Insurance defense attorneys often argue coverage does not exist for losses the insurance industry routinely pays and recognizes as covered. I believe Ergas v. Universal Property and Casualty Insurance Company,1 which I discussed yesterday in Chipped Tile Claims Get Marred, misconstrues longstanding insurance contract interpretation. Hopefully, the policyholders’ attorneys file a motion for rehearing, because the judges got it wrong and the insurance industry knows it.
For instance, a couple of comments from yesterday’s post show common examples demonstrating that the practical application of the decision would lead to an absurd result:
… I’m perplexed how a falling object can be deemed as "marring" and excluded. So a hammer falls onto a tile and chips the tile – lets say its not a tile – lets say its a very expensive glass table or crystal bowl.. marring? Really? So – a construction worker at your house drops a hammer from the 2nd level staircase.. it lands on your piano.. and that is marring? I’m not getting it. Why stop at a hammer? I’m sure defense counsel is not going to stop there. Doesn’t that set the stage for any object falling on any other object and damaging it?
I am interested to know if "Marring" following this new ruling can be applied to the damage caused to Roofing tile or Shingle during a hail storm.
The FC&S explains in its Bulletins exactly what every property adjuster is taught – the clause is to prevent damages that have been made over a period of time rather than the sudden and accidental losses that exceed a policy deductible:
Q. Our insured has an HO 00 03 10 00. A few months ago, following a downpour, he noticed some wet patches on the ceiling and high up on the walls. When he called in a roofer, the roofer said that the roof had been damaged in a severe hailstorm that occurred about a year previously.
We turned the claim in to the insurer, who denied the loss, saying that too much time had elapsed between the hailstorm and the resulting water damage.
Is this denial correct?
A. There is no requirement in the HO 00 03 that the cause of loss and the resulting effect follow each other within minutes, days, or even months. It is difficult to recognize that a covered cause of loss has occurred unless the physical signs of that cause manifest themselves. So, until the insured noticed the wet patches, he had no idea there was a possible covered loss.
The HO 00 03 excludes losses caused by wear and tear, marring, and deterioration. That is because these are things that will happen over time, and so are uninsurable. However, the policy adds that "any ensuing loss to property described in Coverages A and B not excluded or excepted in this policy is covered." In other words, had the roof simply worn out, the ensuing loss—water damage to the interior—would be covered because it is not excluded. But in this instance, the roof did not wear out. An event specific as to time and place—the verifiable hailstorm—caused the damage to the roof.
Therefore, both the loss to the roof and the water damage to the ceiling and walls are covered.
The clause is made for the purpose of excluding inevitable wearing and deterioration of property which is not fortuitous and not excluding the damage that occurs when a person accidently drops any object on insured damage causing damage. This is demonstrated discussed in the following FC&S discussion:
Q Our insured owns an apartment complex. We have replacement cost coverage on the commercial property policy with the special causes of loss form attached.
Recently our insured rented one of the units to a very large individual. The tenant stepped into the bathtub/shower enclosure, and due to his excessive weight, he cracked the floor area of the tub. During the ensuing shower, there was extensive damage to the apartment below. The crack required replacement of the shower/tub unit, as well as clean-up of the damage.
The insured turned in a claim to the carrier for replacement of the shower unit, and repair of the ceiling in the apartment below. The carrier has offered to pay for the ceiling damage, however, it has denied coverage of the shower enclosure due to the "wear and tear" exclusion. The shower unit was six months old. Inasmuch as the unit was relatively new, and the damage sudden and accidental, we feel there should be coverage for this loss.
The damage to both the ceiling and shower unit should be covered. The wear and tear exclusion is not applicable to a loss of this type, particularly where the unit was almost new. The wear and tear exclusion is one of a number of exclusions in the commercial property’s special causes of loss form that eliminate coverage for what are essentially "non fortuitous" losses, i.e., losses that are certain to happen, and as such are not appropriate subjects for insurance coverage. If you use something long enough, it will wear out. This is not an insurable event.
However, a sudden and accidental breaking of a six-month old shower unit by a "very large" individual is not "wear and tear." It may be that the stall was not manufactured strong enough to hold this person, but that does not bring it under the "non fortuitous" loss exclusions, such as wear and tear.
I have not had the opportunity to read the briefs of the policyholders, but I am certain that references to leading insurance industry sources, such as FC&S, would help the appellate panel understand that they have made a major mistake and are changing insurance coverage law to mean something neither party intended.
1 Ergas v. Universal Prop. & Cas. Ins. Co., 4D11-3803, 2013 WL 1748574 (Fla. 4th DCA April 24, 2013).