against the insurance company because it had been too long since the initial inspection and that the policyholder would have to file an additional claim. I asked him for the photos showing the shingles in question had not been damaged. He said it was ridiculous for me to ask that question and that I should show him photos proving when all of the damage occurred on the roof.
My first question regarding this claim: if he has no photographic evidence from his first inspection showing whether or not the damage had occurred, wouldn't that kill any argument he has that the damage occurred after the initial inspection? Isn't it the policyholder's burden to prove a loss occurred, but the insurer's burden to show why the loss is not covered under the policy?
There was also damage to both the metal soffits and the wooden soffits to which the metal soffits had been attached. I advised him that both the metal and wooden soffits should be covered. He stated that only one or the other should be covered because the wood soffits are an "abandoned surface." There is no mention of abandoned surfaces in the policy. It is my understanding that it was a term that someone made up and has no legal or policy basis whatsoever.
My second question: is there any basis for an insurer to deny payment due to the concept of an "abandoned surface"?
ANSWER: Wind gusts can easily occur in both directions on the same day, even within the same storm. The National Weather Service can confirm wind speeds and direction if necessary. You are correct in that the carrier must prove its reason for denial, so it is on the carrier to prove that there was no damage to the front, especially since the contractor pointed it out.
We found no reference to "abandoned surface" in an internet or Westlaw search other than that which applies to mining and underground or surface mines. This has no use as far as roof is concerned, so the adjuster needs to explain the term and show where it is being used in the industry.
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| Litigation Watch |
Consent Judgment
Following a settlement by the bar and the administrator of an auto passenger's estate of a wrongful death action, the estate filed a petition against the insurer of the bar. This case is Auto-Owners Insurance Company v. J.C.K.C., 2004 WL 2244484.
In 1994, Horton and Supple were patrons of J.C.K.C., dba K.C.'s Lakes Lounge. The two consumed an unknown amount of alcohol and they eventually became intoxicated. The employees of the bar placed Horton in the back of Supple's vehicle and allowed Supple to drive from the premises. Supple lost control of the car and collided with trees, resulting in Horton's death.
The administrator of Horton's estate filed a lawsuit against the bar. K.C.'s Lakes Lounge was insured by Auto-Owners. The insurer defended its insured but filed a declaratory judgment action seeking a declaration that there was no coverage for the lawsuit against the insured based on the liquor liability exclusion. The trial court granted summary judgment to the insurer and the estate appealed.
During the pendency of the appeal, the estate filed an amended complaint based solely on a premises liability claim. That complaint alleged that as a business owner, the lounge breached its duty of care to Horton as a business invitee by failing to protect him from an intoxicated patron. The attorney for the estate notified the insurer that if Auto-Owners refused to provide the insured with a defense, the lounge and the estate would settle. The insurer responded that it would not consent to any settlement.
K.C.'s executed the settlement agreement in 1998 and the trial court entered judgment in favor of Horton and against K.C.'s for $300,000. Then, the estate filed this supplemental petition against Auto-Owners seeking the settlement amount from Auto-Owners. The trial court in that matter ruled against the insurer and this appeal followed.
The Court of Appeals of Ohio, Ninth District, noted that the sole assignment of error claimed by the insurer contended that the trial court erred in finding that it denied coverage to K.C.'s. K.C. argued that Auto-Owners denied coverage and so forfeited its right to insist on compliance with its policy terms and conditions requiring Auto-Owners' consent to any settlement. Specifically, the insured avers that once Auto Owners decided to seek and obtain a judgment that it had no coverage obligations under the policy, it could not prohibit the insured from entering into settlement negotiations with the injured party. The court pointed out that the insurer did indeed defend the insured, albeit under a reservation of rights.
The court said that upon receiving notice of the claim against K.C.'s in the underlying action, the insurer provided a defense, and despite filing a declaratory judgment action, the insurer continued to defend K.C.'s. Because the insurer did not refuse to defend K.C.'s at any point in the underlying action, K.C.'s was not at liberty, and indeed was barred from, entering into a settlement with the plaintiff without the consent of the insurer. As a result, the court found that the trial court erred in finding that the consent judgment was binding on Auto-Owners.
The judgment of the trial court was reversed.
Editor's Note: The general liability policy declares that the insured will not make a payment, assume any obligation, or incur any expense without the consent of the insurer. The insured in this instance sought to get around this condition by claiming that since the insurer filed a declaratory judgment action seeking a declaration of no coverage, the insurer had forfeited its right to prevent consent judgments.
The Appeals Court found that where an insurer unjustifiably refuses to defend an insured and thus leaves the insured to fend for itself, the insured is at liberty to make a reasonable settlement without prejudice to its rights under the insurance contract. In this case, however, the insurer did defend the insured and its reservation of rights letter and its declaratory judgment action did not leave the insured at liberty to consent to any settlement. |
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| Fraud of the Week |
Contractor Fraud – Florida
AMOUNT: $7,760
A woman in Florida was affected by contractor fraud when a roofing contractor took over her insurance claim, collected nearly $8,000 in claim money, and disappeared without beginning work on the roof. The roof had allegedly been damaged in a hail storm. The roofing contractor knocked on the homeowners front door and offered to inspect the roof for damage. The victim allowed the roofers to inspect her roof and hired the company to repair the damage. The roofers promised to handle the claim so the homeowners would not have to pay the deductible. She signed an Assignment of Benefits over to the contractors, which gave them control of the claim. The contractor collected the settlement and cashed the check for $7,760 and did not repair the roof. The victim was given several excuses as to why the roof hadn't been repaired or replaced, and then stopped hearing any news from the company in regards to her roof repairs. The company claims that their manager has been ill and their customer service has suffered as a result, and that the victim's roof will eventually be repaired or she will receive her claim money back.
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